On July 8, 2011, the Division of Corporation Finance issued a Statement on Well-Known Seasoned Issuer (WKSI) Waivers. The Statement provides guidance regarding ineligible issuer waivers to issuers that formerly qualified as WKSIs – and, therefore, short-form securities registration – but, as result of actual or perceived violations of the anti-fraud provisions of the securities laws, are ineligible issuers. Issuers that have violated the anti-fraud provisions of the federal securities laws, or that are the subject of a judicial or administrative decree or order (including a settled claim or order) prohibiting certain conduct or activities regarding the anti-fraud provisions of the federal securities laws, become “ineligible issuers” and therefore do not have WKSI status for three years.
The SEC may grant waivers of ineligible issuer status upon a showing of good cause. Authority to grant waivers from ineligible issuer status has been delegated by the SEC to the Director of the Division of Corporation Finance. In determining whether to grant or deny a request for waiver, the Division of Corporation Finance will review all of the facts and circumstances in light of specific factors, including:
- whether the anti-fraud violation stems from the issuer’s own disclosures about itself
- whether the anti-fraud violation is scienter based
The Division of Corporation Finance noted that, “absent exceptional circumstances, a waiver request involving an anti-fraud violation that is scienter based and stems from the issuer’s own disclosures would likely not be granted. “ In contrast, if the anti-fraud violation is not scienter based and stems from the issuer’s own disclosures, the SEC will consider additional factors in determining whether to grant or deny the waiver. These factors include:
- the remedial measures taken by the issuer
- the pervasiveness and timing of the misconduct
- the impact on the issuer if the waiver request is denied