The SEC rules and guidance require an unqualified “validity opinion” (an exhibit 5.1 opinion delivered by issuer's counsel) to be filed by the issuer in connection with each registered shelf takedown, including, for frequent issuers, takedowns conducted pursuant to a medium-term note program or other continuous offering program. The SEC's interpretation on this is in its Compliance and Disclosure Interpretation:
Question: Can a registration statement under Rule 415 be declared effective without an opinion of counsel as to the legality of the securities being issued when no immediate sales are contemplated?
Answer: No. However, when sales are not expected in the near future, the registrant may file a qualified opinion of counsel and have its registration statement be declared effective, subject to the understanding that an unqualified opinion will be filed no later than the closing date of the offering of the securities covered by the registration statement. An updated opinion of counsel with respect to the legality of the securities being offered may be filed in a Form 8-K report rather than a post-effective amendment to a Form S-3 shelf registration statement. This position is limited to opinions of counsel regarding the legality of the securities being offered, which are required to be filed in connection with shelf takedowns. [Aug. 14, 2009]
Historically, counsel working with issuers that used their shelf registration statements in connection with proposed sales on a delayed basis of various types of securities or in connection with medium-term note programs, filed qualified 5.1 opinions at the time of the shelf filing. For frequent issuers, some of which have almost daily takedowns of securities, the above-referenced Staff guidance had largely been observed in the breach.
However, the SEC recently contacted a variety of large frequent issuers to request stricter adherence to this stated policy. Accordingly, for example, if you search recent EDGAR filings for large frequent issuers, you will find frequent Form 8-K/6-K filings containing the relevant validity opinions. Some issuers have taken the approach of filing a legal opinion with the SEC under cover of a Form 8-K containing the proper disclosures and subsequently including in each pricing supplement the unqualified validity opinion.
Issuers will need to make certain that the correct corporate and related diligence procedures are being followed in connection with rendering validity opinions frequently.