In a past installment, we discussed some of the basics of foreign private issuers (FPIs). This week, your good client Dizzy has called to tell you that he wants to take his FPI musical instrument manufacturing company (whose signature product is a trumpet with a distinctive bent horn) public in the United States. He wants to know if he can begin the SEC review process before publicly filing a registration statement for the initial public offering. Will Dizzy be singing the blues?
Confidential SEC review of FPI IPO registration statements
Under the SEC Staff’s current policy, an FPI may submit its IPO registration statement on a confidential basis if it:
- qualifies as an emerging growth company (EGC) under the JOBS Act;
- is listed or is concurrently listing its securities on a non-US securities exchange;
- is being privatized by a foreign government; or
- can “demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.”
So, an FPI that is not an EGC and is solely listing its securities in the United States generally may not submit a registration statement for confidential review. By contrast, an FPI that is an EGC or will dual list in the United States may begin the SEC review process by confidentially submitting its F-1 registration statement for review. A dual-listed FPI that is also an EGC should indicate at the outset whether it is confidentially submitting as an eligible FPI or as an EGC (among other things, an EGC is required to make all of its previous confidential submissions publicly available on EDGAR at least 21-days prior to the start of its traditional road show).
How does Dizzy confidentially submit the registration statement for its IPO?
FPIs should submit IPO registration statements for non-public review through EDGAR, in the same manner as EGCs. That means using the updated procedures for confidential EGC submissions on new Form DRS or DRS/A outlined here and here.
When submitting an F-1 confidentiality, bear in mind that the F-1 must be substantially complete. However, the SEC Staff has confirmed that the non-public submission of a registration statement does not constitute the “filing” of a registration statement under the Securities Act. This is relevant to the SEC’s rules that key off of a filing with the SEC, such as Rule 163A’s 30-day safe harbor from the definition of offer. It also means that the registration statement does not need to be signed and does not need to include the consent of the FPI’s auditors or other experts. In addition, because a confidential submission is not a filing, FPIs are not required to pay SEC filing fees until the first public filing. However, confidential submissions do trigger FINRA filing requirements and require the submission of a FINRA application and payment of FINRA’s applicable filing fee (unless no FINRA member broker-dealer is yet involved in the offering). See FINRA Rule 5110(b)(4).