Filing and documentary requirements

General filing requirements

Give details of any filing requirements for public offerings of debt securities. Outline any requirements for debt securities that are not applicable to offerings of other securities.

In a public offering, to ensure that all material information is available to potential investors, the Securities Act generally requires that a registration statement be filed with the SEC before any offers or sales are made. The registration statement contains the prospectus that will be used to market the offering, along with exhibits containing material agreements and other key documents.

In a public offering of debt securities, the US Trust Indenture Act of 1939 (TIA) requires the filing of a qualified indenture with the registration statement, prior to offering any securities. The indenture is the contract that embeds the terms of the securities and is entered into among the issuer, any guarantors and a trustee, which acts on behalf of the security holders. The TIA aims to protect debt investors by requiring certain provisions in the indenture for the securities. It is also customary, although not required, for an indenture used in a private offering of debt securities to contain certain provisions that are required under the TIA.

Prospectus requirements

In a public offering of debt securities, must the issuer produce a prospectus or similar documentation? What information must it contain?

The SEC has adopted various forms of registration statement. The applicable form turns on whether the issuer is a US issuer or foreign private issuer, how much reporting history it has and what type of offering it is planning, among other things. These forms specify the qualitative and quantitative information required in a prospectus, which generally includes, among other items:

  • a description of the issuer’s business and properties;
  • a description of the securities offered;
  • risk factors related to the issuer’s business and industry and the offering;
  • officers’ and directors’ biographies and description of the board committees, corporate governance policies and executive compensation programmes;
  • a description of the planned use of proceeds from the offering;
  • information about the underwriters and the plan of distribution;
  • tax treatment of the securities;
  • financial statements and related information for the issuer and any guarantors prepared in accordance with US Generally Accepted Accounting Principles (US GAAP) (or reconciled to it) or International Financial Reporting Standards (IFRS), as well as for any significant investee or company being acquired (including pro forma financial statements relating to such an acquisition); and
  • management’s discussion and analysis of financial condition and results of operations (MD&A).

Most disclosure requirements apply to US issuers and non-US issuers, but non-US issuers may be subject to special disclosure requirements not applicable to US issuers, such as description of home country regulation.

The disclosure rules under the US federal securities laws use an integrated disclosure framework, meaning that the disclosures required in filings under the Securities Act and the Exchange Act are based on the same set of rules. A significant benefit to this approach is the issuer’s ability to include the required information in the prospectus by incorporating by reference to its other filings with the SEC. If the issuer already is an Exchange Act-reporting company, then a significant portion of the information required in the prospectus can be incorporated by reference to its Exchange Act filings (eg, a description of the issuer’s business and the historical financial statements).


Describe the drafting process for the offering document.

The offering document is called a prospectus in a public offering and an offering circular or an offering memorandum in a private offering. However, no significant differences generally exist in the drafting process or the offering documents themselves. For private offerings, market practice is to track the disclosure requirements for a comparable public offering. This approach helps ensure the accuracy and completeness of the disclosure and protect the issuer and other offering participants from liability. Nonetheless, because there is no SEC review and the disclosure items for a public offering technically are not applicable, there is scope for some marginal flexibility in a private offering. For example, if preparing or reconciling certain financial information would be overly burdensome for the issuer, the working group may determine that its omission is not material.

Drafting an offering document is a joint effort by all parties involved in the offering. The issuer and its counsel take the lead in drafting the disclosure and preparing the required information, and the underwriters and their counsel, as well as the issuer’s auditors will be heavily involved in the comment and revision process. As part of the due diligence process, the underwriters and their counsel request back-up materials that support the disclosure. The SEC also occasionally requests some of these materials as part of its review process.

It is important for the issuer to start the drafting process early, especially if the issuer does not have Exchange Act filings upon which to draw. Particular attention should be paid to ensure that the issuer has all the required financial information, because its preparation can require substantial time if it is not ready. As a closing condition to a public or private offering, the underwriters will require that the issuer’s auditors deliver a customary comfort letter, which speaks to the audit and review work done by the auditors and the absence of material adverse changes relating to certain key line items.

The underwriters and their counsel often lead the drafting efforts for certain sections of the offering document, including the prospectus summary (commonly called the ‘box’, which gives highlights of the transaction and helps convey the marketing ‘story’); the description of the notes (and the corresponding indenture); and the underwriting section, which details how the transaction will be marketed.

Although the trustee and its counsel play a limited role in the drafting process, they generally review the offering documents for consistency with the terms of the indenture, especially those portions relating to the rights and obligations of the trustee.

In a public offering, it is critical to factor in time for SEC review (for issuers other than WKSIs). Depending on the scope of SEC comments and the issuer’s reporting and review history (or lack thereof), the review process can require two months or more, particularly for companies that are not SEC-reporting companies. In addition, documentary due diligence by the banks and their counsel can be time-consuming, particularly if the issuer is not pre-prepared with a data room containing its material documents.

In addition to addressing specific SEC line item requirements, it is critical to consider whether the disclosure contains any material misstatements or omissions. Such misstatements or omissions can give rise to SEC enforcement actions, as well as private claims (including class actions), under the US federal securities laws. Materiality is not a bright-line concept. Rather, information is material if it would be ‘viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available’ (Basic Inc v Levinson, US Sup Ct (1988)). Other US courts have defined it similarly and the SEC has emphasised that materiality is both a quantitative and qualitative determination based on all facts and circumstances.

Which key documents govern the terms and conditions of the debt securities? Who are the parties to such documents? How can such documents be accessed?

The terms and conditions of debt securities are typically governed by the indenture. Even though the underwriters are not parties to the indenture, their input on what investors will expect and accept is critical. This is particularly true for high-yield notes, which feature a complex array of covenants.

Although the offering document has a section that describes the terms and conditions of the notes, usually under the heading ‘Description of the Notes’, this section does not, strictly speaking, govern the terms and conditions of the notes. Instead, it describes those terms and conditions, but must do so accurately, because investors will make their investment decision on the basis of the description, rather than the indenture itself, and the issuer and offering participants will have potential liability for any material misstatements or omissions in the description.

The indenture will be accessible on the SEC website, as an exhibit to the registration statement in the case of a registered offering, or as an exhibit to the issuer’s Exchange Act reports (assuming it is an SEC-reporting issuer).

Does offering documentation require approval before publication? In what forms should it be available?

In a public offering, a registration statement containing a prospectus must be filed with the SEC before any offers can be made, and declared effective by the SEC before any sales can be made (with certain exceptions for WKSIs). With the exception of an automatic shelf registration statement for a WKSI, the SEC may review the registration statement before declaring it effective. Before commencing marketing efforts (or ‘launching’) the offering, the issuer generally clears all SEC comments to avoid any risk of having to amend the preliminary prospectus (or ‘red herring’) after it has been sent to potential investors. Also in the context of a public offering, unless an exemption applies (eg, for offerings of certain investment grade non-convertible debt), FINRA approval may be required. FINRA review generally focuses on excessive and unfair underwriting compensation and potential conflicts of interest involving the underwriters. The SEC will not declare the registration statement effective until FINRA issues a no objection letter.

Prospectuses related to the public offering of debt securities are filed with the SEC and are publicly available on the SEC website. The issuer and the underwriters generally also send investors PDF versions of the preliminary and the final prospectuses, along with hard copies of the final prospectus.

Unlike the case of the public offering, in private offerings the offering memorandum is confidential and not required to be publicly filed. Also, there is no requirement to get FINRA approval prior to commencing a sale. The working group will often use PDF versions of the offering documents and generally deliver a hard copy of the final offering memorandum.


Are public offerings of debt securities subject to review and authorisation? What is the time frame for approval? What are the restrictions imposed, if any, on the issuer and the underwriters during the review process?

As discussed above, SEC and FINRA review may apply, and, depending on the issuer’s business, additional regulatory agencies also may be involved (eg, banking authorities). The SEC will typically take about 30 days to review the initial filing, then less time to review subsequent amendments. The working group responds to the comments directly and also revises the registration statement in response. The comments and responses ultimately become part of the public record on the SEC’s website.

Depending on the category of the issuer and the type of offering, SEC review may not be necessary. For shelf registration statements, once the registration statement is declared effective, prospectus supplements used in ‘takedown’ offerings will not be subject to SEC review (for a WKSI, the shelf registration statement on Form S-3 (or, for a foreign private issuer, Form F-3) also becomes automatically effective without any SEC review). However, the SEC will, from time to time, review the periodic and current reports that the issuer files under the Exchange Act, which are incorporated by reference into the shelf registration statement.

In a public offering, no sales can be made unless the issuer has an effective registration statement on file with the SEC. Before the issuer files the registration statement with the SEC (the ‘quiet period’), unless an exception or a safe harbour (eg, allowing a limited notice of an upcoming registered offering) applies, neither the issuer nor the underwriters will be allowed to make any offers, including any press release, reports, advertisements or interviews that could condition the market or generate public interest in the issuer or its securities.

Once the registration statement has been filed but before it becomes effective (the ‘waiting period’), the issuer and the underwriters may make oral offers and written offers using the preliminary prospectus filed with the SEC or any free writing prospectuses and certain other statements within prescribed safe harbours, but no sales can be made. The issuer and the underwriters typically will wait until all SEC comments are cleared before launching the offering.

On what grounds may the regulators refuse to approve a public offering of securities?

The scope of the SEC review may be light or heavy, and may cover qualitative disclosure as well as the issuer’s financial statements. Until all SEC comments are resolved and the review process is complete, the SEC will not declare the registration statement effective.

How do the rules differ for public and private offerings of debt securities? What types of exemptions from registration are available?

As discussed above, a public offering of debt securities in the United States is required to be registered with the SEC, and subject to a host of requirements relating to the content of disclosure and the offering process.

Section 4(a)(2) of the Securities Act exempts ‘transactions by an issuer not involving any public offering’, and the SEC has adopted safe harbours under this exemption. An offering memorandum used in a private offering is not subject to SEC filing and review process, giving the working group more control over the timing of the offering. In addition, there is more leeway regarding the scope of disclosure.

One safe harbour is Rule 506 of Regulation D. The rule generally allows the issuer to offer an unlimited amount of securities without having to register under the Securities Act if, among other conditions, the issuer does not use general solicitation or general advertising (GSGA) to sell the securities (unless all purchasers are accredited investors and the issuer takes reasonable steps to verify their accredited investor status, in which case GSGA is permitted) and files a Form D with the SEC. The other two rules - Rules 504 and 505 - under Regulation D relate to offerings of securities in amounts less than US$1 million and US$5 million, and may be useful to small businesses.

Rule 144A is a resale safe harbour that issuers commonly use to issue securities to qualified institutional buyers (QIBs) without registering with the SEC. Subject to certain conditions, Rule 144A exempts from registration any resale of securities to QIBs by a person that is not the issuer. In a typical Rule 144A transaction, the underwriters purchase the securities from the issuer in an exempt private offering, and resell these securities to QIBs (the banks therefore are typically referred to as ‘initial purchasers’ in a Rule 144A offering, though they perform the same role as they do in a public offering and, for ease of reference, are otherwise referred to in this chapter as ‘underwriters’).

One notable limitation to Rule 144A is that the securities subject to a Rule 144A resale must not be the same class of securities listed on a US national securities exchange (the ‘no fungibility’ requirement). Debt securities sold pursuant to Regulation D or Rule 144A will be restricted securities, meaning that they cannot be publicly resold in the United States until a holding period has passed.

Another safe harbour from registration is Regulation S, which is based on extraterritoriality, and not on being a private offering under section 4(a)(2). Regulation S allows securities to be offered and sold outside the United States in an offshore transaction without having to register with the SEC.

Depending on the category of issuer, as defined in Regulation S, there are various restrictions and conditions that apply, but, in any case, the offering generally must not be made to a person in the United States and there can be no directed selling efforts in the United States. Securities sold pursuant to Regulation S generally will not be restricted securities, but may be subject to restrictions on their distribution in the United States during the 40-day period following the offering.

Although private offerings are exempt from Securities Act registration, they are subject to the general anti-fraud provisions, section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Offering process

Describe the public offering process for debt securities. How does the private offering process differ?

For a public offering of debt securities other than shelf takedown offerings, the offering process generally involves the following stages:

  • before launch, the issuer engages one or more underwriters and counsel, and the parties begin preparing the offering documentation. The underwriters, their counsel and the issuer’s counsel begin the due diligence process by conducting documentary due diligence and holding due diligence calls with the issuer’s management and the auditors. Once the registration statement is filed, the issuer waits for SEC comments and, together with its counsel, prepares response letters and amendments to the registration statement. At the same time, the parties continue to negotiate the underwriting agreement and other transaction documents (eg, comfort letter and legal opinions) and conduct due diligence. Once SEC comments are cleared, the offering launches if market conditions are right, and management and the underwriters market the offering. They use the preliminary prospectus and a slide deck for the road show. This process helps to gauge investor interest to facilitate pricing the securities (not all deals require a full-blown roadshow; some may be successfully executed with less intensive marketing efforts);
  • when ready, the issuer requests that the SEC declare the registration statement effective and a pricing call is held with the underwriters to determine the final offer price, the interest rate and other terms. The issuer and the underwriters then prepare a term sheet reflecting the pricing terms and file it with the SEC as a free-writing prospectus. At the same time, the underwriters confirm sales with the investors. The issuer, any guarantors and the underwriters execute the underwriting agreement and the auditors deliver the executed comfort letter to the underwriters. Within two business days, the issuer files the final prospectus reflecting the pricing information with the SEC; and
  • settlement typically takes place two to five business days from the pricing date. At settlement, the underwriters wire the net proceeds to the issuer and receive the debt securities, usually through the Depository Trust Company (DTC), the US clearing system. The indenture is executed and all closing documents, including legal opinions, negative assurance letters (10b-5 letters), certificates and bring-down comfort letter, are delivered to the respective parties.

For an offering of debt securities pursuant to an effective shelf registration statement, the offering process is largely the same, except that there is no need to file a registration statement and wait for SEC comments, as that already has been done. The issuer and the underwriters use a preliminary prospectus supplement, combined with the base prospectus contained in the already effective shelf registration statement, to launch the offering.

A final prospectus supplement reflecting the pricing terms is filed within two business days of pricing. The shelf takedown process saves a significant amount of time and is commonly used by eligible established SEC-reporting companies.

In the case of a private offering of debt securities, no SEC filing is needed, but the overall offering process is similar. The main offering document is a confidential offering memorandum, which generally is prepared using public offering-style disclosure. The marketing, pricing and settlement processes are essentially the same as in a public offering, except that the target investors may differ (eg, only QIBs can purchase in a Rule 144A offering).

Closing documents

What are the usual closing documents that the underwriters or the initial purchasers require in public and private offerings of debt securities from the issuer or third parties?

In both public and private offerings, a number of documents are delivered as a condition to the closing of a transaction. These documents are required by the underwriting agreement and indenture.

The main closing documents include:

  • legal opinions and negative assurance letters (10b-5 letters) from issuer’s and underwriters’ counsel, both addressed to the banks;
  • comfort letters from the issuer’s auditors addressed to the banks, related to the audit and review work done by the auditors and the absence of material adverse changes relating to certain key line items;
  • certificates from the issuer’s officers addressed to the banks addressing various matters, including the absence of a material adverse change and the correctness of the representations and warranties in the underwriting agreement; and
  • opinions and certificates addressed to the trustee, as required under the indenture.
Listing fees

What are the typical fees for listing debt securities on the principal exchanges?

The decision to list debt securities on an exchange is influenced by the types of securities and the target investors. In contrast to common stock, it is not uncommon for debt securities to trade readily without being listed. For listed debt securities, both NYSE and Nasdaq have an initial listing fee and an ongoing annual fee, but they are de minimis, and vary depending on the type of debt securities, the size of the principal amount and whether other securities of the issuer are already listed on the exchange.