SEC Expands Confidentiality Of Registration Statements

Overview of Announced Changes

On March 3, the U.S. Securities and Exchange Commission announced by press release that it has expanded accommodations for issuers submitting draft registration statements for nonpublic review.¹ The new accommodations are available immediately and were announced by the press release as SEC policy rather than pursuant to formal rulemaking. The changes apply to:

• Initial registrations under the Securities Exchange Act of 1934 (Exchange Act)
• Follow-on Securities Act registrations under the Securities Act of 1933 (Securities Act)
• Targets in de-SPAC (special purpose acquisition company) transactions
• Content and processing time of draft registration statements

In the press release, the SEC said that it believes these accommodations can further facilitate capital formation while maintaining protections for investors.

Change 1: Expanded Accommodations for Companies Filing Initial Registrations Under Section 12(g) of the Exchange Act

Companies already are eligible for confidential review of their initial registration statements under the Securities Act. One new accommodation is for registrations under the Exchange Act. Companies looking to list securities on a national securities exchange are required under Section 12(b) of the Exchange Act to register the class of securities to be listed. Domestic companies satisfy this requirement by filing a registration statement on Form 10 (when not using shortform Form 8-A when coupled with an IPO). Foreign private issuers use Form 20-F, and certain qualifying Canadian companies use Form 40-F. Such companies thereby become subject to the ongoing reporting requirements under the Exchange Act.

Other companies are required to register a class of securities pursuant to Section 12(g) of the Exchange Act, thereby similarly becoming subject to such reporting requirements, if their assets exceed $10 million and either the number of their equity securities record holders is greater than 2,000 or their number of nonaccredited investors is greater than 500.

Companies must file a registration statement (on Form 10, 20-F or 40-F) pursuant to Section 12(g) no later than 120 days after the fiscal year in which the company met any of the foregoing tests. Under the expanded accommodations, these Section 12(g) companies are now entitled to submit registration statements for review on a confidential basis, which is the same accommodation as that previously allowed for Section 12(b) filers.

Change 2: One-Year Time Limit Removed for Follow-on Securities Act Offerings and Exchange Act Registrations

As noted above, initial registration statements under the Securities Act already are eligible for confidential review. A new accommodation now will allow the same confidential review for all follow-on registrations. Previously, only companies whose initial registrations had occurred within 12 months before any follow-on offering were allowed to submit for confidential review initial filings of registration statements for such follow-on offerings. The SEC now has done away with this 12-month time limit. The SEC will accept an initial registration statement for any follow-on offering under the Securities Act or registration of a class of securities under either Section 12(b) or 12(g) of the Exchange Act, without regard to how much time has passed since the issuer completed its initial public offering under the Securities Act or first became subject to the reporting requirements of the Exchange Act. It should be noted, however, that the SEC has retained its initial-filing-only limitation for follow-on offerings. All amendments to all such initial filings must be filed publicly.

Change 3: Confidential Review Afforded to Targets in De-SPAC Transactions

The SEC has announced that it is expanding availability of confidential review of registration statements filed in connection with de-SPAC transactions. In particular, the SEC now permits issuers of securities in a de-SPAC transaction to submit their draft registration statements for confidential review. In these cases, the registration statement is essentially equivalent to that in an IPO. The press release states that this approach is consistent with the SEC's position that a de-SPAC is functionally equivalent to a target's IPO.

Change 4: Content and Processing Time of Draft Registrations

The enhanced accommodations announced by the SEC also affect the content and processing time of draft registration statements. Changes to such content requirements include that the SEC now permits issuers to omit the names of their underwriters from their initial registration statement filings if (a) such information is otherwise required by Items 501 and 508 of Regulation S-K and (b) the issuer includes such names in its subsequent submissions and public filings. Changes to processing time include that the SEC now permits issuers to request that their filings be expedited. The press release states that the SEC will consider such requests if they are reasonable, but that the SEC reserves the right to modify or terminate at any time its expedited procedures.

SEC Evolution of Exceptions and Expansions

The expansion of accommodations described in the press release is not the first set of confidentiality accommodations the SEC has afforded to registration statements.

Under the Jumpstart Our Business Startups Act of 2012 (JOBS Act), qualifying emerging growth companies (EGCs) were given specific statutory permission to submit drafts of IPO registration statements for confidential SEC review. Thereunder, the back-and-forth between the EGCs and the SEC may be kept confidential during the entire SEC review process, so long as the EGC publicly files all of its previously confidential registration statements at least 15 days before beginning its IPO marketing. This extended confidentiality gave EGCs the ability to delay publicly disclosing information until nearly the end of such review process. In 2017, the SEC expanded this EGC permission to allow all companies (not just EGCs) the same confidentiality treatment formerly allowed to EGCs.

The most recent changes announced in the press release are a continuation of the SEC's progressive expansion of confidentiality accommodations to issuers in their registration processes.

Note on Foreign Private Issuers

Foreign private issuers also are permitted to submit draft registration statements under the SEC's newly enhanced accommodations described in the press release. Alternatively, foreign private issuers may choose to follow the SEC's guidance as to confidential treatment as originally contained in its May 30, 2012, announcement.² Foreign private issuers that also qualify as EGCs have the additional option to follow the rules described above for EGCs.

Footnotes

1. SEC.gov | Enhanced Accommodations for Issuers Submitting Draft Registration Statements

2. SEC.gov | Non-Public Submissions from Foreign Private Issuers