The Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) announced yesterday that effective July 10, 2017, it will accept draft registration statement submissions from all initial public offering (“IPO”) issuers and newly-public companies, including foreign private issuers, that elect to take advantage of the new procedures, for nonpublic review. The SEC's procedures for confidential review of draft registration statements under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) originally applied only to emerging growth companies, or “EGCs” (i.e., companies with less than $1 billion of revenue in their most recently completed fiscal year). In extending confidential review procedures to non-EGCs, the SEC cited the Division of Corporation Finance's continuing efforts to facilitate capital formation and the popularity of the JOBS Act confidential review relief.
Under the new procedures, the SEC will now accept for review on a nonpublic basis:
- Draft registration statements (including revisions thereto) relating to IPOs to be registered under the Securities Act of 1933, as amended (the “Securities Act”);
- Draft registration statements (including revisions thereto) relating to the registration of a class of securities pursuant to Section 12(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”); and
- An initial draft only of the follow-on registration statement for companies submitting Securities Act registration statements prior to the end of the twelfth month following the effective date of their initial registration statement under the Securities Act or Exchange Act Section 12(b) registration statement.
An issuer submitting a confidential draft Securities Act registration statement in connection with an IPO must confirm in a cover letter to the SEC accompanying the initial submission that it will publicly file its registration statement and all revisions or amendments at least 15 days prior to any road show or, in the absence of a road show, at least 15 days prior to the requested effective date of the registration statement. For Exchange Act 12(b) registration statement drafts, the cover letter must confirm that the public filing of the registration statement and all revisions or amendments will be made at least 15 days prior to the anticipated effective date of the registration statement for listing of the relevant securities on a national securities exchange. Newly public companies submitting an initial confidential draft of a followon registration statement must both confirm in their cover letters that they will make their initial draft registration statement publicly available via the SEC’s EDGAR system at least 48 hours prior to the requested effective time and date, and must respond to any SEC comments with a public filing of the initial registration statement and any related amendments.
Other provisions of the JOBS Act applicable to EGCs – for example, the use of testing-the-waters communications, reduced financial statement requirements and the extended phase-in for compliance with the Sarbanes-Oxley Act of 2002 – have not been extended under the new SEC policy. However, the SEC’s announcement clarifies that review will not be delayed if an issuer omits financial information from its registration statement that it reasonably believes will not be required at the time of effectiveness, consistent with the relief provided to EGCs under the Fixing America’s Surface Transportation Act of 2015.
The technical procedures to be followed by non-EGCs making confidential submissions via EDGAR are the same as those already in place for EGCs. Pending the revision of Form ID, potential issuers that have not already obtained EDGAR access codes should indicate on their Form ID submissions that they intend to use the codes to submit a draft registration statement pursuant to JOBS Act §106.
The SEC intends to monitor practices under the expanded processing procedures, and may modify, limit or terminate the new relief granted to non-EGC issuers in order to protect investors.