On December 10, 2015, the Staff of the SEC’s Division of Corporation Finance issued an announcement along with new Compliance and Disclosure Interpretations (C&DIs) relating to the recently enacted Fixing America’s Surface Transportation (FAST) Act. 1 The FAST Act provides, among other things, additional flexibility for emerging growth companies (EGCs), a category of issuers created under the Jumpstart Our Business Startups (JOBS) Act of 2012, to submit or file registration statements that omit financial information that relates to a historical period that an EGC reasonably believes will not be required in its registration statement at the time of its contemplated offering.2 The SEC Staff’s announcement and C&DIs provide interpretive guidance with respect to these new simplified disclosure requirements for EGCs under the FAST Act.
EGCs May Not Omit Interim Financial Statements
The SEC Staff indicated in the C&DIs that an EGC issuer may not omit interim financial statements from its submission or filing for a period that has financial information that will be included within required financial statements covering a longer interim or annual period at the time of its offering, even though the shorter period will not be required to be presented separately at that time. The SEC Staff explained that interim financial information relates to both the interim period and to any longer period (either interim or annual) into which it has been or will be included. The SEC Staff provided the following illustrative example:
Consider a calendar year-end EGC that submits or files a registration statement in December 2015 and reasonably expects to commence its offering in April 2016 when annual financial statements for 2015 and 2014 will be required. This issuer may omit its 2013 annual financial statements from the December filing. However, the issuer may not omit its nine-month 2014 and 2015 interim financial statements because those statements include financial information that relates to annual financial statements that will be required at the time of the expected offering in April 2016.
EGCs Are Permitted to Omit Financial Statements of Other Entities
The SEC Staff also indicated in the C&DIs that an EGC issuer may omit financial statements of other entities from its submission or filing if the EGC issuer reasonably believes that those financial statements will not be required at the time of its contemplated offering. The SEC Staff stated that these simplified disclosure requirements for EGCs under the FAST Act are not, by their terms, limited to financial statements of the issuer. Accordingly, an EGC issuer could omit financial statements of, for example, an acquired business required by Rule 3-05 of Regulation S-X, if the issuer reasonably believes those financial statements will not be required at the time of the offering. This situation could occur when the issuer expects to update its registration statement to include an additional year of audited annual financial statements prior to the offering and, after that update, the acquired business has been a part of the issuer’s financial statements for a sufficient period of time to obviate the need for separate financial statements for the acquired business.
The SEC Staff noted in its announcement that the new simplified disclosure requirements for EGCs under the FAST Act will become effective 30 days after the date of enactment of the FAST Act (i.e., January 4, 2015) and the SEC is required to amend the relevant instructions to Forms S-1 and F-1 to reflect this statutory change within that 30-day period. However, the SEC Staff indicated that it will not object if EGCs apply the new simplified disclosure requirements immediately