On Aug. 17, the U.S. Securities and Exchange Commission (SEC) issued guidance in connection with financial information that may be omitted on draft registration statements. These measures are the latest in the SEC’s efforts to facilitate capital formation and make the process of registering an offering simpler for issuers. Under the new policy, any issuer may omit both interim and annual financial information from draft registration statements, to the extent that the issuer “reasonably believes” the omitted financial information will not be required when the registration statement is publicly filed and made available.
Under Section 71003 of the Fixing America’s Surface Transportation Act (FAST Act), an emerging growth company may omit from its filed registration statements, annual and interim financial information that relates to a historical period that the issuer reasonably believes will not be required to be included at the time of the contemplated offering. For instance, emerging growth companies are required to submit two years of audited financial statements in a registration statement for an initial public offering. If an emerging growth company that has a calendar-year fiscal year submits a draft registration statement in November 2017 and reasonably believes it will commence its offering in April 2018 (which will require 2017 financial information), the issuer may omit its 2015 annual financial information, since it will be submitting annual financial information for 2016 and 2017 instead. Additionally, interim financial information for 2016 and 2017 would not have to be submitted, because the audited annual financial information would be complete. However, if the filing took place in January 2018, while audited annual financial information would not be required to be submitted for 2015, interim financial information would need to be provided for 2017 (because no audited financials would yet exist for 2017).
Section 71003 of the FAST Act relief is not available to issuers other than emerging growth companies, but under the new staff policy issued on Aug. 17, an issuer that is not an emerging growth company may omit from its draft registration statements, interim and annual financial information that it reasonably believes it will not be required to present separately at the time it files its registration statement publicly. For example, if a non-emerging growth company submits a draft registration statement in November 2017 and reasonably believes it will first publicly file in April 2018, the issuer may omit its audited 2014 annual financial information and interim financial information related to 2016 and 2017, because this information will be included in the audited annual financial statements for 2015, 2016 and 2017.