United States: Overview Of Securities Law Provisions Of The FAST Act

On December 4, 2015, President Obama signed into law the Fixing America's Surface Transportation Act. The FAST Act, which is aimed principally at authorizing spending on highway and transit projects, includes several amendments to the Jumpstart Our Business Startups Act (JOBS Act) and other securities law provisions, some of which are effective immediately.

Amendments to JOBS Act for Emerging Growth Companies

Effective immediately upon enactment of the FAST Act:

Public filing prior to road show: Section 71001 of the FAST Act amends Section 6(e)(1) of the Securities Act of 1933 to require an emerging growth company to publicly file its IPO registration statement not later than 15 days prior to commencing its roadshow. Previously, the public filing had to be made no later than 21 days prior to commencement of the roadshow. This reduction may cause emerging growth companies (EGCs) to reevaluate the timing of activities that are commonly conducted in the period of time between the initial public filing of an IPO and the launch of the IPO's roadshow, such as obtaining lock-up agreements and questionnaires from stockholders who had not been privy to the EGC's IPO plans.

EGC grace period: Section 71002 of the FAST Act further amends Section 6(e)(1) of the Securities Act to provide a grace period for an issuer that was an EGC at the time it submitted a confidential registration statement or publicly filed a registration statement for its IPO, but ceases to be an EGC prior to completion of its IPO. In this limited circumstance, the issuer will continue to be treated as an EGC through the earlier of:

  • the date on which the issuer consummates its IPO pursuant to such registration statement; or
  • the end of the one-year period beginning on the date the company ceases to be an EGC.

Effective within 30 days of enactment of the FAST Act:

Omission of certain financial statements: Section 71003 of the FAST Act amends Section 102 of the JOBS Act to permit an EGC that files (or submits for confidential review) a registration statement on Form S-1 or Form F-1 to omit financial information for historical periods otherwise required by Regulation S-X as of the time of filing (or confidential submission) of such registration statement, provided that:

  • the omitted financial information relates to a historical period that the issuer reasonably believes will not be required to be included in the Form S-1 or Form F-1 at the time of the contemplated offering; and
  • prior to the issuer distributing a preliminary prospectus to investors, such registration statement is amended to include all financial information required by Regulation S-X at the date of such amendment.

The SEC is required to revise the relevant instructions to Form S-1 and Form F-1 within 30 days of enactment of the FAST Act to reflect this amendment to the JOBS Act. As a result of this amendment, issuers can avoid devoting time and resources to preparing financial statements and related disclosures solely to comply with Form S-1 or Form F-1 requirements at the time of filing (or confidential submission) but that would not otherwise be required at the time of their contemplated offering.

Small Company Simple Registration

Required within 45 days of enactment of the FAST Act:

Forward incorporation by reference for Form S-1: Section 84001 of the FAST Act requires the SEC to revise Form S-1 to permit a smaller reporting company to incorporate by reference in a Form S-1 registration statement any documents that it files with the SEC after the effective date of the Form S-1. This will allow smaller reporting companies that are not eligible to register shares for resale using Form S-3 to avoid having to file post-effective amendments solely for the purpose of keeping a resale Form S-1 current.

Disclosure Modernization and Simplification

Required within 180 days of enactment of the FAST Act:

Summary page for Form 10-K: Section 72001 of the FAST Act requires the SEC to issue regulations to permit issuers to submit a summary page in their Form 10-K, but only if each item on the summary page includes a cross-reference (by electronic link or otherwise) to the related information in the Form 10-K.

Improvement of Regulation S-K: Section 72002 of the FAST Act requires the SEC to revise Regulation S-K to:

  • further scale or eliminate requirements of Regulation S-K in order to reduce the burden on EGCs, accelerated filers, smaller reporting companies and other smaller issuers, while still providing all material information; and
  • eliminate provisions of Regulation S-K required for all issuers that are duplicative, overlapping, outdated or unnecessary.

Required within 360 days of enactment of the FAST Act:

Study on modernization and simplification of Regulation S-K: Section 72003 of the FAST Act requires the SEC to conduct another study on Regulation S-K, this time in consultation with two committees previously established by the SEC (the Investor Advisory Committee and the Advisory Committee on Small and Emerging Companies), to:

  • determine how best to modernize and simplify Regulation S-K requirements in a manner that reduces the costs and burdens on issuers, while still providing all material information to investors;
  • emphasize a company-by-company disclosure approach that allows relevant and material information to be disseminated to investors without boilerplate language or static requirements; and
  • evaluate alternative methods of information delivery and presentation and explore methods for discouraging repetition and the disclosure of immaterial information.

A report on this study is due to Congress within 360 days from the enactment of the FAST Act, and rules to implement the recommendation of the report are to be issued within 360 days from the issuance of the report.

In December 2013, the SEC staff completed the study of Regulation S-K required under the JOBS Act. The SEC staff has since taken steps to begin to implement reforms through its ongoing "disclosure effectiveness" project.

Reforming Access for Investments in Startup Enterprises

Effective immediately:

New resale exemption: Section 76001 of the FAST Act adds a new statutory exemption to the Securities Act for certain resales of restricted securities. New Section 4(a)(7) provides a non-exclusive exemption from registration for any resale transaction that meets the following conditions:

  • each purchaser is an accredited investor;
  • neither the seller nor any person acting on the seller's behalf engages in any form of general solicitation or general advertising; and
  • in the case of an issuer that is not a reporting company, is not exempt from the reporting requirements pursuant to Rule 12g3-2(b) of the Securities Exchange Act of 1934, or is not a foreign government eligible to register securities on Schedule B, the issuer provides to the seller and the prospective purchaser, upon request of the seller, the following information: 
    • the issuer's exact name (as well as the name of any predecessor);
    • the address of the issuer's principal executive offices;
    • the exact title and class of the security, its par or stated value and the number of shares or total amount of the securities outstanding as of the end of the issuer's most recent fiscal year;
    • the name and address of the transfer agent, corporate secretary, or other person responsible for stock transfers;
    • a statement of the nature of the issuer's business and the products and services it offers, which will be presumed reasonably current if the statement is as of 12 months before the transaction date;
    • the names of the issuer's officers and directors;
    • the names of the broker, dealer, or agent that will be paid any commission or remuneration in connection with the transaction;
    • the issuer's most recent balance sheet and profit and loss statement and similar financial statements for the two preceding fiscal years during which the issuer has been in operation, prepared in accordance with GAAP, or in the case of a foreign private issuer, IFRS. The balance sheet will be presumed reasonably current if it is as of a date less than 16 months before the transaction and the profit and loss statement will be presumed reasonably current if it is for the 12 months preceding the date of the balance sheet. If the balance sheet is not as of a date less than six months before the transaction date, it must be accompanied by additional statements of profit and loss for the period from the date of such balance sheet to a date less than six months before the transaction date;
    • if the seller is an affiliate of the issuer, a brief statement is required regarding the nature of the affiliation, and a certification by such seller that it has no reasonable grounds to believe that the issuer is in violation of the securities laws or regulations;
  • the seller is not the issuer or a direct or indirect subsidiary of the issuer;
  • neither the seller, nor any person that has been or will be paid remuneration or a commission for their participation in connection with the transaction, would be disqualified as a bad actor under Rule 506(d)(1) of Regulation D or is subject to a statutory disqualification described under Section 3(a)(39) of the Exchange Act;
  • the issuer is not in bankruptcy or receivership and is not a blank check, blind pool or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in an acquisition of an unidentified person;
  • the transaction does not relate to an unsold allotment to, or a subscription or participation by, a broker or dealer as an underwriter of the security a redistribution; and
  • the transaction involves securities of a class that has been authorized and outstanding for at least 90 days prior the transaction date.

The securities sold in an exempted transaction under Section 4(a)(7) will be deemed to be "restricted securities" within the meaning of Rule 144 and "covered securities" under the Securities Act for purposes of preemption from state "blue sky" regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jennifer A. Zepralka
Similar Articles
Relevancy Powered by MondaqAI
Hunton & Williams LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Hunton & Williams LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions