Yesterday afternoon, the SEC announced that it had—unanimously—adopted amendments, largely as originally proposed in 2019, to modernize filing fee disclosure and payment methods. How long has it been since the SEC adopted anything unanimously? Apparently it took a far-from-spellbinding 432-page adopting release about filing fee disclosure and Automated Clearing House payments to finally achieve that level of comity. Here is the brief fact sheet. The amendments revise almost everything—"most fee-bearing forms, schedules, statements, and related rules"—to require each fee table and accompanying explanatory notes (which will now be moved to a separate exhibit) to include "all required information for fee calculation in a structured format." That means more XBRL. The amendments also add new options for fee payment using ACH and debit and credit cards, retain the current option for payment by wire transfer, but eliminate fee payment with paper checks and money orders. Most of the amendments will become effective on January 31, 2022 with extensive transition periods to allow filers time to comply with the Inline XBRL structuring requirements. The amendments related to ACH and debit and credit cards will become effective on May 31, 2022.
Filing fees can become very complex, especially when there are multiple transactions, fee offsets and carryforwards. Filers enter data manually, sometimes in more than one location in the filing, increasing the possibility of filer error. Currently, SEC staff manually review fee information for every filing and resolve discrepancies. By enabling the staff to use automated tools to help validate payment information, the amendments should make the fee payment validation process faster and more efficient. In addition, the required tagging of the fee table and accompanying information and pre-submission validation should give filers more certainty about the correctness of the fee paid. That's because EDGAR will automatically compute the filing fee due using the structured data and validate the information submitted by the filer. Because the final amendments will employ inline XBRL, no separate XBRL document will be required.
Currently, fee-related information is provided on the filing cover page and in a submission header, but disclosure of all the information necessary to calculate the fee is not required. For example, the fee for a business combination transaction can be based on the market value of the securities to be received, cash to be received and cash to be paid. However, Rule 457 and Form S-4 require disclosure of only the title of each class of securities to be registered, the amount to be registered, the proposed maximum offering price per unit, and the amount of the registration fee, although filers sometimes provide more information voluntarily. The amendments will require fee-bearing filings to include all of the information necessary to calculate the fee, and that information will be presented in inline XBRL on a separate exhibit.
Changes from the proposal
The rules were adopted largely as proposed with just a few changes, among them:
- The amendments move the filing fee-related information to a separate filing fee exhibit rather than requiring it on the cover page as proposed and make related conforming changes;
- To facilitate filing fee determination and information presentation, as well as EDGAR validation, the final rules will require more detailed tabular disclosure of certain information that, under the proposal, would have been presented in a narrative or in the header for a filing; and
- The final amendments will also provide for tabular disclosure of any claimed fee offsets and tabular disclosure if the registrant is filing a single prospectus that relates to two or more registration statements.
The final amendments
Among other things, the final amendments will make the following changes:
- Require filing fee-related information to appear in a filing fee exhibit rather than on the cover page of each of the forms and schedules (for Securities Act filings, new Item 601(b)(107))
- Add columns to the basic filing fee table for registration forms to indicate: the type of security being newly registered or carried forward; the registration form type, file number, and initial effective date of one or more previously filed registration statements associated with any unsold securities that the registrant is carrying forward; fees paid in connection with amendments; and entries for total offering amounts, the total amount of fee offsets and the total fee due net of fee offsets and any previously paid amounts;
- Add new tables to disclose any fee offsets and reliance on Rule 429;
- Add a "fee rate" column to the filing fee table;
- Revise filing fee tables in Schedules 13E-3 and TO and add filing fee tables to Schedules 13E-4F, 14A, 14C, and 14D-1F, and, in a change from the proposal, information about any claimed offsets in a separate offsets table;
- Add or clarify instructions regarding filing fee table presentation, calculations and related disclosure content and presentation;
- Add filing fee tables and calculation disclosure requirements to Rule 13e-1;
- Revise Rule 424(g) so that the form of prospectus that reflects the amount of a pay-as-you-go registration fee also includes all filing fee information needed for the filing fee calculation (not just the currently required registration fee table), and require all the information in a filing fee exhibit (not, as proposed, on the prospectus cover page or elsewhere together in the filing);
- Revise the General Instructions to Forms S-3 and F-3 (i) to require that filing fee information appear in a filing fee exhibit to a post-effective amendment or 424(b) or (h) prospectus rather than a periodic report that is incorporated by reference into the registration statement, and (ii) when providing information that was omitted at the time of initial effectiveness about a specific transaction, to specify certain other required information, such as the maximum aggregate amount or maximum aggregate offering price; and
- Revise the General Instructions to Forms S-4 and F-4, when providing information about a specific transaction about which information was initially omitted, to specify certain required information to be included in a filing fee exhibit, such as the maximum aggregate amount or maximum aggregate offering price.
There are lots of detailed changes to other rules and forms, including Rule 429, forms for filings relying on Rule 415(a)(6), Rule 457(p) and Rule 424(g). You get the drift.
Changes to the filing fee tables and instructions
The final amendments also made several changes to the filing fee tables and instructions to require additional detail about filing fee calculations in tabular format. For example, in Form S-1, there will be a basic table, "Table 1: Newly Registered and Carry Forward Securities," and two other tables to disclose the additional detail needed to calculate the filing fee. New "Table 2: Fee Offset Claims and Sources" will provide more detail regarding any fee offsets, and new "Table 3: Combined Prospectuses" will be included if the company is relying on Rule 429.
As noted above, the final amendments add new options for fee payment using ACH (with payments expected to become available to the SEC within one to three business days) and debit and credit cards (which must be issued by a U.S. financial institution and will be processed using the Treasury's Pay.gov service). The amendments also retain the current option for payment by wire transfer, but eliminate fee payment with paper checks and money orders. The release notes that "debit and credit card payments are expected to be available to the Commission the next business day and within 24 hours of the transaction, respectively. Consequently, filers should time their payments and filings accordingly."
To facilitate the filing fee process, the final amendments require "structuring" of all filing fee-related information in an exhibit. According to the adopting release: filers that use the option to "construct structured filing fee-related information within EDGAR generally will receive validation and resulting error and warning messages before they submit both test and live filings. Filers that construct this structured information outside of EDGAR, however, will receive validation and resulting error and warning messages after they submit both test and live filings. While EDGAR will automatically compute the filing fee due using the structured data and validate the information submitted by the filer, validation failures caused by incorrect or incomplete structured filing fee-related information generally will result in a warning to filers and a flag for staff follow-up, but EDGAR will accept the filing. However, approximately three months after all filers are required to comply with the structured data requirement, the Commission will suspend filings rather than issue warnings for incorrect or incomplete structured filing fee-related information. Commission staff will provide advance notice of the specific date of the change to filers." Under the final amendments, all filers will be able "to file their filing fee-related information structured in Inline XBRL prior to the compliance date for each category of filers" and the SEC will make available a separate filing agent test system.
The final amendments will permit, where a registrant has not relied on Rule 457(o) to calculate a required filing fee and wants to increase the amount registered of one or more classes of securities on the registration statement, or add a new class, and decrease the amount of another class on the registration statement, the registrant may, in a pre-effective amendment, calculate the total filing fee due based on the then-current expected offering amounts, offering prices, and filing fee rates, and rely on Rule 457(b) to apply, as a credit against the current total filing fee due, the amounts previously paid in connection with the registration statement. New form instructions will permit a registrant claiming this type of offset to recalculate the filing fee in its entirety and claim an offset pursuant to Rule 457(b) in the amount of the filing fee previously paid in connection with the registration statement.
Apparently, none of the amendments discussed above were considered "technical amendments." Ok. There are some of those, not even touched here.
The amendments generally will be effective on January 31, 2022. However, the SEC is adopting a phase-in period for the structuring requirements, beginning with large accelerated filers. Under the transition provisions, large accelerated filers will not need to comply with the structuring requirements until their filings submitted on or after 30 months after the January 31, 2022. All other filers will have an additional 12 months (i.e., 42 months after January 31, 2022) to comply with the structuring requirements. Compliance with the amended disclosure requirements other than the structuring requirements will be mandatory on the January 31, 2022 effective date. The amendments that will add or eliminate payment options will be effective on May 31, 2022.
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