Proposed Rule2026-10373
Registered Offering Reform
Primary source
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Published
May 26, 2026
Issuing agencies
Securities and Exchange Commission
Abstract
The Securities and Exchange Commission ("Commission") is proposing amendments that are intended to facilitate capital formation in the public securities markets. Specifically, the proposed amendments would make Form S-3 and the ability to conduct shelf offerings available to significantly more issuers, extend certain benefits currently reserved for "well-known seasoned issuers" to a broader set of issuers, and modernize Form S-1 by expanding the ability to incorporate information by reference into that form. The proposed amendments also would make conforming changes to the registration, communication, and offering process for certain business development companies and registered closed-end investment companies that register securities on Form N-2. We also are proposing to amend the communication rules to permit broad-based advertising for certain insurance products. In addition, we are proposing certain other amendments that are intended to modernize certain rules. Finally, to mitigate the costs and complexity of conducting a registered offering, the proposed amendments would preempt State securities law registration and qualification requirements for all registered offerings.
Full Text
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<title>Federal Register, Volume 91 Issue 100 (Tuesday, May 26, 2026)</title>
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[Federal Register Volume 91, Number 100 (Tuesday, May 26, 2026)]
[Proposed Rules]
[Pages 31022-31281]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-10373]
[[Page 31021]]
Vol. 91
Tuesday,
No. 100
May 26, 2026
Part III
Securities and Exchange Commission
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17 CFR Parts 210, 229, 230, et al.
Registered Offering Reform; Proposed Rule
Federal Register / Vol. 91 , No. 100 / Tuesday, May 26, 2026 /
Proposed Rules
[[Page 31022]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 229, 230, 232, 239, 240, and 249
[Release Nos. 33-11418; 34-105513; IC-36160; File No. S7-2026-17]
RIN 3235-AN41
Registered Offering Reform
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
proposing amendments that are intended to facilitate capital formation
in the public securities markets. Specifically, the proposed amendments
would make Form S-3 and the ability to conduct shelf offerings
available to significantly more issuers, extend certain benefits
currently reserved for ``well-known seasoned issuers'' to a broader set
of issuers, and modernize Form S-1 by expanding the ability to
incorporate information by reference into that form. The proposed
amendments also would make conforming changes to the registration,
communication, and offering process for certain business development
companies and registered closed-end investment companies that register
securities on Form N-2. We also are proposing to amend the
communication rules to permit broad-based advertising for certain
insurance products. In addition, we are proposing certain other
amendments that are intended to modernize certain rules. Finally, to
mitigate the costs and complexity of conducting a registered offering,
the proposed amendments would preempt State securities law registration
and qualification requirements for all registered offerings.
DATES: Comments should be received on or before July 27, 2026.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/comments/s7-2026-17/registered-offering-reform">https://www.sec.gov/comments/s7-2026-17/registered-offering-reform</a>).
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b3c1c6dfd69ed0dcdeded6ddc7c0f3c0d6d09dd4dcc5"><span class="__cf_email__" data-cfemail="3d4f485158105e5250505853494e7d4e585e135a524b">[email protected]</span></a>. Please include
File Number S7-2026-17 on the subject line.
Paper Comments
<bullet> Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-2026-17. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
submitted comments on the Commission's website (<a href="https://www.sec.gov/rules-regulations/public-comments/s7-2026-17">https://www.sec.gov/rules-regulations/public-comments/s7-2026-17</a>). Do not include
personally identifiable information in submissions; you should submit
only information that you wish to make available publicly. The
Commission may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the Commission's website. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at <a href="http://www.sec.gov">www.sec.gov</a> to receive notifications by email.
A summary of the proposal of not more than 100 words is posted on
the Commission's website (<a href="https://www.sec.gov/rules-regulations/2026/05/S7-2026-17">https://www.sec.gov/rules-regulations/2026/05/S7-2026-17</a>).
FOR FURTHER INFORMATION CONTACT: Mark W. Green, Senior Special Counsel,
or Isabel Rivera, Special Counsel, Office of Rulemaking, Division of
Corporation Finance, at (202) 551-3430, Matt McNair, Senior Adviser to
the Chief Counsel, Office of Chief Counsel, Division of Corporation
Finance, at (202) 551-3500, Pamela Ellis, Senior Counsel; Blair
Burnett, Bradley Gude, Branch Chiefs; or Brian McLaughlin Johnson,
Assistant Director, at (202) 551-6792, Investment Company Regulation
Office, Division of Investment Management; U.S. Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: We are proposing to amend the following
rules and forms:
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[GRAPHIC] [TIFF OMITTED] TP26MY26.210
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Table of Contents
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\1\ 15 U.S.C. 77a et seq.
\2\ 15 U.S.C. 78a et seq.
\3\ 15 U.S.C. 80a et seq.
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I. Introduction
A. Overview of the Proposed Amendments
B. Eliminating Public Float Requirements and Other Indicia of
Market Following
II. Discussion of Proposed Amendments
A. Form S-3
1. Background
2. Proposed Amendments
B. The Enhanced Registration and Communication Benefits
1. Background
2. Proposed Amendments
C. Form S-1
1. Background
2. Proposed Amendments
D. Business Development Companies and Closed-End Funds
1. Background
2. Proposed Amendments
E. Registered Non-Variable Annuity Advertising
1. Background
2. Proposed Amendments
F. Preemption of State Securities Law Registration and
Qualification
1. Background
2. Proposed Amendments
G. Other Rule Amendments
1. Delaying Amendments
2. Elimination of Certain Conditions Relating to Age of Financial
Statements
3. Conforming and Technical Amendments
III. Other Matters
IV. Economic Analysis
A. Overview
B. Baseline
1. Form S-1 and Form S-3 Issuers
2. Form N-2 and Insurance Company Issuers
C. Benefits and Costs
1. Benefits and Costs of Proposed Amendments to Form S-3
Eligibility
2. Benefits and Costs of Amendments to Eligibility for the Enhanced
Registration and Communication Benefits
3. Benefits and Costs of Amendments to Incorporation by Reference
in Form S-1
4. Benefits and Costs of Amendments to Preempt State Regulation and
Qualification
5. Business Development Companies, Closed-End Funds, and Registered
Non-Variable Annuity Advertising
6. Benefits and Costs of Proposed Amendments to Rule 473 and
Regulation S-X
7. Other Commission Proposals
8. Aggregate Monetized Benefits and Costs
D. Effects on Efficiency, Capital Formation, and Competition
1. Effects on Efficiency
2. Effects on Capital Formation
3. Effects on Competition
E. Reasonable Alternatives
1. Retain and Modify the Public Float-Based Conditions for Form S-3
Eligibility and WKSI Status
2. Retain WKSI Definition and Use an Alternative Measure of Whether
an Issuer is ``Well-Known''
F. Request for Comment
V. Paperwork Reduction Act
A. Summary of the Collections of Information
B. Summary of the Proposed Amendments' Estimated Effects on the
Collections of Information
C. Incremental and Aggregate Burden and Cost Estimates
D. Request for Comment
VI. Congressional Review Act
VII. Initial Regulatory Flexibility Act Analysis and Regulatory
Flexibility Act Certification
A. Initial Regulatory Flexibility Act Analysis
1. Reasons for, and Objectives of, the Proposed Action
2. Legal Basis
3. Small Entities Subject to the Proposed Amendments
4. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
5. Duplicate, Overlapping, or Conflicting Federal Rules
6. Significant Alternatives
B. Request for Comment
C. Certification Relating to Issuers of Registered Non-Variable
Annuities
Statutory Authority
I. Introduction
We are proposing amendments that are intended to facilitate capital
formation in the public securities markets. To achieve that goal, the
proposed amendments would amend certain of our Securities Act rules and
forms to provide issuers with greater flexibility to determine the
timing and structure of their registered offerings and reduce the costs
of conducting a registered offering by, among other things, simplifying
and modernizing the applicable rules and forms.\4\
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\4\ For purposes of this release, we use the terms
``registered'' or ``public'' offerings or markets interchangeably,
the terms ``exempt'' or ``private'' offerings or markets
interchangeably, and the terms ``public companies,'' ``companies,''
``registrants,'' and ``issuers'' interchangeably. Unless explained
in the text, the use of different terms in different places is not
meant to connote a significant difference.
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The Commission's longstanding, three-part mission is to protect
investors, maintain fair, orderly, and efficient markets, and
facilitate capital formation. Over the years, the Commission has
engaged in various rulemakings with the express goal of facilitating
capital formation.\5\ Some of those rulemakings focused specifically on
facilitating capital formation with respect to registered offerings.\6\
As the Commission has recognized, the public capital markets offer
several benefits to issuers and investors alike.\7\ For
[[Page 31025]]
example, the Commission has noted that issuers can raise capital
through the public markets on more favorable terms as compared to the
private markets.\8\ This is due, in large part, to the ``substantial
pricing discounts that private investors often demand to compensate
them for the relative illiquidity of the restricted shares they are
purchasing'' in exempt offerings.\9\ Both issuers and their investors
benefit from this characteristic of the public markets because
investors ``may be less subject to the risk of dilution in the value of
their shares if the companies in which they invest are able to meet
more of their capital needs in the public markets.'' \10\
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\5\ See, e.g., Facilitating Capital Formation and Expanding
Investment Opportunities by Improving Access to Capital in Private
Markets, Release No. 33-10884 (Nov. 2, 2020) [86 FR 3496, 3551 (Jan.
14, 2021)] (``Harmonization Adopting Release'') (``[T]he amendments
simplify, harmonize, and improve certain aspects of the exempt
offering framework to promote capital formation.''); Exemptions to
Facilitate Intrastate and Regional Securities Offerings, Release No.
33-10238 (Oct. 26, 2016) [81 FR 83494, 83494 (Nov. 21, 2016)] (``The
amendments . . . are designed to facilitate capital formation.'');
Revisions to the Eligibility Requirements for Primary Securities
Offerings on Forms S-3 and F-3, Release No. 33-8878 (``Baby Shelf
Adopting Release'') (Dec. 19, 2007) [72 FR 73534, 73548 (Dec. 27,
2007)] (``We therefore believe that extending shelf registration
benefits to more companies in the manner that we have chosen will
facilitate the capital-raising efforts of smaller public companies
who currently have fewer financing options than their larger
counterparts.''); Securities Offering Reform, Release No. 33-8591
(July 19, 2005) [70 FR 44721, 44796 (Aug. 3, 2005)] (``Securities
Offering Reform Adopting Release'') (stating the Commission's belief
that the rules will ``make the capital formation process more
efficient'').
\6\ See, e.g., Securities Offering Reform for Closed-End
Investment Companies, Release No. 33-10771 (Apr. 8, 2020) [85 FR
33290, 33321 (June 1, 2020)] (``CEF Offering Reform Adopting
Release'') (``The rule is designed to reduce regulatory impediments
to capital formation and provide more flexibility to these funds to
conduct registered securities offerings.''); Baby Shelf Adopting
Release at 73534 (``The amendments are intended to allow more
companies to benefit from the greater flexibility and efficiency in
accessing the public securities markets afforded by Form S-3 and
Form F-3 without compromising investor protection.''); Securities
Offering Reform Adopting Release at 44794 (``Providing flexibility
for registered offerings may encourage issuers to raise capital
through the registration process instead of through private
placements.''); Asset-Backed Securities, Release No. 33-8518 (Dec.
22, 2004) [70 FR 1506, 1591 (Jan. 7, 2005)] (``[W]e anticipate that
these rules will enhance capital formation by simplifying the
process of registering an offering of asset-backed securities.'').
\7\ See, e.g., Solicitations of Interest Prior to a Registered
Public Offering, Release No. 33-10699 (Sept. 25, 2019) [84 FR 53011,
53028 (Oct. 4, 2019)] (``[I]f the final rule encourages additional
issuers to conduct a registered securities offering, issuers may
benefit from greater secondary market liquidity associated with
registered securities, compared to exempt securities, to the extent
that greater liquidity makes the issuers' securities potentially
more attractive to prospective investors. Any additional issuers
that elect to conduct a registered offering in part as a result of
the final rule also may benefit from the greater ease of raising
follow-on financing through future registered offerings.''); Baby
Shelf Adopting Release at 73548 (``Consequently, we anticipate that
the amendments will result in smaller issuers raising more capital
through the public markets rather than through exempt offerings
conducted in the domestic and offshore markets. Investors in these
companies will benefit by such companies' improved access to capital
on more favorable terms.''); Securities Offering Reform Adopting
Release at 44794 (``Typically, registered securities enjoy more
liquid markets than unregistered securities. Therefore, registered
securities are less likely to be subject to a liquidity discount. In
addition, registered securities offerings provide a potentially
larger investor base than that available to those who participate in
private placements.'').
\8\ See, e.g., Baby Shelf Adopting Release at 73548 (``We
believe that extending shelf registration benefits to more
companies, in the manner we have chosen, will facilitate the
capital-raising efforts of smaller public companies who currently
have fewer financing options than their larger counterparts. . . .
By selling into the public markets, these companies may be able to
avoid the substantial pricing discounts that private investors often
demand to compensate them for the relative illiquidity of the
restricted shares they are purchasing.''); Securities Offering
Reform Adopting Release at 44794 (``[R]egistered securities
offerings provide a potentially larger investor base than that
available to those who participate in private placements.
Accordingly, issuers may incur lower transaction costs when raising
capital because they will have access to a much deeper market for
their securities and may have to expend fewer resources to locate
investors.'').
\9\ Baby Shelf Adopting Release at 73548.
\10\ Id.
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Investors in registered offerings also enjoy additional benefits
and protections. As compared to exempt offerings, issuers conducting
registered offerings are required to provide their investors with more
robust disclosures, and those disclosures are subject to enhanced
liability standards.\11\ Although these requirements may increase
compliance costs and litigation risks for issuers, those issuers
ultimately may benefit from a lower cost of capital due, in part, to
investors' reduced risk perception with respect to registered
offerings.\12\
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\11\ Harmonization Adopting Release at 3562 (noting certain
``investor protections associated with registered offerings'' that
are not associated with exempt offerings, such as ``gun jumping
provisions of the Securities Act . . . staff review, Section 11
liability, disclosure requirements in the registration statement,
and Exchange Act reporting requirements'').
\12\ See, e.g., Accelerated Filer and Large Accelerated Filer
Definitions, Release No. 34-88365 (Mar. 12, 2020) [85 FR 17178,
17215 (Mar. 26, 2020)] (``2020 Accelerated Filer Adopting Release'')
(``[A]t the issuer level, more reliable disclosures are generally
expected, based on economic theory, to lead investors to demand a
lower expected return to hold an issuer's securities (i.e., a lower
cost of capital).'').
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When pursuing the goal of facilitating capital formation, the
Commission also has sought to ensure investors remain appropriately
protected.\13\ To the extent there is a trade-off between efforts to
facilitate capital formation and protect investors, the Commission has
calibrated its rules with an eye towards balancing those two goals.
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\13\ See, e.g., Harmonization Adopting Release at 3498 (``We are
amending the exempt offering framework to close gaps and reduce
complexities that may impede access to capital for issuers and
thereby limit investment opportunities, while preserving or
enhancing important investor protections.''); Baby Shelf Adopting
Release at 73534 (``These amendments are intended to allow a larger
number of public companies to benefit from the greater flexibility
and efficiency in accessing the public securities markets afforded
by Form S-3 and Form F-3 in a manner that is consistent with
investor protection.''); Securities Offering Reform Adopting Release
at 44761 (``The amendments we are adopting today are designed to
ensure that appropriate investor protections are maintained.'');
Shelf Registration, Release No. 33-6499 (Nov. 17, 1983) [48 FR
52889, 52890 (Nov. 23, 1983)] (``Shelf Registration Adopting
Release'') (``The Commission believes that limiting the Rule to
primary offerings of securities qualified to be registered on Form
S-3 or F-3 and to traditional shelf offerings strikes the
appropriate balance.'').
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This proposal is intended to achieve the benefits associated with
increased capital formation in the public securities markets. At the
same time, we are committed to ensuring that investors remain
appropriately protected. We recognize, however, that several aspects of
our current Securities Act rules and forms, while intended to help
protect investors at the time they were adopted, may now have the
unintended effect of unduly inhibiting capital formation in today's
markets. We believe, therefore, that it is appropriate to recalibrate
certain of our rules and forms to ensure that they do not unduly
restrict issuers' abilities to raise capital in a timely, efficient
manner via a registered offering.
A. Overview of the Proposed Amendments
As discussed in more detail in section II below, the proposed
amendments can be separated into several categories. First, we are
proposing to revise Form S-3's eligibility requirements to allow a
broader range of issuers to conduct offerings using the form, including
delayed primary offerings (which, for purposes of this release, we
refer to as ``shelf offerings'') \14\ and at the market (``ATM'')
primary offerings. Notably, the proposed amendments would eliminate the
following eligibility requirements in Form S-3:
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\14\ When an issuer conducts a delayed offering under a shelf
registration statement, it is commonly described as taking
securities ``off the shelf.'' These delayed offerings are referred
to as ``takedowns.''
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<bullet> The issuer must have filed all the material required to be
filed pursuant to section 13, 14, or 15(d) of the Exchange Act for a
period of at least 12 calendar months immediately preceding the filing
of the registration statement (which we refer to as the ``One-Year
Seasoning'' requirement); and
<bullet> The aggregate value of the issuer's voting and non-voting
common equity held by non-affiliates (i.e., ``public float'') must be
$75 million or more to offer an unlimited amount of securities on Form
S-3.\15\
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\15\ Throughout this release, ``public float'' refers to the
aggregate market value of the voting and non-voting common equity
held by non-affiliates.
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These proposed changes would significantly expand the population of
issuers eligible to offer an unlimited amount of securities on Form S-
3. Specifically, we estimate that there could be an increase of over 60
percent in the number of issuers eligible to offer an unlimited amount
of securities on Form S-3.\16\ As discussed in section II.A below,
these newly eligible issuers would benefit from the cost savings and
capital raising efficiencies and flexibilities associated with the
ability to use Form S-3 and conduct shelf offerings.
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\16\ See Table 2 and the accompanying discussion in section
IV.B.1.a below for the methodology used in developing (and the
assumptions underlying) this estimate.
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Second, we are proposing to extend certain benefits currently
reserved for ``well-known seasoned issuers'' (``WKSIs'') and other
seasoned issuers (which we refer to as the ``Enhanced Registration and
Communication Benefits'') to a larger set of issuers.\17\ Those
benefits, which are discussed in section II.B below, are intended to
further the Commission's longstanding goal of ``facilitat[ing] capital
formation, and possibly lower[ing] the cost of
[[Page 31026]]
capital, by improving access to the public capital markets.'' \18\
Currently, in order to be a WKSI (and, in turn, qualify for all of the
Enhanced Registration and Communication Benefits), an issuer must,
among other things, either have a public float of $700 million or more
or have issued at least $1 billion aggregate principal amount of non-
convertible securities, other than common equity, in primary offerings
for cash, not exchange, registered under the Securities Act. Under the
proposed amendments, issuers would not be required to meet either of
these metrics in order to qualify for the Enhanced Registration and
Communication Benefits. Instead, under the proposed amendments, issuers
generally would qualify for those benefits if they are eligible to use
Form S-3 and have at least one class of common equity securities listed
on a national securities exchange.\19\ Thus, as a result of the
proposed amendments, we estimate that there could be an increase of
over 200 percent in the number of issuers eligible for all of the
Enhanced Registration and Communication Benefits.\20\
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\17\ Among other things, the Enhanced Registration and
Communication Benefits include the ability to file shelf
registration statements on Form S-3 that are automatically effective
upon filing with the Commission, to exercise greater flexibility
with respect to pre-filing and post-filing communications, and to
pay filing fees at the time of the takedown, rather than at the time
of filing a Form S-3. See infra sections II.B.1 and II.B.2.a for a
more comprehensive discussion of the Enhanced Registration and
Communication Benefits, the types of issuers that currently qualify
for each of the benefits, and the types of issuers that would
qualify for each of the benefits under the proposed amendments.
\18\ Securities Offering Reform Adopting Release at 44793.
\19\ A ``national securities exchange'' is a securities exchange
that has registered with the Commission under section 6 of the
Exchange Act. 15 U.S.C. 78f. In this release, we refer to issuers
that have at least one class of common equity securities listed on a
national securities exchange as ``exchange-listed.'' To qualify for
the ability to file automatic shelf registration statements, issuers
also would be required to have been subject to the Exchange Act's
reporting requirements for a period of at least 12 calendar months.
\20\ See Table 7 and the accompanying discussion in section
IV.B.1.a below for the methodology used in developing (and the
assumptions underlying) this estimate.
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Third, we are proposing to revise Form S-1 to expand issuers'
abilities to incorporate by reference information filed before (i.e.,
backward incorporation by reference) and after (i.e., forward
incorporation by reference) the effective date of the registration
statement. As discussed in section II.C below, the ability to backward
incorporate currently is limited to issuers that, among other things,
have filed an annual report for their most recently completed fiscal
year. The ability to forward incorporate currently is limited to
issuers that, among other things, are smaller reporting companies
(``SRCs'').\21\ Under the proposed amendments, issuers that meet Form
S-1's requirements to incorporate by reference would be able to
backward incorporate regardless of whether they had filed an annual
report for their most recently completed fiscal year and forward
incorporate regardless of whether they are an SRC. This would allow a
greater number of issuers to enjoy the cost savings associated with
incorporation by reference, with an estimated increase of up to 106
percent in the number of issuers eligible to forward incorporate on
Form S-1.\22\
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\21\ To be able to forward incorporate by reference, an issuer
must be an SRC that meets the eligibility requirements for
incorporation by reference in General Instruction VII of Form S-1,
which includes being subject to the reporting requirements pursuant
to section 13 or 15(d) of the Exchange Act, having filed all reports
and other materials required to be filed by sections 13(a), 14, or
15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports and materials), having filed an annual report required under
section 13(a) or 15(d) of the Exchange Act for the most recently
completed fiscal year, and not being a BSP issuer, as defined infra
note 180. See infra section II.C for a discussion of the
requirements to incorporate by reference on Form S-1.
\22\ We calculated this estimated increase by comparing the
number of Exchange Act reporting issuers that are SRCs to the number
of such issuers that are non-SRCs, according to the economic
analysis we conducted in another proposing release. See Enhancement
of Emerging Growth Company Accommodations and Simplification of
Filer Status for Reporting Companies, Release No. 33-11419 (May 19,
2026) (``Filer Status Proposal'') (noting in EA Table 2 that, as of
2024, there were 2,904 SRCs and 3,067 Exchange Act reporting
companies that were non-SRCs).
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Fourth, in addition to the proposed amendments to the registration
process for issuers that register securities on Form S-1 and Form S-3,
we are also proposing to modify the registration, communication, and
offering process for certain business development companies (``BDCs'')
and registered closed-end investment companies (``registered CEFs'',
collectively with BDCs, ``affected funds'') that register securities on
Form N-2, broadening their access to shelf offerings and the Enhanced
Registration and Communication Benefits. These amendments would allow a
greater number of affected funds to raise capital more efficiently and
would provide more affected funds flexibility to manage the timing of
their offerings in response to market opportunities.
Fifth, we are proposing to amend Rule 482 and other related rules
to permit broad-based advertising relating to certain insurance
products as discussed in more detail in section II.E below.
Sixth, under section 18(b)(3) of the Securities Act,\23\ we are
proposing to define ``qualified purchaser'' such that State securities
law registration and qualification requirements would be preempted with
respect to any registered offering. As discussed in section II.F below,
such preemption currently applies to registered offerings in which the
securities being offered and sold are listed or approved for listing on
a national securities exchange. Preemption currently does not, however,
apply to registered offerings of unlisted securities. The proposed
amendment, therefore, would eliminate the costs associated with
complying with numerous states' registration and qualification
requirements for registered offerings of unlisted securities.
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\23\ 15 U.S.C. 77r(b)(3).
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Finally, we are proposing certain other amendments that are
intended to modernize our rules. We discuss those proposed amendments
in section II.G below.\24\
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\24\ We also are proposing certain conforming and technical
amendments to some of our rules and forms that are intended to
simplify them and avoid redundancy. These amendments generally are
not intended to have a substantive effect and are discussed in more
detail in section II.G.3 below.
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We invite and encourage interested parties to submit comments on
any aspect of the proposed amendments. When commenting, please include
the reasoning in support of your position or recommendation and provide
any supporting documentation or data.
B. Eliminating Public Float Requirements and Other Indicia of Market
Following
As noted in section I.A above, the proposed amendments would
overhaul the criteria used to determine whether an issuer can use Form
S-3 or the Enhanced Registration and Communication Benefits. For
example, the proposed amendments would eliminate the requirements that
issuers exceed a specified public float or amount of registered debt
issued threshold to be eligible to offer an unlimited amount of
securities on Form S-3 or to qualify for all of the Enhanced
Registration and Communication Benefits. The proposed amendments also
would eliminate the One-Year Seasoning requirement for Form S-3
eligibility.
These proposed amendments are intended to expand the population of
issuers eligible to use Form S-3 and the Enhanced Registration and
Communication Benefits. As discussed in section II.A.1 below, this goal
is consistent with several prior Commission rulemakings. We recognize,
however, that the proposed amendments also would, in many ways,
represent a departure from the Commission's historical approach. An
issuer's eligibility to use Form S-3 has, since the form's inception,
depended on whether the issuer satisfies the Exchange Act seasoning and
minimum public float requirements.\25\ Similarly, since the Commission
adopted the Enhanced Registration and
[[Page 31027]]
Communication Benefits, an issuer's ability to use those benefits has
been conditioned, in part, on whether the issuer exceeds either a
minimum public float or amount of registered debt issued threshold.\26\
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\25\ See infra section II.A.1.b and c.
\26\ See infra section II.B.1.
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In adopting rules and forms permitting short-form and shelf
registration and the Enhanced Registration and Communication Benefits,
and in periodically reconsidering the requirements issuers must meet to
qualify for some of those benefits, the Commission has sought to reduce
issuers' costs of raising capital while maintaining investor
protection.\27\ The proposed amendments are intended to reflect the
Commission's experience since it adopted or last amended the rules,
including a reassessment of how best to protect investors in a manner
that does not unduly limit issuers' access to short-form and shelf
registration and the Enhanced Registration and Communication Benefits.
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\27\ See supra note 13.
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As the Commission has previously recognized, public securities
offerings provide investors with benefits and protections not available
in the private markets. The existing eligibility requirements,
including the One-Year Seasoning and public float requirements, are
intended to protect investors. Those eligibility requirements, however,
also limit the number of issuers that may utilize Form S-3 and the
Enhanced Registration and Communication Benefits, thus prompting some
issuers to raise capital through other means, such as an exempt
offering or private financing, in lieu of conducting a registered
offering. Because registered offerings often ultimately benefit issuers
and investors alike, we believe it is appropriate to expand
significantly the population of issuers eligible to use Form S-3,
conduct shelf and ATM offerings, and qualify for the Enhanced
Registration and Communication Benefits so as to encourage more
registered offerings, provided that appropriate investor protections
are maintained.
The proposed changes to these eligibility requirements also are
intended to reflect technological advancements and developments in the
financial markets since the Commission adopted short-form registration,
shelf registration, and the Enhanced Registration and Communication
Benefits. The Commission has stated that the eligibility criteria in
Form S-3 ``are based on the Commission's belief that information about
companies using the form already is known or is so readily available
that it need not be repeated in a prospectus.'' \28\ The Commission
historically relied on that criteria--in particular, the Exchange Act
reporting history and minimum public float requirements--as indicia of
whether an issuer was widely followed and, in turn, whether information
about the issuer had been sufficiently disseminated into the
marketplace such that short-form registration was appropriate.\29\ The
Commission relied on a similar rationale in conditioning the ability to
use the Enhanced Registration and Communication Benefits on an issuer's
ability to meet the specified public float or registered debt
thresholds.\30\
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\28\ Reproposal of Comprehensive Revision to System for
Registration of Securities Offerings, Release No. 33-6331 (Aug. 6,
1981) [46 FR 41902, 41913 (Aug. 18, 1981)] (``1981 Reproposal'').
\29\ See id. (explaining that short-form eligibility is premised
``generally on dissemination of information in the marketplace, as
represented by the length and nature of compliance by the company
with the reporting requirements of the Exchange Act, and, with
respect to proposed Form S-3, on the registrant's float'').
\30\ See Securities Offering Reform Adopting Release at 44791
(``For issuers with publicly traded equity, we believe that market
capitalization provides a sufficient proxy for determining whether
or not an issuer is well followed. For issuers of fixed income
securities, we believe that the amount of fixed income securities
sold in registered offerings for cash in the past three years
provides a sufficient proxy.'').
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When short-form registration was first introduced in 1967,
Commission filings were submitted and available only in paper copy. The
Commission attempted to facilitate broader distribution of this
information by contracting with an outside company to create and
distribute microfiche copies to designated Commission public reference
rooms,\31\ but obtaining copies of these documents was cumbersome and
expensive. Notably, an individual had to either make paper copies in
the Commission's public reference rooms or order copies from service
bureaus which, in turn, had to make and sell paper copies as
requested.\32\ Thus, because it was difficult for investors to obtain
information about an issuer, the Commission sought to ensure that, for
companies using short-form registration, there was ``wide dissemination
of information about such companies in the market place'' and that
``securities analysts [would] follow companies of this size.'' \33\
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\31\ See Release No. 34-8345 (June 28, 1968) [not published in
the Federal Register].
\32\ To review Commission filings, investors had to either
physically visit one of the Commission's public reference rooms or
subscribe to commercial data vendors for a considerable fee. See
Yen-Cheng Chang, Alexander Ljungqvist, and Kevin Tseng, Do Corporate
Disclosures Constrain Strategic Analyst Behavior?, 36 Rev. of Fin.
Stud. 3614, 3169 (2023) (citing letter to Chairman Richard C.
Breeden and Representative Edward J. Markey from Patricia Glass
Schuman, American Library Association et al. dated January 13, 1992,
available at <a href="http://www.bio.net/bionet/mm/ag-forst/1992-January/000187.html">http://www.bio.net/bionet/mm/ag-forst/1992-January/000187.html</a>) (noting that pre-EDGAR one vendor charged ``a fee of
$125 per month, plus a connect charge of $39 an hour, plus a charge
of 2.5 cents per line of data plus search charges which range from
$6 to $51 per search'' while another charged ``$84 per hour plus $1
per page'' and noting as an example that ``obtaining Ford's 1994 10-
K from [the vendor] would have cost $145 in page charges alone'').
\33\ Short Form for the Registration of Securities, Release No.
33-5923 (Apr. 11, 1978) [43 FR 16672, 16673 (Apr. 19, 1978)] (``1978
Amendments to Short-Form Registration'').
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In the intervening years, technological developments have
transformed how information is disseminated into the marketplace and
facilitated widespread access to issuer information. For example,
issuers today must make their Commission filings electronically through
the Commission's Electronic Data Gathering, Analysis, and Retrieval
system (``EDGAR''),\34\ which makes these filings immediately available
to the investing public without charge.\35\ In addition, corporate news
is disseminated in an electronic world, and issuers today make their
Commission filings and other company information available through
recognized electronic channels of distribution, including their
websites and other digital technologies. Today's investors can access
and follow publicly filed information about an issuer for low or no
cost in real time and on demand.
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\34\ In 1993, the Commission began mandating electronic filings
on EDGAR on a phased-in basis. See Rulemaking for EDGAR System,
Release No. 33-6977 (Feb. 23, 1993) [58 FR 14628 (Mar. 18, 1993)]
(``1993 EDGAR Adopting Release''). This phase-in culminated in all
corporate issuers becoming subject to electronic filing requirements
in 1996. See Rulemaking for EDGAR System, Release No. 33-7122 (Dec.
19, 1994) [59 FR 67752 (Dec. 30, 1994)].
\35\ EDGAR was first introduced as a concept more than 15 years
after the Commission adopted short-form registration and more than a
year after Form S-3's adoption. See Electronic Filing, Processing
and Information Dissemination System, Release No. 33-6519 (Mar. 22,
1984) [49 FR 12707 (Mar. 30, 1984)]. Even though EDGAR was
introduced in the mid-1980s, issuers were not required to make their
filings electronically on EDGAR until the mid-1990s, which was after
the Commission last revisited the ``One-Year Seasoning''
requirement. The Commission, therefore, has not reassessed that
requirement since EDGAR was in its infancy.
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Further, although Commission filings have been available to the
investing public electronically, free of charge, through EDGAR since
the mid-1990s and were available to investors in 2005 when the
Commission adopted the Enhanced Registration and Communication Benefits
and in 2007 when the Commission last considered eliminating the public
float requirement
[[Page 31028]]
in Form S-3,\36\ we believe such information has become even more
widely accessible in the intervening years. Whereas only 71 percent of
U.S. adults used the internet in 2007 and only 47 percent had a
broadband connection at home,\37\ today 96 percent use the internet and
79 percent have a broadband connection at home.\38\ In addition, today
approximately 91 percent of Americans own a smartphone compared to just
35 percent in 2011.\39\ Thus, a greater number of investors can
retrieve investment information from nearly anywhere and nearly
anytime. Moreover, the Commission improved investor access to this
information in 2019 by requiring active hyperlinks to information
incorporated by reference into registration statements and
prospectuses.\40\ As a result, today's investors can now more easily
and rapidly access Commission filings on EDGAR and via issuer websites,
as well as other issuer-related information that is available through
other electronic channels, at significantly lower cost than in the
past.\41\
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\36\ See Baby Shelf Adopting Release at 73536 (noting that ``the
technological advances that have revolutionized communications
between companies and the market should allow us to ease the Form S-
3 eligibility standards without undermining investor protection or
the integrity of the markets'' but ``retaining public float as a
factor in determining the extent of short-form eligibility'' because
``[t]echnology can facilitate and enhance market following, but it
does not ensure it'').
\37\ John B. Horrigan & Aaron Smith, Home Broadband Adoption
2007, Pew Research Center (July 3, 2007), available at <a href="https://www.pewresearch.org/internet/2007/07/03/home-broadband-adoption-2007/">https://www.pewresearch.org/internet/2007/07/03/home-broadband-adoption-2007/</a>.
\38\ Internet, Broadband Fact Sheet, Pew Research Center (Nov.
13, 2024), available at <a href="https://www.pewresearch.org/internet/fact-sheet/internet-broadband/">https://www.pewresearch.org/internet/fact-sheet/internet-broadband/</a>.
\39\ Mobile Fact Sheet, Pew Research Center (Nov. 13, 2024),
available at <a href="https://www.pewresearch.org/internet/fact-sheet/mobile/">https://www.pewresearch.org/internet/fact-sheet/mobile/</a>.
\40\ See 17 CFR 230.411(d); FAST Act Modernization and
Simplification of Regulation S-K, Release No. 33-10618 (Mar. 20,
2019) [84 FR 12674 (Apr. 2, 2019)] as corrected by FAST Act
Modernization and Simplification of Regulation S-K, Correction,
Release No. 33-10618A (Aug. 6, 2019) [84 FR 13796 (Aug. 13, 2019)]
(``FAST Act Adopting Release''). The Commission also has made it
easier for the public to access EDGAR data by, for example, offering
robust search features for EDGAR filings and making available
Application Programing Interfaces (``APIs'') and Really Simple
Syndication (``RSS'') feed options that can help investors stay
current with filings made on EDGAR. See U.S. Securities and Exchange
Commission, EDGAR Application Programming Interfaces (Last Reviewed
or Updated April 8, 2025), available at <a href="https://www.sec.gov/search-filings/edgar-application-programming-interfaces">https://www.sec.gov/search-filings/edgar-application-programming-interfaces</a>; U.S. Securities
and Exchange Commission, Structured Disclosure RSS Feeds (Last
Reviewed or Updated Jan. 21, 2026), available at <a href="https://www.sec.gov/data-research/structured-data/structured-disclosure-rss-feeds">https://www.sec.gov/data-research/structured-data/structured-disclosure-rss-feeds</a>. Further, investors may use other websites to receive alerts
when, for example, a company issues a press release or a media
outlet publishes a news article about the company.
\41\ Sabrina Chi & Devin M. Shanthikumar, Do Retail Investors
Use SEC Filings? Evidence from EDGAR Search (Oct. 25, 2018),
available at <a href="https://ssrn.com/abstract=3281234">https://ssrn.com/abstract=3281234</a> (finding that retail
investor trading is significantly related to EDGAR searches for Form
10-K and Form 10-Q filings).
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Because of the ease with which investors may obtain Exchange Act
disclosure documents and other information about an issuer, we believe
that eligibility to use Form S-3 and the Enhanced Registration and
Communication Benefits should not depend on the extent of an issuer's
market following, including analyst coverage (e.g., by reference to its
public float or initial Exchange Act seasoning).\42\ Instead, we
believe a more appropriate criterion is whether investors can readily
obtain issuer-specific information that is incorporated by reference
into a prospectus and the related registration statement to make an
informed investment decision. If an issuer is current and timely with
respect to its Exchange Act reporting obligations, then an investor's
ability to obtain such issuer-specific information will not depend on
the length of the issuer's Exchange Act reporting history or the amount
of the issuer's public float. In the pre-EDGAR era, it may have been
important to include eligibility requirements for short-form
registration that ``assure[d] that sufficient information about
registrants using the form [was] available to the investing public
through the Exchange Act reporting system.'' \43\ Today, however, the
public availability of all issuers' Exchange Act reports in EDGAR
effectively addresses the concerns that animated those requirements. We
believe, therefore, that eligibility for Form S-3 and the Enhanced
Registration and Communication Benefits no longer should be conditioned
on an issuer's Exchange Act reporting history, public float, or amount
of registered debt issued.
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\42\ Cf. supra note 33 and accompanying text.
\43\ Adoption of Amendments to Registration Forms and Guide and
Rescission of Registration Form, Release No. 33-5791 (Dec. 20, 1976)
[41 FR 56301, 56302 (Dec. 28, 1976)] (``1976 Amendments to Forms S-7
and S-16'').
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That said, consistent with the Commission's investor protection
mandate, we are not proposing to expand eligibility to use Form S-3 or
the Enhanced Registration and Communication Benefits to all issuers.
For example, under the proposed amendments, issuers would be eligible
to use most of the Enhanced Registration and Communication Benefits
only if they are eligible to use Form S-3 and are exchange-listed.
Further, although use of Form S-3 would not be conditioned on an issuer
having satisfied the One-Year Seasoning requirement under the proposed
amendments, use of the form would be conditioned on an issuer being
current and timely with respect to all the material required to be
filed pursuant to sections 13(a), 14(a), 14(c), and 15(d) of the
Exchange Act during the preceding 12 calendar months, or such shorter
period that the issuer was required to file such reports and materials.
The proposed amendments also would prohibit issuers from using Form S-3
(and, therefore, the Enhanced Registration and Communication Benefits)
if they are within a category of issuers we believe pose greater
investor protection concerns, including those issuers that potentially
present the highest risk of non-compliance with Securities Act and
Exchange Act disclosure requirements. We discuss each of these aspects
of the proposed amendments in more detail below.
II. Discussion of Proposed Amendments
A. Form S-3
We are proposing to amend Form S-3 to revise its eligibility
requirements. In addition, we are proposing certain other amendments to
Form S-3 that would simplify and modernize the form. Taken together,
these proposed amendments are intended to allow a greater number of
issuers the flexibility to access the public securities markets quickly
by using Form S-3 while also ensuring that investors remain
appropriately protected. Form S-3, as it would read under the proposed
amendments, is attached to this release as Appendix B.
1. Background
a. Eligibility To Use Form S-3 and Conduct Shelf Offerings
Form S-3 is a short-form registration statement that eligible
issuers can use to register offerings under the Securities Act. The
ability to use Form S-3 can confer significant advantages on eligible
companies seeking to raise capital through the public markets. Notably,
an issuer that is Form S-3 eligible for primary offerings is permitted
to conduct shelf offerings--that is, offerings made on a delayed
basis--under Rule 415.\44\ Rule 415 provides
[[Page 31029]]
issuers with considerable flexibility to access the public securities
markets from time to time in response to changes in the market and the
issuer's capital needs. Issuers that are eligible to conduct shelf
offerings under Rule 415 are permitted to register securities offerings
prior to planning any specific offering and, once the registration
statement is effective, issue securities in one or more offerings
without waiting for further Commission or staff action.
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\44\ Rule 415(a) provides that ``[s]ecurities may be registered
for an offering to be made on a continuous or delayed basis in the
future, Provided, That: (1) the registration statement pertains only
to: . . . (x) Securities registered (or qualified to be registered)
on Form S-3 or Form F-3 which are to be offered and sold on an
immediate, continuous or delayed basis by or on behalf of the
registrant, a majority owned subsidiary of the registrant or a
person of which the registrant is a majority-owned subsidiary.'' 17
CFR 230.415(a). Offerings under 17 CFR 230.415(a)(1)(x) (``Rule
415(a)(1)(x)'') are referred to as ``shelf offerings'' because
securities can be offered (or ``taken down'' from the shelf
registration statement) over time and from time to time. As noted
above, for purposes of this release, the term ``shelf offering'' is
intended to refer to an offering made on a delayed basis.
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By having more control over the timing of their offerings, eligible
issuers can take advantage of desirable market conditions, thus
allowing them to raise capital on more favorable terms (such as a
higher equity price or lower debt interest rate). As a result, the
ability to sell securities ``off the shelf'' as needed gives issuers a
financing alternative that may be more advantageous for them than other
available methods, such as private placements with securities priced at
discounted values based in part on their relative illiquidity.
One of the primary advantages of Form S-3 is the ability to omit
from the prospectus included in a registration statement at the time of
effectiveness (the ``base prospectus'') certain information, including,
for WKSIs, information as to whether an offering is a primary or
secondary offering, the plan of distribution for the securities, a
description of the securities to be offered other than an
identification of the name or class of such securities, and the
identification of other issuers.\45\ An issuer can instead provide this
information at the time that it is actually conducting an offering,
after its terms have been determined. The ability to omit information
from the base prospectus at the time of effectiveness, therefore,
enables issuers to conduct shelf offerings.
---------------------------------------------------------------------------
\45\ See 17 CFR 230.430B(a).
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In addition, Form S-3 permits the required information to be
backward and forward incorporated by reference to a company's
disclosure in its Exchange Act filings. The ability to forward
incorporate allows for automatic updating of the registration
statement.\46\ By contrast, a company without the ability to forward
incorporate must file a prospectus supplement to update information or,
in certain cases, file a post-effective amendment to its registration
statement to prevent information in the registration statement from
becoming outdated and to update for fundamental changes to the
information set forth in the registration statement.\47\
---------------------------------------------------------------------------
\46\ See 17 CFR 229.512(a)(1)(B).
\47\ See 17 CFR 229.512(a)(1).
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Issuers that are ineligible to file on Form S-3 often register
their offerings on Form S-1, which has far fewer eligibility
requirements than Form S-3.\48\ Issuers filing registration statements
on Form S-1 are not permitted to register shelf offerings under Rule
415 and therefore cannot register securities in advance of an actual
offering. Thus, as compared to conducting a shelf offering on Form S-3,
it is more challenging (and, in some instances, likely not feasible)
for Form S-1 registrants to take advantage of favorable market
opportunities, as they must prepare and file a registration statement
at the time of an expected offering and await Commission or staff
action before offering or selling securities. Further, Form S-1 permits
certain issuers to backward incorporate. Form S-1 currently does not,
however, permit issuers other than SRCs to forward incorporate, which
therefore requires a company to update the registration statement
through prospectus supplements and post-effective amendments.\49\
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\48\ See General Instruction I of Form S-1 (``This Form shall be
used for the registration under the [Securities Act]. . . of
securities of all registrants for which no other form is authorized
or prescribed, except that this Form shall not be used for
securities of foreign governments or political subdivisions thereof
or asset-backed securities, as defined in 17 CFR 229.1101(c).'').
Form S-3 has more extensive registrant and transaction requirements,
as discussed infra notes 50-64 and accompanying text.
\49\ As discussed in more detail in section II.C below, the
proposed amendments would permit other issuers using Form S-1 (i.e.,
not just SRCs) to forward incorporate.
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To use Form S-3, an issuer must meet the form's registrant
requirements,\50\ which generally pertain to the issuer's reporting
history under the Exchange Act, as well as at least one of the form's
transaction requirements.\51\ Form S-3's registrant requirements (which
are enumerated in General Instruction I.A of Form S-3) specify that to
use the form, an issuer must satisfy each of the following:
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\50\ See Form S-3, General Instruction I.A.
\51\ See Form S-3, General Instruction I.B.
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<bullet> U.S. Issuer. The issuer must be organized under the laws
of the United States or any State or territory or the District of
Columbia and have its principal business operations in the United
States or its territories.\52\
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\52\ See Form S-3, General Instruction I.A.1.
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<bullet> Exchange Act Reporting. The issuer must have a class of
securities registered pursuant to section 12(b) or 12(g) of the
Exchange Act or be required to file reports pursuant to section 15(d)
of the Exchange Act.\53\
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\53\ See Form S-3, General Instruction I.A.2.
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<bullet> One-Year Seasoning. The issuer must have been subject to
the requirements of section 12 or 15(d) of the Exchange Act for a
period of at least 12 calendar months immediately preceding the filing
of the registration statement.\54\
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\54\ See Form S-3, General Instruction I.A.3(a).
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<bullet> Current in Exchange Act Reporting. The issuer must have
filed all the material required to be filed pursuant to section 13, 14,
or 15(d) of the Exchange Act for a period of at least 12 calendar
months immediately preceding the filing of the registration
statement.\55\
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\55\ See id. General Instruction I.A.3(b) of Form S-3 specifies
that an issuer must be timely in its Exchange Act reports ``during
the twelve calendar months and any portion of a month immediately
preceding the filing of the registration statement.'' As an
illustration of how that measurement period functions, an issuer
intending to file a Form S-3 on July 19, 2026 would have to have
been current and timely with respect to its Exchange Act filings,
other than specified reports on Form 8-K, from July 1, 2025 through
July 19, 2026.
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<bullet> Timely in Exchange Act Reporting. The issuer must have
filed in a timely manner all reports required to be filed during the 12
calendar months and any portion of a month immediately preceding the
filing of the registration statement, other than specified reports on
Form 8-K.\56\
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\56\ See Form S-3, General Instruction I.A.3(b).
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<bullet> Certain Failures to Make Payments and Defaults. The issuer
must have not, since the end of the last fiscal year for which
certified financial statements of the issuer and its consolidated
subsidiaries were included in a report filed pursuant to section 13(a)
or 15(d) of the Exchange Act: (a) failed to pay any dividend or sinking
fund installment on preferred stock; or (b) defaulted (i) on any
installment or installments on indebtedness for borrowed money, or (ii)
on any rental on one or more long-term leases, which defaults in the
aggregate are material to the financial position of the issuer and its
consolidated and unconsolidated subsidiaries, taken as a whole.\57\
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\57\ See Form S-3, General Instruction I.A.4.
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<bullet> Electronic Filings. The issuer must have filed with the
Commission all required electronic filings.\58\
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\58\ See Form S-3, General Instruction I.A.7(a).
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<bullet> Interactive Data Files. The issuer must have submitted
electronically to the Commission all Interactive Data
[[Page 31030]]
Files \59\ required to be submitted pursuant to 17 CFR 232.405 during
the 12 calendar months and any portion of a month immediately preceding
the filing of the registration statement on Form S-3 (or for such
shorter period of time that the issuer was required to submit such
files).\60\
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\59\ 17 CFR 232.11 defines Interactive Data File as ``the
machine-readable computer code that presents information in
eXtensible Business Reporting Language (XBRL) electronic format
pursuant to Sec. 232.405 and as specified by the EDGAR Filer
Manual.''
\60\ See Form S-3, General Instruction I.A.7(b).
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Foreign issuers, other than foreign governments, also can use Form
S-3 if they satisfy all the registrant requirements, other than the
``U.S. Issuer'' eligibility requirement, and file the same Exchange Act
reports as a domestic issuer.\61\ In addition, successor issuers are
permitted to use Form S-3 if they meet certain conditions.\62\
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\61\ See Form S-3, General Instruction I.A.5.
\62\ See Form S-3, General Instruction I.A.6. Specifically,
successor issuers may use Form S-3 if: (a) the issuer's predecessor
and the successor issuer, taken together, meet the registrant
requirements, and the succession was primarily for the purpose of
changing the state of incorporation of the predecessor or forming a
holding company and the assets and liabilities of the successor at
the time of succession were substantially the same as those of the
predecessor; or (b) if all predecessors met the conditions at the
time of succession and the successor issuer has continued to do so
since the succession. See id.
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Form S-3's transaction requirements (which are enumerated in
General Instruction I.B of Form S-3) specify that the form can be used
for primary offerings only under the following circumstances:
<bullet> General Instruction I.B.1--Primary Offerings by Certain
Registrants. An issuer may register any primary offering of its
securities on the form if, among other requirements, the issuer's
public float is $75 million or more.
<bullet> If an issuer does not have a public float of at least $75
million, it may nevertheless register the following primary offerings
on Form S-3:
[cir] General Instruction I.B.2--Primary Offerings of Non-
Convertible Securities Other than Common Equity. An issuer may register
a primary offering of non-convertible securities other than common
equity, provided the issuer: (1) has issued at least $1 billion in non-
convertible securities, other than common equity, in primary offerings
for cash registered under the Securities Act over the prior three
years; (2) has outstanding at least $750 million of non-convertible
securities, other than common equity, issued in primary offerings for
cash registered under the Securities Act; (3) is a wholly-owned
subsidiary of a WKSI; or (4) is a majority-owned operating partnership
of a real estate investment trust (``REIT'') that qualifies as a WKSI.
[cir] General Instruction I.B.4--Rights Offerings, Dividend or
Interest Reinvestment Plans, and Conversions or Warrants and Options.
An issuer may register securities to be offered upon exercise of
outstanding rights, under a dividend or interest reinvestment plan, or
upon the conversion of outstanding convertible securities or the
exercise of outstanding warrants or options, if certain conditions are
met.
[cir] General Instruction I.B.6--Limited Primary Offerings by
Certain Other Registrants. An issuer that is not a shell company may
register any primary offering if it is exchange-listed and the
aggregate market value of securities sold by or on behalf of the issuer
under the instruction during the 12 months immediately prior to, and
including, the sale is no more than one-third of the issuer's public
float.
Form S-3's transaction requirements specify that the form can be
used for resale offerings only under the following circumstances:
<bullet> General Instruction I.B.1--Primary Offerings by Certain
Registrants.\63\ An issuer may register resales of outstanding
securities if the issuer has a public float of at least $75 million.
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\63\ Although General Instruction I.B.1 is titled ``Primary
Offerings by Certain Registrants,'' the instruction, in addition to
permitting primary offerings, permits registration of ``outstanding
securities to be offered for cash for the account of any person
other than the registrant'' if the issuer's public float is $75
million or more.
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<bullet> General Instruction I.B.3--Transactions Involving
Secondary Offerings. If an issuer does not have a public float of at
least $75 million, resales of outstanding securities can be registered
on Form S-3 if the securities are listed on a national securities
exchange or quoted on the automated quotation system of a national
securities association.\64\
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\64\ The reference in General Instruction I.B.3 to securities
being ``quoted on the automated quotation system of a national
securities association'' is a reference to The Nasdaq Stock Market
LLC (``Nasdaq'') before Nasdaq became a national securities
exchange. Because Nasdaq is now a national securities exchange, this
language has no effect. Accordingly, a class of securities to be
offered in reliance on General Instruction I.B.3 must be listed on a
national securities exchange.
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In addition, General Instruction I.B.5 provides that Form S-3 may
not be used to register offerings of asset-backed securities, as
defined in 17 CFR 229.1101(c).
Finally, Form S-3 has instructions that specify circumstances under
which certain subsidiaries are eligible to use the form.\65\ In
addition to the permissible offerings by subsidiaries identified in
General Instruction I.B.2 (with respect to wholly-owned subsidiaries of
WKSIs and majority-owned operating partnerships of REITs that qualify
as WKSIs), General Instruction I.C provides that majority-owned
subsidiaries may register certain offerings on Form S-3 if:
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\65\ The definition of WKSI under 17 CFR 230.405 (``Rule 405'')
also allows majority-owned subsidiaries of WKSIs to be treated as
WKSIs for purposes of certain offerings. We discuss the WKSI status
of these issuers and our related proposed amendments in section II.B
below.
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<bullet> the issuer-subsidiary itself meets the registrant
requirements and the applicable transaction requirement; \66\
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\66\ See Form S-3, General Instruction I.C.1.
---------------------------------------------------------------------------
<bullet> the parent of the issuer-subsidiary meets the registrant
requirements and the conditions of General Instruction I.B.2 are met;
\67\
---------------------------------------------------------------------------
\67\ See Form S-3, General Instruction I.C.2.
---------------------------------------------------------------------------
<bullet> the parent of the issuer-subsidiary meets the registrant
requirements and the applicable transaction requirement, and provides a
full and unconditional guarantee, as defined in 17 CFR 210.3-10 (``Rule
3-10 of Regulation S-X''), of the payment obligations on the securities
being registered, and the securities being registered are non-
convertible securities, other than common equity; \68\
---------------------------------------------------------------------------
\68\ See Form S-3, General Instruction I.C.3.
---------------------------------------------------------------------------
<bullet> the parent of the issuer-subsidiary meets the registrant
requirements and the applicable transaction requirement, and the
securities of the issuer-subsidiary being registered are full and
unconditional guarantees, as defined in Rule 3-10 of Regulation S-X, of
the payment obligations on the parent's non-convertible securities,
other than common equity, being registered; \69\ or
---------------------------------------------------------------------------
\69\ See Form S-3, General Instruction I.C.4.
---------------------------------------------------------------------------
<bullet> the parent of the issuer-subsidiary meets the registrant
requirements and the applicable transaction requirement, and the
securities of the issuer-subsidiary being registered are guarantees of
the payment obligations on the non-convertible securities, other than
common equity, being registered by another majority-owned subsidiary of
the parent where the parent provides a full and unconditional
guarantee, as defined in Rule 3-10 of Regulation S-X, of such non-
convertible securities.\70\
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\70\ See Form S-3, General Instruction I.C.5.
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For convenience, throughout the remainder of this release, we refer
to the offerings involving parent or subsidiary guarantees permitted
under General Instructions I.C.3, I.C.4, and I.C.5 as ``Guarantee-
Related Offerings.''
b. History of Short-Form Registration
The Commission first introduced short-form registration ``in the
nature of
[[Page 31031]]
an experiment'' with Form S-7 in 1967.\71\ Unlike other forms, Form S-7
permitted eligible issuers to omit certain information about the
issuer, such as property descriptions, pending legal proceedings, and
director and executive compensation. To use the form, issuers had to
have a class of equity securities registered under section 12(b) or (g)
of the Exchange Act and had to be current and timely in their Exchange
Act reporting for at least five years.\72\ Issuers also had to satisfy
other qualitative criteria related to business continuity,\73\ board
stability,\74\ solvency,\75\ financial performance,\76\ and dividend
coverage.\77\ The rationale for this short-form registration statement
was that the omitted information was already available through the
issuer's Exchange Act reports, making its inclusion in the registration
statement unnecessary.\78\
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\71\ Adoption of Short Form for Registration of Securities of
Certain Issuers and Amendment of Rule 174, Release No. 33-4886 (Nov.
29, 1967) [32 FR 17933 (Dec. 15, 1967)] (``Form S-7 Release''). The
Commission had previously adopted a registration statement
designated Form S-7 in 1947 to be used by the International Bank of
Reconstruction and Development. See Adoption of Form S-7, Release
No. 33-3238 (July 8, 1947) [12 FR 4531 (July 10, 1947)]. This form
was rescinded in 1950. See Bretton Woods Agreement, Release No. 33-
3364 (Jan. 9, 1950) [15 FR 280 (Jan. 17, 1950)].
\72\ Form S-7 was available to listed issuers with a class of
common equity securities registered under section 12(b) and unlisted
domestic issuers that had a class of equity securities registered
under section 12(g). See Form S-7 Release.
\73\ The registrant was required to have been engaged in
business of substantially the same general character since the
beginning of the last five fiscal years.
\74\ The issuer's board of directors had to have been directors
of the registrant during each of the last three fiscal years.
\75\ The issuer and its subsidiaries could not have, during the
prior 10 years, defaulted in the payment of any dividend or sinking
fund installment on preferred stock, or in the payment of any
principal, interest, or sinking fund installment on any indebtedness
for borrowed money, or in the payment of rentals under long term
leases.
\76\ The issuer and its consolidated subsidiaries had to have
had sales or gross revenues of at least $50 million for the prior
fiscal year and a net income, after taxes but before extraordinary
items net of tax effect, of at least $2.5 million for the prior
fiscal year, and of at least $1 million for each of the preceding
four fiscal years.
\77\ If the securities to be registered were common stock or
securities convertible into common stock, the issuer had to have
earned in each of the prior five fiscal years any dividends paid in
each such year on all classes of securities. In addition, if the
issuer paid a stock dividend in any of such fiscal years, the
aggregate amount transferred from surplus to capital in respect of
each such dividend had to have been charged only to the earned
surplus account and been equal to the aggregate fair market value of
the stock issued as such dividend.
\78\ See Form S-7 Release (noting that ``[t]he form represents a
closer integration of the requirements of the [Securities Act] and
the [Exchange Act]'' and that ``prospectuses and registration
statements on this form will be substantially shorter than
heretofore and will, therefore, be substantially easier both for the
issuer to prepare and for the Commission to process'').
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Over time, the Commission has periodically amended its rules and
forms to broaden the availability of short-form registration and shelf
offerings. In the Commission's 1969 Disclosure Policy Study led by
Commissioner Francis Wheat (often referred to as the ``Wheat Report''),
the Commission recommended a ``substantial expansion'' of short-form
registration.\79\ In response, the Commission broadened short-form
eligibility by decreasing Form S-7's five-year Exchange Act reporting
requirement to three years and eliminating or easing certain
qualitative criteria.\80\
---------------------------------------------------------------------------
\79\ Francis M. Wheat, Disclosure to Investors--A Reappraisal of
Administrative Policies Under the '33 and '34 Securities Acts, at
67-68 (1969), available at <a href="https://www.sechistorical.org/museum/galleries/tbi/gogo_d.php">https://www.sechistorical.org/museum/galleries/tbi/gogo_d.php</a>.
\80\ See Adoption of Amendments to Form S-7, Release No. 33-5100
(Nov. 12, 1970) [35 FR 228 (Nov. 24, 1970)]. Specifically, the
Commission eliminated the business continuity requirement and eased
the board stability requirement (by specifying that a majority of
the existing board must have been directors of the issuer or a
predecessor for each of the last three, rather than five, fiscal
years) and the financial performance requirement (eliminating the
requirement to have had gross revenues of at least $50 million for
the prior fiscal year and replacing the requirement to have had net
income of at least $2.5 million in the last fiscal year and $1
million for each of the last five fiscal years with a requirement to
have had net income of $500,000 in each of the last five fiscal
years).
---------------------------------------------------------------------------
That same year, the Commission further expanded short-form
registration by adopting Form S-16, which increased the scope of
offerings available to issuers eligible to use Form S-7.\81\
Specifically, Form S-16 allowed these issuers to register secondary
offerings of securities listed on a national securities exchange,
conversions of convertible securities, and warrant exercises.\82\
Unlike Form S-7, Form S-16 allowed incorporation by reference of an
issuer's Exchange Act reports, including forward incorporation, and
required fewer disclosures.\83\
---------------------------------------------------------------------------
\81\ See Adoption of Form S-16 for Registration of Securities to
be Offered in Specified Transactions and Amendment of Rules 427 and
429, Release No. 33-5117 (Dec. 23, 1970) [36 FR 777 (Jan. 16,
1971)].
\82\ See id.
\83\ See id.
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In 1976, the Commission again amended Form S-7 to extend its
availability--and, by extension, that of Form S-16--to a larger number
of issuers.\84\ The amendments made Form S-7 available to issuers with
a class of debt securities registered under section 12(b) as well as
issuers with a section 15(d) reporting obligation. They also permitted
use by successor issuers and certain majority-owned subsidiaries of
Form S-7 eligible parents, while broadening eligibility by reducing the
Exchange Act reporting timeliness requirement from three years to one
year. In addition, the amendments eliminated the board stability and
dividend coverage requirements and eased the financial performance
requirement.\85\ The Commission also retained certain safeguards--
including the requirement that issuers have filed all Exchange Act
reports for 36 months--``to assure that sufficient information about
registrants using the form is available to the investing public through
the Exchange Act reporting system.'' \86\
---------------------------------------------------------------------------
\84\ See 1976 Amendments to Forms S-7 and S-16.
\85\ See supra notes 73-77 and accompanying text for a
description of the qualitative issuer requirements of Form S-7. The
amendments also made Form S-7 available for certain exchange offers.
See 1976 Amendments to Forms S-7 and S-16.
\86\ Id.
---------------------------------------------------------------------------
In 1978, the Commission further expanded the scope of short-form
registration by amending Form S-16 to permit primary cash underwritten
offerings by any Form S-7 eligible issuer with a public float of at
least $50 million.\87\ The amendments also allowed offerings by
majority-owned subsidiaries whose securities were fully and
unconditionally guaranteed by a parent meeting the $50 million public
float threshold. The Commission characterized these amendments as
``extremely important,'' noting that they were expected to ``reduce
registration costs and thus the costs of raising capital, facilitate
timely access to the capital markets, make more meaningful the periodic
reporting requirements of the Exchange Act and eliminate needless
duplication of disclosure which results in increased costs to
investors.'' \88\ At the same time, the Commission explained that the
$50 million public float requirement was intended to limit eligibility
to ``a small top tier of companies . . . which usually provide high
quality corporate communication documents, including [Exchange] Act
reports, and whose corporate information is widely disseminated because
members of this class of registrants are widely followed by debt and
equity analysts.'' \89\
---------------------------------------------------------------------------
\87\ 1978 Amendments to Short-Form Registration.
\88\ Id. at 16673.
\89\ Id. (internal quotation marks omitted) (quoting The Report
of the Advisory Committee on Corporate Disclosure to the Securities
and Exchange Commission (Nov. 3, 1977), Committee Print 95-29, House
Committee on Interstate and Foreign Commerce, 95th Cong., 1st
Sess.). With respect to the $50 million public float requirement in
particular, the Commission stated that ``this requirement will
provide some assurance that, in addition to wide dissemination of
information about such companies in the market place, securities
analysts will follow companies of this size.'' Id. Although the
Commission recognized that ``[t]he lack of interest of securities
professionals in a company does not mean necessarily that
information about that company is not readily available or that the
public information is of inferior quality,'' it further noted that
``professional interest should help assure market reaction to
material information about a company and thereby alleviate the need
to provide the information directly to offerees when securities are
registered on Form S-16 for a primary offering.'' Id.
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[[Page 31032]]
In 1982, the Commission replaced Forms S-7 and S-16 with Forms S-2
and S-3 as part of adopting the ``integrated disclosure system.'' \90\
Form S-2 allowed any issuer that had been an Exchange Act reporting
company for at least 36 months (and had timely filed its reports during
the prior 12 calendar months) to register any transaction, other than
an exchange offer, on a short-form basis.\91\ Similar to Form S-7,
instead of providing all required disclosures directly in the
prospectus, issuers that qualified to use the form could choose to
either (i) deliver a copy of the annual report to security holders with
the prospectus or (ii) present issuer-oriented information comparable
to that required to be included in such annual report in the
prospectus. In either case, the more complete issuer information
required by the form was incorporated by reference into the prospectus
from the issuer's most recent annual report on Form 10-K. Form S-2 did
not permit forward incorporation; accordingly, updating amendments
(which required Commission or staff action to become effective) had to
be filed for ongoing offerings.\92\
---------------------------------------------------------------------------
\90\ Adoption of Integrated Disclosure System, Release No. 33-
6383 (Mar. 3, 1982) [47 FR 11380 (Mar. 16, 1982)] (``Integrated
Disclosure Adopting Release'') (implementing an integrated
disclosure system by, among other things, ``expan[ding] and
reorganiz[ing] . . . Regulation S-K as the repository for the
uniform disclosure requirements of documents filed with the
Commission under the Securities Act and the [Exchange Act]'').
\91\ The Commission initially sought public comment on whether
to add a market criterion, such as public float, as a condition of
Form S-2 eligibility. See Proposed Comprehensive Revision to System
for Registration of Securities Offerings, Release No. 33-6235 (Sept.
2, 1980) [45 FR 63693 (Sept. 25, 1980)] (``1980 Proposed
Revisions''). The Commission determined not to move forward with
such a requirement, stating that although it ``believes such
criteria, which ensure adequate information dissemination, are
necessary where, as in the case of an offering on Form S-3, much of
the underlying disclosure is not delivered . . . , with Form S-2
there is delivery of the basic disclosure documents and therefore
the Commission believes that requirement can be deleted.'' 1981
Reproposal at 41912.
\92\ The Commission rescinded Form S-2 in 2005 because requiring
physical delivery of Exchange Act reports had ``become outdated in
view of the introduction of EDGAR, other technological developments,
and the rapid dissemination of information in the market.''
Securities Offering Reform Adopting Release at 44782. The Commission
also stated that Form S-2 had become ``superfluous'' in light of
concurrent amendments to Form S-1 that allowed certain Exchange Act
reporting issuers to incorporate by reference into Form S-1
information from previously filed Exchange Act reports and
documents. Id.
---------------------------------------------------------------------------
As initially adopted, Form S-3 permitted registration of any
primary or secondary offering if the issuer had, among other
requirements: (1) been subject to Exchange Act reporting for at least
36 months; (2) timely filed its Exchange Act reports for the 12 months
prior to filing the registration statement; and (3) at least $150
million in public float, or, alternatively, at least $100 million in
public float if the annual trading volume of such stock was at least
three million shares.\93\ An issuer also could register certain
specific transactions on Form S-3 without regard to public float,
including primary offerings of investment grade non-convertible debt or
preferred stock, secondary offerings of a class of securities listed on
a national securities exchange or quoted on the Nasdaq interdealer
quotation system, rights offerings to shareholders, offerings of
securities issuable upon exercise of warrants or upon conversion of
other outstanding securities, and offerings pursuant to dividend and
interest reinvestment plans.\94\
---------------------------------------------------------------------------
\93\ See Integrated Disclosure Adopting Release.
\94\ Id.
---------------------------------------------------------------------------
The Commission adopted Form S-3 ``in reliance on the efficient
market theory,'' \95\ with registrant and transaction requirements
designed to ``relat[e] short-form registration to the existence of
widespread following in the marketplace.'' \96\ Based on commenter
input, the Commission explained that ``a test based on the registrant's
[public] float . . . is an appropriate measure of marketplace
following'' and determined that ``a [public] float of $150 million is
the appropriate level at which short-form registration should be
allowed.'' \97\
---------------------------------------------------------------------------
\95\ Id. at 11382.
\96\ Id. at 11384.
\97\ Id.
---------------------------------------------------------------------------
c. History of Shelf Registration
At the same time it adopted Forms S-2 and S-3 in 1982, the
Commission also adopted Rule 415 as a ``temporary rule.'' \98\ Rule 415
conditionally permitted shelf registration and codified Commission
staff practice that had informally permitted shelf registration prior
to that time.\99\ The Commission permanently adopted Rule 415 in 1983
after it concluded that the rule ``has operated efficiently and has
provided registrants with important benefits in their financings, most
notably cost savings.'' \100\ In doing so, the Commission acknowledged
commenters' concerns regarding the ``adequacy of disclosure and due
diligence'' \101\ and addressed those concerns by ``limiting the Rule
to primary offerings of securities qualified to be registered on Form
S-3 or F-3 and to traditional shelf offerings.'' \102\ The Commission
noted that ``[t]he integrated disclosure system addresses concerns
about the quality and timeliness of disclosure by ensuring that the
marketplace is provided with a continuous stream of high quality
corporate information about registrants widely followed in the
marketplace.'' \103\ The Commission further stated that ``[f]or
registrants not eligible to use short form registration, . . . concerns
about disclosure and due diligence outweigh the benefits of Rule 415.''
\104\
---------------------------------------------------------------------------
\98\ See id. at 11394.
\99\ This staff practice was set forth in a release commonly
referred to as ``Guide 4,'' which was published in 1968. See Guides
for Preparation and Filing of Registration Statements, Release No.
33-4936 (Dec. 9, 1968) [33 FR 18617 (Dec. 17, 1968)]. Guide 4 set
forth the Division of Corporation Finance's view that the last
sentence of section 6(a) of the Securities Act, 15 U.S.C. 77f(a)
(``A registration statement shall be deemed effective only as to the
securities specified therein as proposed to be offered.''),
prohibited ``securities [to] be registered if there is no intention
to offer them within the proximate future.'' Id. Guide 4 also set
forth the Division's view that ``[t]here are, however, certain types
of deferred or extended offerings for which registration is
permitted or required'' (e.g., when the issuer proposed to engage in
a continuing acquisition program or in the case of securities
underlying exercisable options, warrants, or rights). Id.
\100\ Shelf Registration Adopting Release at 52890 (``The cost
savings are attributable to a number of factors, including
flexibility to respond to rapidly changing markets, reduced legal,
accounting, printing and other expenses and increased competition
among underwriters.'').
\101\ Id. at 52890. With respect to adequacy of disclosure,
commenters ``question[ed] the amount and quality of information
available, as well as whether investors receive it in time to make
investment decisions'' and ``express[ed] concern that [Rule 415]
contributes to deficiencies in the disclosure provided to investors
caused, in great part, by short form registration statements.'' Id.
at 52892. With respect to due diligence, commenters ``attribute[d]
concerns . . . largely to fast time schedules'' associated with
shelf offerings under Rule 415. Id. at 52892-93.
\102\ Id. at 52890. Commenters also expressed concerns about the
``institutionalization of the securities markets, impact on retail
distribution, increased concentration in the securities industry,
[and] effects on the secondary markets.'' Id. at 52893. The
Commission noted, however, that these concerns ``relate to economic
factors, such as volatile interest rates and other market forces,
which exist apart from Rule 415 and thus are not appropriate bases
on which to take action on the Rule.'' Id.
\103\ Id. With respect to registrants not eligible to use short-
form registration, ``[t]he Commission also note[d] that shelf
registration may not be as advantageous for such registrants because
they cannot rely on subsequently filed Exchange Act reports for
certain updating of the information in the shelf registration
statement.'' Id. at 52893-94.
\104\ Id.
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[[Page 31033]]
In 1992, the Commission amended Form S-3 to make it and, by
extension, shelf registration, available to a broader group of issuers
and classes of transactions.\105\ It increased the pool of eligible
issuers by shortening the requisite Exchange Act reporting history from
36 to 12 months for most issuers and reducing the public float
requirement from $150 million to $75 million.\106\ In proposing these
amendments, the Commission cited the success of Form S-3 and the
integrated disclosure system over the previous 10 years, which had
``achieved their intended effects of providing issuers efficient access
to the public securities markets without compromising investor
protection'' and ``improvement in the quality of ongoing Exchange Act
reporting.'' \107\ Among other things, the Commission noted that the
amendments ``would provide significant cost savings, efficiency and
flexibility for many issuers'' and, with respect to the expanded access
to shelf registration, ``allow[ ] significantly greater numbers of
issuers the flexibility to access the public securities markets on
demand without having to obtain additional clearance from the
Commission's staff,'' which would ``remove unnecessary regulatory
obstacles to capital raising.'' \108\
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\105\ Simplification of Registration Procedures for Primary
Securities Offerings, Release No. 33-6964 (Oct. 22, 1992) [57 FR
48970 (Oct. 29, 1992)] (``1992 Adopting Release'').
\106\ The Commission also eliminated the alternative test of
$100 million public float with annual trading volume of three
million shares because this test became unnecessary due to the lower
$75 million public float threshold.
\107\ Simplification of Registration Procedures for Primary
Securities Offerings, Release No. 33-6943 (July 16, 1992) [57 FR
32461, 32463 (July 22, 1992)] (``1992 Proposing Release'').
\108\ 1992 Adopting Release at 48971.
---------------------------------------------------------------------------
The 1992 amendments also permitted shelf registration of debt,
equity, and other securities on an unallocated basis and provided for
immediate effectiveness of Form S-3 registration statements for
dividend and interest reinvestment plans.\109\ The Commission suggested
that unallocated offerings may promote greater use of shelf offerings,
especially for common stock offerings. In this regard, the Commission
noted ``[t]he limited use of shelf registration for common stock,''
which it attributed to ``concerns by registrants about the market
effects from the overhang created by such registration, as well [as]
concerns that the market would view even a registration statement for
possible future sales of common stock as signaling management's view
that the price of the stock has reached a peak.'' \110\ The Commission
addressed these concerns by allowing issuers to identify the types of
securities covered by the registration statement without having to
identify the specific amount (either number of shares or dollar amount)
of each category to be offered (these registration statements are
commonly referred to as ``universal shelf registration statements'').
---------------------------------------------------------------------------
\109\ In an unallocated shelf offering, an issuer is permitted
to disclose the various types and categories of securities (both
debt and equity) covered by the registration statement without
assigning a specific dollar amount to each category to be offered.
In such offering, the registration statement lists the types of
securities covered and the prospectus supplement filed in connection
with a ``takedown'' offering from the shelf registration statement
specifies the amount of the particular security being offered.
\110\ 1992 Proposing Release at 32466. ``Overhang'' generally
refers to potential downward pressure on an issuer's stock price
that may occur when an issuer signals a willingness to sell
securities in the future by filing a shelf registration statement
and investors fear future dilution stemming from future issuances.
See, e.g., Mary C. Neary, SEC Rule 415: Resolving the Dilemma of
Shelf Registrations Creates Problems of Its Own, 3 Pace L. Rev. 275,
300 (1983) (``[N]ot knowing when a large block of stock will be sold
from the shelf, or the date, underwriter, or timing of future
offerings, creates what is known as an `overhang' problem, and
intensifies the downward pressure, effectively placing a lid on the
stock price.'').
---------------------------------------------------------------------------
The Commission further liberalized the shelf registration process
in several ways in a 2005 rulemaking titled ``Securities Offering
Reform.'' \111\ First, the Commission permitted a new category of
issuers, referred to as WKSIs, greater flexibility in registering their
securities offerings by allowing them to file shelf registration
statements on Form S-3 that are automatically effective upon filing
with the Commission.\112\ Second, the Commission adopted rules allowing
WKSIs using automatic shelf registration statements to pay filing fees
at any time (i.e., either in advance of a takedown or on a ``pay-as-
you-go'' basis at the time of each takedown).\113\ The ``pay-as-you-
go'' model enabled WKSIs to file shelf registration statements without
specifying a total dollar amount of securities to be offered. Third,
the Commission eliminated a provision in Rule 415 that limited the
amount of securities that could be registered for certain primary
offerings on Form S-3 to an amount reasonably expected to be offered
and sold within two years.\114\ Fourth, WKSIs were permitted to add new
classes of securities or securities of an eligible subsidiary to an
already effective automatic shelf registration statement by post-
effective amendment.\115\ Finally, the amendments eliminated certain
limitations imposed on ATM offerings by seasoned issuers.\116\
---------------------------------------------------------------------------
\111\ See Securities Offering Reform Adopting Release.
\112\ See 17 CFR 230.462(e); 17 CFR 239.13(d). The term ``WKSI''
and the benefits currently reserved for these issuers are discussed
in greater detail in section II.B below.
\113\ See 17 CFR 230.456(b).
\114\ See Securities Offering Reform Adopting Release at 44774-
75.
\115\ See 17 CFR 230.413(b). In general, securities cannot be
added to an effective registration statement. See 17 CFR 230.413(a).
\116\ Specifically, the Commission eliminated a requirement that
ATM offerings involve an underwriter and a requirement that an ATM
offering not exceed 10% of the issuer's public float if the offering
related to voting stock.
---------------------------------------------------------------------------
To further enhance issuers' access to the public markets, the
Commission in 2007 again amended the eligibility requirements of Form
S-3.\117\ These amendments allowed an even greater number of issuers to
conduct primary securities offerings on the form, and, in turn, to
conduct shelf offerings. Significantly, under these amendments, an
issuer could use Form S-3 to conduct primary shelf offerings without
regard to the size of its public float or the rating of its debt to be
offered if it satisfied the form's registrant requirements, was not a
shell company, was exchange-listed, and did not sell more than the
equivalent of one-third of its public float in primary offerings over
any period of 12 calendar months.
---------------------------------------------------------------------------
\117\ See Baby Shelf Adopting Release.
---------------------------------------------------------------------------
In further extending Form S-3 eligibility to a broader group of
issuers and allowing the use of Form S-3 without regard to an issuer's
public float, the Commission stated its ``belie[f] that extending Form
S-3 short-form registration to additional issuers should enhance their
ability to access the public securities markets.'' \118\ The Commission
also noted ``that such a measure would greatly enhance smaller public
companies' access to capital in the securities markets, with far less
burden and cost.'' \119\ In adopting these amendments, the Commission
emphasized ``the great advances in the electronic dissemination and
accessibility of company disclosure transmitted over the internet in
the last several years.'' \120\ The Commission, therefore, was
``persuaded that the technological advances that have revolutionized
communications between companies and the market should allow us to ease
the Form S-3 eligibility standards without undermining investor
protection or the integrity of the markets.'' \121\
---------------------------------------------------------------------------
\118\ Id. at 73535.
\119\ Id.
\120\ Id.
\121\ Id. at 73536.
---------------------------------------------------------------------------
Nonetheless, the Commission stated that it was not prepared at that
time ``to allow unlimited use of this form for
[[Page 31034]]
primary offerings by companies who do not have at least $75 million in
public float.'' \122\ In that regard, the Commission noted certain
concerns related to allowing smaller public companies to use shelf
registration. Those concerns included ``that the securities of smaller
public companies are comparatively more vulnerable to price
manipulation than the securities of larger public companies, and may
also be more prone to financial reporting error and abuses'' and ``that
the disclosure obligations and liability imposed by the federal
securities laws on smaller public companies are comparable, but not
identical, to the largest reporting companies.'' \123\
---------------------------------------------------------------------------
\122\ Id. at 73535.
\123\ Id. at 73536. In addition, although the Commission cited
certain technological advances as a reason for expanding Form S-3
eligibility, it also explained that ``[w]hile current technology
provides investors with access to information about publicly
reporting companies at an unprecedented level of ease and speed, it
does not guarantee that the market has fully absorbed and
synthesized all of the available information of a given company''
and that ``[t]echnology can facilitate and enhance market following,
but it does not ensure it.'' Id.
---------------------------------------------------------------------------
In part due to those concerns, the Commission stated that only a
``modest expansion of Form S-3 . . . eligibility'' was warranted at
that time.\124\ The Commission further explained, however, that it
``may revisit the appropriateness of the form restrictions at a later
time if our experience with this revised requirement suggests issuer
eligibility for primary offerings on Form S-3 . . . should be further
revised.'' \125\ The Commission has not further expanded shelf
offerings or Form S-3 eligibility since 2007.
---------------------------------------------------------------------------
\124\ Id. at 73534.
\125\ Id.
---------------------------------------------------------------------------
d. Public Views on Expanding Form S-3 Eligibility
Over the years, some market participants have advocated for
expanding Form S-3 eligibility to reduce compliance costs in connection
with registered offerings and to promote capital formation. Those
commentators have proposed different methods for accomplishing this
objective.
For example, in 2006, the Commission's Advisory Committee on
Smaller Public Companies recommended allowing all Exchange Act
reporting companies that had been reporting for at least one year and
were listed on a national securities exchange or quoted in the over-
the-counter market to use Form S-3.\126\ In response to a 2011
Commission proposing release, one commenter recommended eliminating
Form S-3's transaction requirements and permitting its use by issuers
that had reliably filed Exchange Act reports for at least one
year.\127\ Participants at the Commission's 2012 Government-Business
Forum on Small Business Capital Formation recommended permitting ``all
public companies (regardless of public float or exchange-traded status)
to utilize Form S-3 for primary and secondary offerings'' or
eliminating the one-third limit under General Instruction I.B.6 for
exchange-listed issuers.\128\ In 2015, another commentator supported
making Form S-3 available to any issuer current in its Exchange Act
reporting obligations, regardless of public float.\129\ At the ``Small
Cap Policy Roundtable: Reassessing the Framework for Small Public
Companies'' hosted by the Commission's Office of the Advocate for Small
Business Capital Formation, some participants recommended
reconsideration of: (1) the One-Year Seasoning requirement and the
requirement to have a Form 10-K on file to use Form S-3; (2) the $75
million public float requirement in General Instruction I.B.1 and
raising the related one-third limit in General Instruction I.B.6; (3)
whether failing to file a Form 8-K should result in a 12-month
ineligibility to use Form S-3; and (4) whether it makes sense to lose
Form S-3 eligibility over a limited omission of XBRL tags.\130\ Also in
2025, the New York City Bar Association recommended that all exchange-
listed issuers be permitted to register offerings in any amount on Form
S-3.\131\ More recently, a participant at the Commission's annual Small
Business Forum recommended that the Commission consider shortening the
One-Year Seasoning requirement, eliminating or reducing the $75 million
public float requirement in General Instruction I.B.1, and eliminating
or reducing the 12-month ineligibility that results from a late Form 8-
K filing.\132\ Various others commentators have recommended modernizing
the registration process or shelf eligibility without specifying the
manner for doing so.\133\
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\126\ Recommendation IV.P.3. of the Final Report of the Advisory
Committee on Smaller Public Companies (Apr. 23, 2006), at 68-72
(``[W]e recommend that the efficiencies associated with the use of
Form S-3 be made available to all companies that have been reporting
under the Exchange Act for at least one year, and are current in
their Exchange Act reporting at the time of filing. Additionally, we
recommend elimination of the current condition to the use of Form S-
3 that the issuer has timely filed all required reports in the last
year.''), available at <a href="http://www.sec.gov/info/smallbus/acspc/acspc-finalreport.pdf">http://www.sec.gov/info/smallbus/acspc/acspc-finalreport.pdf</a>.
\127\ See letter in response to Security Ratings, Release No.
33-9186 (Feb. 9, 2011) [76 FR 8946 (Feb. 16, 2011)] (``Security
Ratings Proposing Release'') from Securities Industry and Financial
Markets Association (Mar. 18, 2011).
\128\ 31st Annual Government-Business Forum on Small Business
Capital Formation, Final Report (Nov. 15, 2012), at 26, 28,
available at <a href="https://www.sec.gov/info/smallbus/gbfor31.pdf">https://www.sec.gov/info/smallbus/gbfor31.pdf</a>.
\129\ Legislative Proposals to Enhance Capital Formation and
Reduce Regulatory Burdens, Part II: Hearing Before the Subcomm. on
Capital Markets and Government Sponsored Enterprises, 114th Cong.
(2015) (Statement of David Weild) (``We would also support the
expansion of Form S-3 and other shelf registration approaches to
improve access to capital for smaller public companies that are
current with their SEC filings.''), available at <a href="https://financialservices.house.gov/uploadedfiles/hhrg-114-ba16-wstate-dweild-20150513.pdf">https://financialservices.house.gov/uploadedfiles/hhrg-114-ba16-wstate-dweild-20150513.pdf</a>.
\130\ See Transcript of Small Cap Policy Roundtable: Reassessing
the Framework for Small Public Companies at 26-27, 34-35 (June 18,
2025), available at <a href="https://www.sec.gov/files/small-cap-policy-roundtable-transcript.pdf">https://www.sec.gov/files/small-cap-policy-roundtable-transcript.pdf</a>.
\131\ See letter from New York City Bar Ass'n to The Hon. Paul
S. Atkins dated May 27, 2025 (``We recommend that the Commission
eliminate or increase the one-third public float limit in General
Instruction I.B.6 of Form S-3 or exempt issuers after some period of
time (e.g., one year after the company becomes eligible to file on
Form S-3).''), available at <a href="https://www.nycbar.org/reports/letter-to-sec-chairman-atkins-with-recommendations-for-rulemaking-and-guidance/">https://www.nycbar.org/reports/letter-to-sec-chairman-atkins-with-recommendations-for-rulemaking-and-guidance/</a>.
\132\ See Transcript of the 45th Annual Small Business Forum at
161-62 (Mar. 9, 2026), available at <a href="https://www.sec.gov/files/transcript-45th-sb-forum.pdf">https://www.sec.gov/files/transcript-45th-sb-forum.pdf</a>.
\133\ See, e.g., 44th Annual Small Business Forum, Final Report
(Apr. 10, 2025) (recommending that the Commission ``[s]treamline the
SEC registration process for smaller businesses''); Transcript of
the 44th Annual Small Business Forum (Apr. 10, 2025), comments of
Dave Lynn (encouraging the Commission to review smaller company
access to shelf registration), available at <a href="https://www.sec.gov/files/2025-SBF-508-Transcript.pdf">https://www.sec.gov/files/2025-SBF-508-Transcript.pdf</a>; 37th Annual Government-Business
Forum on Small Business Capital Formation, Final Report (Dec. 12,
2018) (forum participants recommending ``[i]ncreasing the companies
that can take advantage of Form S-3--whether listed on a national
exchange or not''), available at <a href="https://www.sec.gov/info/smallbus/gbfor37.pdf">https://www.sec.gov/info/smallbus/gbfor37.pdf</a>; Legislative Proposals to Enhance Capital Formation for
Small and Emerging Growth Companies, 113th Cong. (2014) (Statement
of Brian Hahn) (recommending ``[e]xpanded eligibility for Form S-3
to encompass a greater pool of small companies''), available at
<a href="https://financialservices.house.gov/uploadedfiles/hhrg-113-ba16-wstate-bhahn-20140409.pdf">https://financialservices.house.gov/uploadedfiles/hhrg-113-ba16-wstate-bhahn-20140409.pdf</a>.
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There also have been legislative attempts to expand access to Form
S-3 by allowing all exchange-listed issuers to register any offering on
the form, regardless of public float, and to allow non-exchange-listed
issuers to register on Form S-3 primary offerings of up to one-third of
their public float.\134\ Opponents of these proposals, however,
cautioned that such changes could ``allow companies to avoid SEC staff
review and risk increased fraud and market manipulation, particularly
for non-exchange traded companies.'' \135\
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\134\ Accelerating Access to Capital Act of 2017, H.R. 4529,
115th Cong. (2017); Accelerating Access to Capital Act of 2016, H.R.
2357, 114th Cong. (2015); Small Business Freedom to Grow Act of
2014, H.R. 4568, 113th Cong. (2014).
\135\ H.R. Rep. No. 115-576, at 9 (2017) (noting that
``[c]urrent restrictions for companies using Form S-3, which are
based on size and whether they are traded on an exchange, ensure
that they have timely information available to the public, ample
liquidity, and strong corporate governance standards,'' and
expressing the view that the proposed legislation ``would
dangerously expand the type of companies that are eligible to use .
. . Form S-3 to register their securities before selling them to the
public''), available at <a href="https://www.govinfo.gov/content/pkg/CRPT-115hrpt576/pdf/CRPT-115hrpt576.pdf">https://www.govinfo.gov/content/pkg/CRPT-115hrpt576/pdf/CRPT-115hrpt576.pdf</a>; see also Legislative Proposals
to Enhance Capital Formation for Small and Emerging Growth
Companies, 113th Cong. (2014) (Statement of Professor John C.
Coffee, Jr.) (expressing concern about allowing smaller issuers,
including those in the over-the-counter market and Pink Sheets, to
use Form S-3 for unlimited capital raising activities, but also
questioning whether the market would accept such offerings or
whether reputable underwriters would feel comfortable underwriting
such offerings), available at <a href="https://financialservices.house.gov/uploadedfiles/hhrg-113-ba16-wstate-jcoffee-20140409.pdf">https://financialservices.house.gov/uploadedfiles/hhrg-113-ba16-wstate-jcoffee-20140409.pdf</a>.
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[[Page 31035]]
2. Proposed Amendments
We are proposing to amend Form S-3's registrant requirements and to
eliminate the form's transaction requirements \136\ to simplify and
expand eligibility, thereby allowing significantly more issuers to
avail themselves of the form's flexibility to access the public
securities markets on demand.\137\
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\136\ Certain transaction-based requirements would continue to
apply to subsidiaries that rely on a parent's Form S-3 eligibility
to conduct offerings on Form S-3. See section II.A.2.c below for a
discussion regarding Form S-3 eligibility for subsidiaries.
\137\ We also recognize that our proposed expansion of Form S-3
eligibility would provide more issuers that register debt securities
subject to the Trust Indenture Act of 1939 (``Trust Indenture Act'')
[15 U.S.C. 77aaa et seq.] (``subject debt securities'') with greater
flexibility to comply with the Trust Indenture Act's trustee
qualification requirements. The Trust Indenture Act requires an
issuer that registers subject debt securities on Form S-1 to file in
the initial filing or a pre-effective amendment a trust indenture to
be qualified and related trustee statement of eligibility and
qualification. Section 305(b)(2) of the Trust Indenture Act [15
U.S.C. 77eee(b)(2)], however, permits the issuer to designate the
trustee on a delayed basis for a shelf offering and, as a result,
the issuer may file the trustee statement of eligibility and
qualification after the related registration statement, such as a
Form S-3, goes effective.
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With respect to the registrant requirements, the proposed
amendments would eliminate the ``One-Year Seasoning,'' ``Certain
Failures to Make Payments and Defaults,'' ``Electronic Filings,'' and
``Interactive Data Files'' eligibility requirements described
above.\138\ The proposed amendments would retain the ``Current in
Exchange Act Reporting'' and ``Timely in Exchange Act Reporting''
requirements and would add two new registrant requirements prohibiting
a subset of ``ineligible issuers,'' as that term is defined in Rule
405, and certain other types of issuers (as discussed in section
II.A.2.a.v below) from using Form S-3.
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\138\ See supra notes 52-60 and accompanying text.
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With respect to the transaction requirements, the proposed
amendments would eliminate those requirements, including the
requirement in General Instruction I.B.1 that the issuer have a public
float of $75 million or more to offer an unlimited amount of securities
for cash on Form S-3. As such, any issuer that meets the proposed
registrant requirements would be eligible to use Form S-3 for any
primary or secondary offering of the issuer's securities.\139\ Each of
the proposed amendments is discussed, in turn, below.\140\
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\139\ As is currently the case, Form S-3 would not be available
for exchange offers or business combination transactions under the
proposed amendments.
\140\ We are proposing various amendments to simplify and
modernize Form S-3. First, we are proposing to amend Item 9 and
eliminate Item 12(a)(3) of Form S-3. Item 9 requires an issuer to
``[f]urnish the information required by Item 202 of Regulation S-K
(Sec. 229.202 of this chapter), unless capital stock is to be
registered and securities of the same class are registered pursuant
to Section 12 of the Exchange Act,'' in which case an issuer must
(in accordance with Item 12(a)(3)) incorporate by reference ``the
description of such class of securities which is contained in a
registration statement filed under the Exchange Act, including any
amendment or reports filed for the purpose of updating such
description.'' We are proposing to eliminate Item 12(a)(3) and amend
Item 9 to specify that 17 CFR 229.202 (``Item 202 of Regulation S-
K'') disclosure should be provided in response to that item
regardless of whether capital stock that is registered under section
12 of the Exchange Act is to be registered on the form. We note that
issuers could elect to incorporate by reference the information
required by Item 9 pursuant to Item 12(d). Item 12(d) currently
permits an issuer to satisfy the disclosure requirements of Items 3
through 11 to be incorporated by reference from documents filed
pursuant to Section 13(a), 14, or 15(d) of the Exchange Act. Second,
we propose to amend Item 12(d) to also permit incorporation by
reference from any Securities Act or Exchange Act filing in order to
give issuers greater flexibility to incorporate by reference on Form
S-3. Third, we also are proposing revisions to simplify Item 11(b)
of Form S-3 by removing references to specific filings that are
required to be incorporated by reference for the purpose of
including certain financial statements required by that item. We do
not believe it is necessary to specify the forms that need to be
incorporated by reference. Instead, we believe issuers should have
the flexibility to incorporate the requisite financial statements
from any filing that is made with the Commission.
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a. Form S-3 Registrant Requirements
i. Exchange Act Reporting (One-Year Seasoning, Current, and Timely
Requirements)
We propose to eliminate the One-Year Seasoning requirement (which
currently is in General Instruction I.A.3(a)) that requires an issuer
to have been an Exchange Act reporting company for at least 12 calendar
months prior to filing a Form S-3 because, as discussed in section I.B
above, we believe an investor's ability to obtain issuer-specific
information in Exchange Act reports does not depend on the length of an
issuer's reporting history. Rather, the ability to obtain such
information depends on whether an issuer is current and timely with
respect to its reporting obligations. Under the proposed amendments, an
issuer would immediately become eligible to use Form S-3 upon having a
class of securities registered pursuant to section 12(b) or 12(g), or
becoming subject to section 15(d), of the Exchange Act.\141\
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\141\ Thus, under the proposed amendments, an issuer could
become an Exchange Act reporting company--for example, by
registering a class of equity securities on Form 10 under section
12(g) of the Exchange Act--and then immediately conduct its first
registered offering on Form S-3.
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Although we are proposing to eliminate the One-Year Seasoning
requirement, we are proposing to retain the Current and Timely in
Exchange Act Reporting requirements.\142\ Specifically, proposed
General Instruction I.A.1.a would set forth the requirement that an
issuer be subject to the Exchange Act's reporting requirements, and
proposed General Instructions I.A.1.b and c, respectively, would set
forth the Current and Timely in Exchange Act Reporting requirements.
Accordingly, under the proposed amendments, Form S-3 eligibility would
be contingent on (among other things) an issuer being subject to the
Exchange Act's reporting requirements and having timely filed all
reports and other materials required to be filed under sections 13(a),
14(a), 14(c), and 15(d) of the Exchange Act, other than specified
reports on Form 8-K, during the preceding 12 calendar months and any
portion of a month immediately preceding the filing of a Form S-3, or,
if an issuer had been subject to such requirements for less than 12
calendar months, during the time the issuer had been required to file
such reports and materials.\143\
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\142\ At least one observer has previously recommended that the
Commission eliminate the timeliness requirement altogether. See 2006
Report of the Advisory Committee on Smaller Public Companies, supra
note 126.
\143\ The proposed amendments would codify the staff's
longstanding interpretation that for purposes of determining whether
a registrant has timely filed all reports required to be filed
during the past twelve calendar months only reports under section
13(a) or 15(d) of the Exchange Act and materials under sections
14(a) and 14(c) of the Exchange Act, other than specified reports on
Form 8-K, would be considered. As is the case currently, the
timeliness requirement would not apply to reports that are required
solely pursuant to Item 1.01, 1.02, 1.04, 1.05, 2.03, 2.04, 2.05,
2.06, 4.02(a), or 5.02(e) of Form 8-K. We note that the Commission
recently issued a proposal that would allow registrants to elect to
report on a semiannual basis on a new Form 10-S in lieu of reporting
quarterly on Form 10-Q. See Semiannual Reporting, Release No. 33-
11414 (May 5, 2026) [91 FR 24968 (May 7, 2026)] (``Semiannual
Reporting Proposal''). If that proposal is adopted, an issuer that
elects to file semiannually would be required to comply with the
timeliness requirement with respect to its Form 10-S filings rather
than with respect to Form 10-Q filings. The staff position discussed
in this footnote and any other staff guidance, statements, or
positions referenced in this release, represent the views of
Commission staff and are not a rule, regulation, or statement of the
Commission. The Commission has neither approved nor disapproved the
views reflected in these staff positions or the content of these
staff statements and, like all staff positions or statements, they
have no legal force or effect, do not alter or amend applicable law,
and create no new or additional obligations for any person.
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[[Page 31036]]
We continue to believe issuers must be current and timely with
respect to their Exchange Act reports at the time of filing a
registration statement on Form S-3 because short-form and shelf
registration are premised on the availability of information about an
issuer.\144\ If an issuer is not current in its Exchange Act reporting
obligations, then the issuer-specific information that may be needed to
make an investment decision would not be available. Moreover, where
Exchange Act reports that are required to be incorporated by reference
into a Form S-3 have not been filed, the issuer likely would not be in
compliance with section 10 of the Securities Act.\145\ Further, we
believe that conditioning Form S-3 eligibility on the timely filing of
Exchange Act reports establishes a compelling incentive for issuers to
timely file their Exchange Act reports, thereby helping ensure
continuous availability of issuer-specific information even after the
shelf registration statement has become effective and in the period
during which an issuer conducts its offerings and at other times.
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\144\ See 1981 Reproposal at 41913 (stating that ``Form S-3
eligibility criteria are based on the Commission's belief that
information about companies using the form already is known or is so
readily available that it need not be repeated in a prospectus'').
\145\ See 15 U.S.C. 77j. We recognize that not all Exchange Act
reports required to be filed during the 12 calendar months preceding
the filing of a Form S-3 are incorporated by reference into the Form
S-3 and therefore are not part of the prospectus. Item 12 of Form S-
3 requires incorporation by reference of reports filed since the end
of the latest fiscal year for which a Form 10-K was required to be
filed, which could be less than a 12-calendar month period. For
example, assume a calendar-year-end issuer files its Form 10-K for
fiscal year end 2025 on Mar. 3, 2026. If the issuer files a Form S-3
on Aug. 27, 2026, it would be required to incorporate by reference
all reports required to have been filed since Dec. 31, 2025, which
would be less than a 12-calendar month period. Nonetheless, we
believe the 12-calendar month lookback period is appropriate because
it helps ensure that all information required to be incorporated by
reference into the Form S-3 is timely filed and therefore available
to investors.
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Consistent with the Commission staff's current practice of not
objecting to use of Form S-3 when an untimely filing has been made
under certain limited circumstances, we also propose to amend the
form's instructions to provide that an issuer would remain Form S-3
eligible notwithstanding an untimely filing having been made during the
relevant lookback period so long as: (a) the filing was made within
seven calendar days of the original due date (where 17 CFR 240.12b-25
(``Rule 12b-25'') applies, the seven calendar days would be calculated
from the filing's original due date and not from the end of the time
period prescribed under Rule 12b-25 \146\) and (b) the issuer made only
one untimely filing during the relevant lookback period.\147\ We want
to encourage issuers to make their Exchange Act filings on a timely
basis. At the same time, however, we believe loss of Form S-3
eligibility can be a disproportionately harsh consequence for a single
untimely filing during a 12-month period. Accordingly, we propose to
permit issuers to remain Form S-3 eligible when the conditions
described herein are satisfied. We believe a seven-day period provides
a reasonable amount of time to file the missed report or other material
while helping ensure investors receive necessary information within a
reasonable timeframe.
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\146\ That is, if an issuer attempts to rely on Rule 12b-25 but
is unable to comply with the requirements of that rule, the seven
calendar days would be calculated from the filing's original due
date and not from the end of the period prescribed under Rule 12b-
25. If, on the other hand, an issuer complies with Rule 12b-25 with
respect to a report, such report is deemed to be filed on the
prescribed due date and, therefore, the issuer would not need to
rely on the seven-calendar-day grace period described in this
section.
\147\ If the seventh calendar day falls on a Saturday, Sunday,
or holiday, the report or other material would need to have been
filed no later than the first business day immediately following the
Saturday, Sunday, or holiday. Under General Instruction G.(3) of
Form 10-K, a reporting issuer subject to the proxy rules may omit
Part III information from the Form 10-K if that information is
included in the issuer's proxy statement filed with the Commission
within 120 calendar days after the fiscal year end. This instruction
treats the omitted Part III information as timely filed on the Form
10-K due date. If the issuer fails to file this information with its
proxy statement or fails to amend its Form 10-K within 120 calendar
days, the Form 10-K is considered untimely. The proposed seven-day
period would apply only to the original Form 10-K due date and not
to the additional 120-day period provided by General Instruction
G.(3).
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The One-Year Seasoning requirement may make registered offerings
less attractive or feasible for new Exchange Act reporting companies.
Currently, such issuers must file a new Securities Act registration
statement on Form S-1 for any registered offerings conducted during
their first year of being an Exchange Act reporting company despite
having already filed a Securities Act or Exchange Act registration
statement through which the issuer became an Exchange Act reporting
company that contained much of the same information that would be in
the new Form S-1. Further, these newly public companies cannot conduct
shelf offerings, making it difficult for them to take advantage of
favorable market conditions to efficiently raise capital from the
public markets or to meet unexpected capital needs during this one-year
period. Eliminating the One-Year Seasoning requirement would allow
issuers to use Form S-3 and conduct shelf offerings immediately after
becoming an Exchange Act reporting company.\148\
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\148\ To the extent issuers are engaged in a registered offering
while contemplating a subsequent registered offering, they should
consider whether they have present disclosure obligations with
respect to such subsequent offering. For example, such issuers
should consider the adequacy of their discussion of liquidity and
capital resources under 17 CFR 229.303(b)(1)(i) and (ii) of
Regulation S-K, the disclosure regarding their intended use of
proceeds under 17 CFR 229.504 of Regulation S-K, and any other
material effects that the subsequent registered offering may have on
the investors of the issuers.
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We recognize that eliminating the One-Year Seasoning requirement
may raise concerns about extending Form S-3 eligibility to issuers
without a demonstrated ability to comply with their Exchange Act
reporting obligations. Specifically, there may be a view that issuers
are more likely to become delinquent in their Exchange Act reporting
obligations during their first year as a reporting company and,
therefore, they should not be able to use Form S-3 until they have
demonstrated an ability to comply with the Exchange Act. Despite these
concerns, we do not believe an initial seasoning period is necessary.
Consistent with the Commission's longstanding approach, the
essential aspect of Form S-3 and shelf eligibility is whether requisite
information about an issuer is available to investors at the time they
make an investment decision. Although there is a risk that an issuer
without a demonstrated ability to comply with its Exchange Act
reporting obligations will become delinquent in its reporting
obligations while it has an effective registration statement on Form S-
3, we do not believe this possibility alone should preclude an issuer
from filing a Form S-3 at a time when it is otherwise eligible to do so
as there are other investor protection measures in place.\149\ To the
extent an issuer were to
[[Page 31037]]
become delinquent before conducting a takedown from a shelf
registration statement, it would still have to assess whether the
registration statement contained all of the required information and
whether the prospectus contained all information required under the
Securities Act.\150\ Further, as discussed below, failure to provide
the material information required to be included in the registration
statement would raise liability concerns under the Federal securities
laws. Our proposed prohibition of certain ineligible issuers from using
Form S-3, as discussed in section II.A.2.a.iv below, also may help
address concerns about the types of issuers that may pose a higher risk
of non-compliance with their Exchange Act reporting obligations.
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\149\ We do not believe that satisfaction of an initial Exchange
Act compliance period is premised on the notion that an issuer's
historical compliance with its Exchange Act reporting obligations is
indicative of, or provides a degree of certainty regarding, future
compliance.
\150\ Although we do not believe the risk of future non-
compliance with Exchange Act reporting requirements warrants
retaining the One-Year Seasoning requirement for the reasons
discussed above, we nevertheless considered whether Form S-3
eligibility should be reassessed at the time of a takedown in
addition to assessing at the time of initial filing and related
updates under section 10(a)(3) of the Securities Act to ensure
issuers remain current and timely (among the other Form S-3
eligibility requirements) at the time of a takedown. See 15 U.S.C.
77j(a)(3) (providing that ``when a prospectus is used more than nine
months after the effective date of the registration statement, the
information contained therein shall be as of a date not more than
sixteen months prior to such use, so far as such information is
known to the user of such prospectus or can be furnished by such
user without unreasonable effort or expense''). We do not believe
such reassessment is necessary or appropriate. We believe the
liability provisions of the Federal securities laws sufficiently
incentivize issuers to conduct takedowns only when in compliance
with the form's eligibility requirements and other requirements
under the Federal securities laws. In addition, we believe that
adding a reassessment requirement at the time of each takedown would
impose an unnecessary burden on issuers and introduce unwarranted
regulatory uncertainty. Accordingly, we are not proposing to require
reassessment at the time of a takedown, but we seek comment on this
issue. But see infra note 206 and accompanying text (noting that
certain types of issuers would be prohibited from using Form S-3 at
any time they become such type of issuer).
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Under the proposed amendments, some issuers using Form S-3 may have
shorter Exchange Act reporting histories than Form S-3 eligible issuers
do today. Nonetheless, we do not believe that such potential
differences in issuers' Exchange Act reporting histories would pose
heightened investor protection risks. As an initial matter, all Form S-
3 issuers would be required to incorporate by reference (or otherwise
disclose) the same issuer-related information and remain subject to the
same liability standards as today.\151\ For example, currently Item
12(a)(1) of Form S-3 requires an issuer to incorporate by reference its
latest annual report on Form 10-K that contains audited financial
statements for the registrant's latest fiscal year for which a Form 10-
K was required to be filed and any Exchange Act reports filed since the
end of such fiscal year. Under the proposed amendments, an issuer that
had not been required to file a Form 10-K since becoming subject to
section 13(a) or 15(d) of the Exchange Act would instead incorporate by
reference a Securities Act or Exchange Act filing that contains ``Form
10 information'' \152\ with all financial statements required by
Regulation S-X. In addition, issuers would be required to provide
``such further material information, if any, as may be necessary to
make the required statements, in the light of the circumstances under
which they are made, not misleading.'' \153\ Under Item 11(a) of Form
S-3 (as revised by the proposed amendments), issuers also would be
required to describe any and all material changes in the issuer's
affairs which have occurred since the end of the most recent fiscal
year covered by the audited annual financial statements required to be
included in the registration statement pursuant to Item 12(a)(1) that
have not been described in a filing incorporated by reference into the
registration statement. Further, to the extent an issuer had not yet
been required to file a Form 10-K, Commission staff would have had the
opportunity to review the information disclosed in the Securities Act
or Exchange Act registration statement through which the issuer became
an Exchange Act reporting company and which would be incorporated by
reference into the prospectus.
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\151\ Issuers are (and would continue to be) required to include
in a prospectus all information required by section 10(a) of the
Securities Act and to ensure that such information is current in
accordance with section 10(a)(3) of the Securities Act. We propose
to amend Item 12(b) of Form S-3, however, to eliminate the
requirement for forward incorporation by reference of proxy or
information statements, or other material, filed under section 14 of
the Exchange Act, as we believe it is unnecessary to incorporate
such information beyond the extent to which Part III information of
Form 10-K is incorporated by reference from the proxy or information
statement. Because this Part III information is already incorporated
by reference--either directly or indirectly--through the Form 10-K,
a separate requirement to incorporate all proxy materials under
section 14 is unnecessary. Notwithstanding 17 CFR 230.411(e) (``Rule
411(e)''), when an issuer incorporates by reference a Form 10-K that
itself incorporates by reference Part III information from a proxy
or information statement within the timeframe specified in General
Instruction G.(3) of Form 10-K, we view the Part III information as
incorporated by reference into Form S-3. We also propose to remove
the reference to section 13(c) in Item 12(b) for the reasons
discussed in section II.C.2 below. Further, we propose to amend
Item12(b) to require issuers to explicitly state that all Exchange
Act reports filed under sections13(a) and 15(d) after the initial
registration statement is filed and before the termination of the
offering are incorporated by reference into the prospectus. This
amendment would eliminate ambiguity and reduce the need for issuers
to file pre-effective amendments solely to incorporate Exchange Act
reports filed during the waiting period.
\152\ Under the proposed amendments, Item 12(a)(1) of Form S-3
would state that the term ``Form 10 information'' means the
information that is required by Form 10 to register under the
Exchange Act each class of securities to be registered on Form S-3.
Item 12(a)(1) also would provide that a filing contains Form 10
information even if it omits the information required by Item 202 of
Regulation S-K with respect to a class of securities to be
registered on the form. We recognize that the filing that would
otherwise serve as an issuer's Form 10 information may, in some
cases, not include the information required by Item 202 of
Regulation S-K--which is a disclosure requirement of Form 10--with
respect to each class of securities to be registered on Form S-3.
For example, an issuer might register common stock in an IPO on Form
S-1 and later register the offer and sale of a different class of
securities, such as debt, on Form S-3. The Form S-1 would not
include the disclosure required by Item 202 of Regulation S-K for
the debt securities and, therefore, the Form 10 information would be
incomplete with respect to those securities. As such, we are
proposing to carve out the information required by Item 202 of
Regulation S-K from Item 12(a)(1) of Form S-3 to address any
potential confusion as to whether the Form S-1 (or other Securities
Act or Exchange Act filing) in those circumstances would satisfy the
requirement to provide Form 10 information because it excludes the
relevant information required by Item 202 of Regulation S-K.
Although the information required by Item 202 of Regulation S-K
would not need to be included in the Securities Act or Exchange Act
filing that serves as the Form 10 information for purposes of Item
12(a)(1), this information would have to be incorporated by
reference from another filing or included directly in the prospectus
in order to satisfy the disclosure requirements of Item 9 of Form S-
3.
\153\ 17 CFR 230.408.
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Finally, other requirements under the Federal securities laws are
designed to ensure investors are adequately protected and receive the
information necessary to make an informed investment decision in
connection with a registered securities offering. For example, under
the Securities Act, anyone who acquires an issuer's securities in a
registered offering has a private right of action under section 11 and
a purchaser has a private right of action under section 12(a)(2).
Section 11 liability exists for untrue statements of material fact or
omissions of material facts required to be included in a registration
statement or necessary to make the statements in the registration
statement not misleading at the time the registration statement became
effective.\154\ Importantly, underwriters,
[[Page 31038]]
experts such as accountants, an issuer's directors, and other
signatories can be held strictly liable for material misstatements or
omissions; \155\ thus, these parties are incentivized to ensure an
issuer's disclosures are free of material misstatements or omissions,
thereby helping to protect investors.\156\ Under section 12(a)(2),
sellers have liability to purchasers for offers or sales by means of a
prospectus or oral communication that includes an untrue statement of
material fact or omits to state a material fact necessary to make the
statements made, based on the circumstances under which they were made,
not misleading. Moreover, section 17(a) of the Securities Act provides,
among other things, that it shall be unlawful for any person in the
offer or sale of a security to obtain money or property by means of any
untrue statement of a material fact or any omission to state a material
fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. Thus, to the
extent that there may be a higher risk of delinquency by issuers with
shorter Exchange Act reporting histories, and less historical
information for investors to review when an issuer has been subject to
the Exchange Act's reporting requirements for a shorter period of time,
the Federal securities laws generally require that issuers provide
investors with information about an issuer that is necessary to make an
informed investment decision and provide remedies to investors when
these disclosure standards are not satisfied. We believe that investors
will continue to be protected by these liability provisions of the
Federal securities laws and receive material information even in the
absence of an initial Exchange Act seasoning requirement.
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\154\ Under Rule 430B, for a prospectus supplement required to
be filed in connection with a takedown of securities pursuant to 17
CFR 230.424(b)(2) (``Rule 424(b)(2)''), 17 CFR 230.424(b)(5) (``Rule
424(b)(5)''), or 17 CFR 230.424(b)(7) (``Rule 424(b)(7)''), all
information in that prospectus supplement will be deemed part of and
included in the registration statement as of the earlier of the date
it is first used or the date and time of the first contract of sale
of securities in the offering to which the prospectus supplement
relates.
\155\ For outside directors, liability is proportional to fault,
but for all other parties, liability is generally joint and several.
See 15 U.S.C. 77k(f).
\156\ These parties may assert a ``due diligence'' defense,
provided the defendant ``had, after reasonable investigation,
reasonable ground to believe and did believe, at the time such part
of the registration statement became effective, that the statements
therein were true and that there was no omission to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.'' 15 U.S.C. 77(k)(b)(3). Some
courts have held that section 11 defendants asserting the due
diligence defense of reasonable investigation must carry the burden
of proof that they acted with the requisite diligence and the bar
for asserting the due diligence defense may be high and highly fact-
specific. See, e.g., In re WorldCom, Inc. Sec. Litig., 346 F. Supp.
2d 628, 662 (S.D.N.Y. 2004) (``Underwriters must exercise a high
degree of care in investigation and independent verification of the
company's representations. Overall, no greater reliance in our self-
regulatory system is placed on any single participant in the
issuance of securities than upon the underwriter. Underwriters
function as `the first line of defense' with respect to material
misrepresentations and omissions in registration statements. As a
consequence, courts must be particularly scrupulous in examining
their conduct.'' (internal quotation marks omitted)).
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For these reasons, we propose to eliminate the One-Year Seasoning
requirement.
Request for Comment
1. We are proposing to eliminate the One-Year Seasoning requirement
in General Instruction I.A.3(a) that requires an issuer to have been an
Exchange Act reporting company for at least 12 calendar months before
becoming eligible to use Form S-3. Should we adopt the amendment as
proposed? If not, please explain why the One-Year Seasoning requirement
is necessary.
2. Instead of eliminating the One-Year Seasoning requirement
altogether, should we shorten the required seasoning period? If yes,
what would be an appropriate seasoning period and why?
3. Notwithstanding the proposal to eliminate the One-Year Seasoning
requirement, we are proposing to require issuers to be subject to the
Exchange Act's reporting requirements and current and timely in their
Exchange Act reporting obligations during the 12 calendar months (or
such shorter period that the issuer has been subject to the Exchange
Act's reporting requirements) and any portion of a month immediately
preceding the filing of a Form S-3. Should we retain these requirements
as proposed?
4. As discussed in section II.A.2.a.i and footnote 148 above, the
proposed amendments would allow issuers to use Form S-3 and conduct
shelf offerings immediately after becoming an Exchange Act reporting
company. Would this aspect of the proposed amendments alter market
practice with respect to initial public offerings (``IPOs'')? For
example, would the proposed amendments affect the need for, or use of,
an overallotment option (i.e., ``greenshoe''), given the proposed
ability to use Form S-3 for follow-on primary offerings after the
completion of the IPO? If so, are there any investor protection
concerns resulting from such a change in market practice? Would the
proposed amendments affect how issuers choose to go public? For
example, would the proposed ability to use Form S-3 for shelf offerings
immediately after becoming a reporting company affect the extent to
which direct listings would be used by companies as a means of going
public?
5. As discussed in footnote 55, Form S-3 currently requires (and
under the proposed amendments, would continue to require) an issuer to
have been timely in its Exchange Act reports ``during the twelve
calendar months and any portion of a month immediately preceding the
filing of the registration statement.'' Should we revise this standard
to instead require only a 12-month (or one-year) lookback? Under this
alternative approach, an issuer intending to file a Form S-3 on July
19, 2026, for example, would need to have been current and timely in
its Exchange Act filings--other than specified Form 8-K reports--from
July 19, 2025 through July 19, 2026 (rather than from July 1, 2025
through July 19, 2026). Why or why not?
6. We are proposing to amend Form S-3's instructions to provide
that an issuer would remain eligible to use the form notwithstanding an
untimely filing having been made during the relevant lookback period so
long as: (a) the filing was made within seven calendar days of the
original due date and (b) the issuer had only one untimely filing
during the relevant lookback period. Should we adopt the amendment as
proposed? Would a shorter or longer period than seven calendar days be
appropriate? For example, should the period be 10 business days rather
than seven calendar days? Are there other conditions that we should
include in this proposed instruction?
7. Under the proposed amendments, an issuer would be required to be
subject to the Exchange Act's reporting requirements. Should issuers
that voluntarily comply with the reporting requirements of section
13(a) or 15(d) be eligible to use Form S-3 if they have filed all
reports and materials that would otherwise be required of an issuer
subject to the Exchange Act's reporting requirements?
8. Should we amend our rules to require reassessing of Form S-3
eligibility each time an issuer conducts a shelf takedown to help
ensure issuers remain current and timely and investors have available
all required information at the time they make an investment decision?
9. Under the proposed amendments to Item 12(a)(1) of Form S-3, an
issuer that was not yet required to file a Form 10-K since becoming
subject to section 13(a) or 15(d) of the Exchange Act would instead
have to incorporate by reference a Securities Act or Exchange Act
filing that contains Form 10 information with respect to each class of
securities to be registered on Form S-3. The term ``Form 10
information'' would
[[Page 31039]]
be defined as the information required by Form 10 to register under the
Exchange Act each class of securities to be registered on the Form S-3.
The proposed amendments also would provide that a filing contains Form
10 information even if it omits the information required by Item 202 of
Regulation S-K with respect to a class of securities registered on this
Form. Should we adopt the amendments as proposed? Is it necessary to
specify that the Form 10 information need not include the information
required by Item 202 of Regulation S-K? Should similar treatment be
permitted for other Form 10 disclosure requirements? Why or why not?
10. We propose to amend Item 12(b) of Form S-3 to eliminate the
requirement for forward incorporation by reference of proxy or
information statements, or other material, filed under section 14(a) or
14(c) of the Exchange Act. We also propose to eliminate Item 12(b)'s
reference to section 13(c) of the Exchange Act. Should we adopt the
amendments as proposed?
11. We propose to amend Item 12(b) of Form S-3, consistent with
prior staff guidance, to clarify that all Exchange Act reports filed
pursuant to sections 13(a) and 15(d) ``after the date of filing the
initial registration statement and prior to the termination of the
offering'' would be deemed to be incorporated by reference into the
prospectus. Should we adopt the amendment as proposed?
12. We propose to amend Item 12(d) of Form S-3, which currently
permits the information required in response to Items 3 through 11 of
the form to be incorporated by reference from filings made pursuant to
section 13(a), 14, or 15(d) of the Exchange Act, to permit such
information to be incorporated from any Securities Act or Exchange Act
filing. Should we adopt the amendment as proposed?
ii. Certain Failures To Make Payments and Defaults
We propose to eliminate the ``Certain Failures to Make Payments and
Defaults'' requirement for Form S-3 eligibility. As explained in
section II.A.1 above, the Commission initially conditioned short-form
registration on satisfaction of certain factors addressing the
``quality'' of the issuer, among other requirements. Over time,
however, the Commission reduced or eliminated certain of those
requirements.\157\ In 1982, when the Commission adopted Form S-3, it
kept the Certain Failures to Make Payments and Defaults requirement
from Form S-7 without explanation.\158\ The Commission had previously
expressed the view that qualitative requirements are not appropriate
criteria for short-form eligibility.\159\ Specifically, in 1981, after
seeking comment on whether to prohibit issuers that were ``financially
troubled'' from using Form S-2, the Commission explained that ``the use
of tests measuring the `quality of a registrant' . . . is inconsistent
with the basic precept of registrant classification under Forms S-3, S-
2, and S-1, namely, the extent information about a registrant has been
disseminated in the marketplace and the accuracy of such information.''
\160\ We believe that eliminating this criterion is consistent with the
Commission's prior statement.
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\157\ See supra section II.A.1.b.
\158\ See Integrated Disclosure Adopting Release.
\159\ See 1981 Reproposal.
\160\ 1981 Reproposal at 41912. The Commission also stated its
intention to ``markedly reduce[ ] or eliminate[ ] those criteria
relating to the `quality' of the registrant, and premise[ ]
eligibility generally on dissemination of information in the market
place, as represented by the length and nature of compliance by the
company with the reporting requirements of the Exchange Act, and,
with respect to proposed Form S-3, on the registrant's float.'' Id.
at 41904; see also id. at 41905 (``[T]he Commission has made a
concerted effort to revise the eligibility requirements in a manner
that is simple and rational and is consistent with its intention to
classify registrants on the basis of the degree of information
disseminated and analyzed in the marketplace.'').
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We agree with the Commission's 1981 statement and, therefore, are
proposing that Form S-3 eligibility no longer be conditioned on an
issuer satisfying the Certain Failures to Make Payments and Defaults
requirement. We view that requirement as the type of qualitative
measure the Commission previously deemed inappropriate. In our view,
such criteria are inconsistent with the principle of short-form
registration, and Form S-3 eligibility should instead focus on an
issuer's status as a current and timely Exchange Act reporting company.
We also believe a specific eligibility requirement in Form S-3
related to defaults on financial obligations is unnecessary because the
Commission's disclosure requirements should provide investors with the
information necessary to evaluate an issuer's financial health. For
example, issuers are required to provide financial statements covering
a minimum of two fiscal years \161\ and to accompany such financial
statements with management's discussion and analysis that ``provide[s]
material information relevant to an assessment of the financial
condition and results of operations of the registrant including an
evaluation of the amounts and certainty of cash flows from operations
and from outside sources.'' \162\ Issuers also are required to file a
Form 8-K within four business days of certain types of defaults,
including specified defaults in connection with various off-balance
sheet arrangements.\163\ In addition, issuers must disclose information
about dividends paid on preferred stock (and other equity securities)
as well as certain default-related matters, including defaults in
principal, interest, sinking fund provisions, or redemption provisions
with respect to any issue of securities or credit agreements, or any
breach of covenant of a related indenture or agreement.\164\
Accordingly, investors should have the information necessary about an
issuer's financial condition, including defaults, to make an informed
investment decision with respect to offerings conducted by that issuer
pursuant to Form S-3, making the Certain Failures to Make Payments and
Defaults requirement superfluous.
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\161\ See 17 CFR 210.3-01; 17 CFR 210.3-02; 17 CFR 210.3-04; 17
CFR 210.8-02.
\162\ 17 CFR 229.303(a).
\163\ See Form 8-K, Item 2.04.
\164\ 17 CFR 210.4-08.
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Request for Comment
13. Should the Commission eliminate the Certain Failures to Make
Payments and Defaults requirement, as proposed? If not, please explain
why.
iii. Electronic Filings and Interactive Data Files
We propose to eliminate the Electronic Filings and Interactive Data
Files requirements. General Instruction I.A.7(a) conditions Form S-3
eligibility on an issuer having ``[f]iled with the Commission all
required electronic filings.'' This provision was added to Form S-3 in
connection with EDGAR's implementation in 1993, which required issuers
to file their registration statements and reports electronically on
EDGAR.\165\ General Instruction I.A.7(b) requires an issuer to have
``[s]ubmitted electronically to the Commission all Interactive Data
Files required to be submitted pursuant to [17 CFR 232.405] . . .
during the twelve calendar months and any portion of a month
immediately preceding the filing of the registration statement on this
Form.'' This provision was added to Form S-3 in connection with the
Commission's initial adoption of the Interactive Data File requirements
in 2009.\166\ Each of these provisions
[[Page 31040]]
appears to have been added to the registrant requirements of Form S-3
to incentivize compliance with newly adopted Commission rules;
specifically, the transition from paper to electronic filings and the
requirement to provide structured data in an Interactive Data File for
the first time.\167\
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\165\ See 1993 EDGAR Adopting Release.
\166\ See Interactive Data to Improve Financial Reporting,
Release No. 33-9002 (Jan. 30, 2009) [74 FR 6776 (Feb. 10, 2009)]
(``Interactive Data Adopting Release'').
\167\ The term ``structured data'' generally refers to data that
is tagged to make it machine-readable, facilitating its use by
investors and other market participants, such as data aggregators
(i.e., entities that, in general, collect, package, and resell
data).
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We are proposing to eliminate these registrant requirements because
we believe they are no longer necessary. While the electronic filing
provision may have helped encourage issuers who had been accustomed to
making their filings in paper to instead make their filings
electronically when EDGAR was first introduced more than 30 years ago,
we believe issuers are now fully accustomed to the electronic filing
process, and we are not aware of issuers commonly attempting to submit
mandated electronic filings in paper. Today, all companies must make
their Commission filings electronically through EDGAR, and mandated
electronic filings are not accepted in paper form, absent a hardship
exemption.\168\ In addition, a mandated electronic Exchange Act report
that was submitted in paper would not be considered to have been filed
with the Commission unless a hardship exemption applied; if resubmitted
electronically after the requisite deadline, such material would be
untimely, and the issuer may be ineligible to use Form S-3.\169\ For
these reasons, we believe the electronic filing provision in General
Instruction I.A.7(a) is no longer necessary as a condition to Form S-3
eligibility.\170\
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\168\ See 17 CFR 232.100 mandating electronic filing and 17 CFR
232.201 and 202 relating to temporary and continuing hardship
exemptions.
\169\ As indicated above, we are retaining the requirement that
an issuer must have timely filed all the material required to be
filed pursuant to sections 13(a), 14(a), 14(c), and 15(d) of the
Exchange Act during the preceding 12 calendar months (or such
shorter period that the issuer was required to file such reports and
materials), other than specified reports on Form 8-K.
\170\ At this time, however, we are not proposing a corollary
amendment to General Instruction A.3(a) of Form S-8, which contains
the same electronic filing provision as General Instruction 1.A.7(a)
of Form S-3.
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We also believe that the Interactive Data File provision is no
longer necessary to induce compliance with the Commission's Interactive
Data File requirements. Since 2009, the Commission's rules have
required companies to provide the information from the financial
statements in their registration statements and periodic and current
reports in structured format using eXtensible Business Reporting
Language (``XBRL'').\171\ In 2018, the Commission began requiring the
use of Inline XBRL for financial statement information.\172\
Subsequently, the Commission has required additional disclosures to be
made using XBRL and Inline XBRL.\173\ We believe issuers are now
sufficiently accustomed to complying with the Commission's Interactive
Data File requirements such that conditioning Form S-3 eligibility on
compliance with these requirements is no longer necessary. Accordingly,
we propose to eliminate this Form S-3 eligibility requirement.\174\
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\171\ See Interactive Data Adopting Release.
\172\ See Inline XBRL Filing of Tagged Data, Release No. 33-
10514 (Aug. 16, 2018) [83 FR 40846 (Aug. 16, 2018)]. Whereas
previously filers generated an HTML document of their financial
statement information or risk/return summary information and then
tagged a copy of the data to create a separate XBRL exhibit, Inline
XBRL allows filers to prepare a single document that is both human-
readable and machine-readable.
\173\ See, e.g., Holding Foreign Companies Accountable Act
Disclosure, Release No. 34-93701 (Dec. 2, 2021) [86 FR 70027 (Dec.
9, 2021)]; Filing Fee Disclosure and Payment Methods Modernization,
Release No. 33-10997 (Oct. 13, 2021) [86 FR 70166 (Dec. 9, 2021)];
FAST Act Adopting Release. More recently, the Commission has adopted
additional disclosures requirements subject to XBRL and Inline XBRL.
See, e.g., Insider Trading Arrangements and Related Disclosures,
Release No. 33-11138 (Dec. 14, 2022) [87 FR 80362 (Dec. 29, 2022)];
Pay Versus Performance, Release 34-95607 (Aug. 25, 2022) [87 FR
55134 (Sept. 8, 2022)].
\174\ At this time, we are not proposing corollary amendments to
17 CFR 230.144(c)(1)(ii) and General Instruction A.3(b) of Form S-8,
which require an issuer to have submitted every Interactive Data
File required to be submitted pursuant to 17 CFR 232.405.
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Request for Comment
14. We are proposing to eliminate the registrant requirements in
General Instruction I.A.7 of Form S-3 that require an issuer to have
filed with the Commission all electronic filings and Interactive Data
Files. Should we adopt the amendments as proposed? If not, please
explain why.
iv. Prohibition on Use of Form S-3 by Certain Ineligible Issuers
Although the proposed amendments would extend the benefits of Form
S-3 and shelf registration to a broader group of issuers, we seek to do
so only to the extent the amendments are consistent with investor
protection. We do not believe it is appropriate to expand Form S-3
eligibility to certain categories of issuers that may pose greater
potential for non-compliance with the Federal securities laws.
Accordingly, in addition to conditioning Form S-3 eligibility on an
issuer being an Exchange Act reporting issuer that is current and
timely with respect to its Exchange Act filings, the proposed
amendments also would prohibit certain ``ineligible issuers,'' as
defined in Rule 405, from using the form.\175\ Under proposed new
General Instruction I.A.2 (which would be titled ``Prohibition on Use
of Form S-3 by Certain Ineligible Issuers''), an issuer would not be
eligible to use Form S-3 if:
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\175\ See proposed General Instruction I.A.2 to Form S-3. Under
paragraph (2) of the definition of ``ineligible issuer'' in Rule
405, the Commission may grant waivers of ineligible issuer status
``upon a showing of good cause, that it is not necessary under the
circumstances that the issuer be considered an ineligible issuer.''
17 CFR 230.405; see also Revised Statement on Well-Known Seasoned
Issuer Waivers, Division of Corporation Finance, U.S. Sec. & Exch.
Comm'n (Apr. 24, 2014), available at <a href="https://www.sec.gov/about/divisions-offices/division-corporation-finance/revised-statement-well-known-seasoned-issuer-waivers-april-24-2014">https://www.sec.gov/about/divisions-offices/division-corporation-finance/revised-statement-well-known-seasoned-issuer-waivers-april-24-2014</a> (elaborating on
application of good cause standard). The Commission has delegated
the authority to act on such applications to the Director of the
Division of Corporation Finance. See 17 CFR 200.30-1(a)(10). Issuers
that obtain such waivers would be able to use Form S-3 assuming they
meet all other requirements of the form. We recognize that the
number of waiver requests could increase due to the proposed
amendments. We seek comment on whether issuers should be permitted
to request such waivers for purposes of establishing Form S-3
eligibility.
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<bullet> The issuer is a ``BSP issuer,'' which the proposed
amendments would define in Rule 405 as an issuer that is, or during the
past three years the issuer or any of its predecessors was: (1) a blank
check company as defined in 17 CFR 230.419(a)(2) (``Rule 419(a)(2)'');
\176\ (2) a shell company, other than a business combination related
shell company, each as defined in Rule 405,\177\ provided, however,
that an issuer, other than a foreign private issuer, as defined in Rule
405,\178\ would not be deemed to be a
[[Page 31041]]
shell company solely because during the past three years either the
issuer or any of its predecessors was a ``special purpose acquisition
company (SPAC),'' as defined in 17 CFR 229.1601(b) (``Item 1601 of
Regulation S-K''); \179\ or (3) an issuer in an offering of penny stock
as defined in 17 CFR 240.3a51-1; \180\
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\176\ See 17 CFR 230.419(a)(2) (defining ``blank check company''
as a company that (i) is a development stage company that has no
specific business plan or purpose or has indicated that its business
plan is to engage in a merger or acquisition with an unidentified
company or companies, or other entity or person and (ii) is issuing
penny stock).
\177\ See 17 CFR 230.405 (defining ``shell company'' as a
registrant, other than an asset-backed issuer, that has (1) no or
nominal operations and (2) either (i) no or nominal assets, (ii)
assets consisting solely of cash and cash equivalents, or (iii)
assets consisting of any amount of cash and cash equivalents and
nominal other assets, and defining ``business combination related
shell company'' as a shell company that is (1) formed by an entity
that is not a shell company solely for the purpose of changing the
corporate domicile of that entity solely within the United States or
(2) formed by an entity that is not a shell company solely for the
purpose of completing a business combination transaction among one
or more entities other than the shell company, none of which is a
shell company).
\178\ In light of the Commission's 2025 concept release, which
solicits public comment on whether the current FPI definition
appropriately balances the protection of investors with the
promotion of capital formation, we are not proposing to amend the
three-year lookback on shell company status for foreign private
issuers. As a result, an FPI that was a SPAC during the past three
years would not be eligible to be a WKSI. See Concept Release on
Foreign Private Issuer Eligibility, Release No. 33-11376 (June 4,
2025) [90 FR 24232 (June 9, 2025)] (``FPI Concept Release'').
\179\ See 17 CFR 229.1601(b) (defining a ``special purpose
acquisition company (SPAC)'' as a company that has: (1) indicated
that its business plan is to: (i) conduct a primary offering of
securities that is not subject to the requirements of 17 CFR 230.419
(``Rule 419''); (ii) complete a business combination, such as a
merger, consolidation, exchange of securities, acquisition of
assets, reorganization, or similar transaction, with one or more
target companies within a specified time frame; and (iii) return
proceeds from the offering and any concurrent offering (if such
offering or concurrent offering intends to raise proceeds) to its
security holders if the company does not complete a business
combination, such as a merger, consolidation, exchange of
securities, acquisition of assets, reorganization, or similar
transaction, with one or more target companies within the specified
time frame; or (2) represented that it pursues or will pursue a
special purpose acquisition company strategy).
\180\ See 17 CFR 240.3a51-1 (setting forth a detailed definition
of the term ``penny stock''). The acronym ``BSP'' in this context is
intended to refer to ``blank check companies,'' ``shell companies,''
and ``penny stock issuers.'' The proposed definition of ``BSP
issuer'' generally conforms to the requirement in paragraph (1)(ii)
of the definition of ``ineligible issuer'' in Rule 405, except that
it excludes issuers that previously were (or whose predecessors
were) ``special purpose acquisition companies (SPACs),'' as defined
in Item 1601 of Regulation S-K. We discuss our basis for excluding
SPACs from the proposed definition of ``BSP issuer'' below. See
infra text accompanying notes 194-196. We are proposing to define
the term ``BSP issuer'' in part because several of our current rules
(and proposed amendments) refer to the three categories of issuers
encompassed in the defined term. We believe there is an
administrative benefit to using a defined term rather than
reiterating those categories of issuers in every instance.
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<bullet> Within the past three years, the issuer or any entity that
at the time was a subsidiary \181\ of the issuer was convicted of any
felony or misdemeanor described in paragraphs (i) through (iv) of
section 15(b)(4)(B) of the Exchange Act; \182\
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\181\ See 17 CFR 230.405 (``A subsidiary of a specified person
is an affiliate controlled by such person directly, or indirectly
through one or more intermediaries.'').
\182\ See 17 CFR 230.405, paragraph (1)(v) of the definition of
``ineligible issuer.'' Section 15(b)(4)(B) of the Exchange Act lists
felonies or misdemeanors (i) involving the purchase or sale of any
security, the taking of a false oath, the making of a false report,
bribery, perjury, burglary, substantially equivalent activities, or
conspiracies to commit any such offenses, (ii) arising out of the
conduct of the business of certain securities market participants,
such as brokers or dealers, (iii) involving the larceny, theft,
robbery, extortion, forgery, counterfeiting, fraudulent concealment,
embezzlement, fraudulent conversion, or misappropriation of funds,
or securities, or substantially equivalent activities, and (iv)
involving the violation of section 152 (Concealment of assets; false
oaths and claims; bribery), 1341 (Frauds and swindles), 1342
(Fictitious name or address), or 1343 (Fraud by wire, radio, or
television) or chapter 25 (Counterfeiting and forgery) or 47 (Fraud
and false statements) of title 18, United States Code, or a
violation of a substantially equivalent foreign statute.
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<bullet> Within the past three years, the issuer or any entity that
at the time was a subsidiary of the issuer was made the subject of any
judicial or administrative decree or order arising out of a
governmental action that: (1) prohibits certain conduct or activities
regarding, including future violations of, the antifraud provisions of
the Federal securities laws; (2) requires that the person cease and
desist from violating the antifraud provisions of the Federal
securities laws; or (3) determines that the person violated the
antifraud provisions of the Federal securities laws; provided, however,
that an issuer only would be ineligible to use Form S-3 under this
provision if the prohibition, requirement, or determination is based on
an untrue, false, or misleading statement of a material fact or an
omission to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading, in each case in violation of the applicable
antifraud provision and arising from a registration statement filed
under the Securities Act, the Investment Company Act, or section 12 of
the Exchange Act, any offering materials provided to purchasers in
connection with an offering exempt from the registration requirements
of the Securities Act, or a filing required by section 13(a), 14(a),
14(c), or 15(d) of the Exchange Act or the Commission's rules
thereunder; \183\
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\183\ See 17 CFR 230.405, paragraph (1)(vi) of the definition of
``ineligible issuer.''
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<bullet> The issuer has filed a registration statement that is the
subject of any pending proceeding or examination under section 8 of the
Securities Act or has been the subject of any refusal order or stop
order under section 8 of the Securities Act within the past three
years; \184\ or
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\184\ See 17 CFR 230.405, paragraph (1)(vii) of the definition
of ``ineligible issuer.''
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<bullet> The issuer is the subject of any pending proceeding under
section 8A of the Securities Act in connection with an offering.\185\
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\185\ See 17 CFR 230.405, paragraph (1)(viii) of the definition
of ``ineligible issuer.''
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These categories of issuers have been viewed historically as
unsuited for certain types of short-form registration and other
offering-related accommodations or ineligible for certain disclosure-
related relief.\186\ For instance, the Commission has stated that penny
stock and blank check offerings, as well as shell companies, may give
rise to certain disclosure and offering-related abuses.\187\ In
addition, Congress has expressed concerns with these issuers and
imposed limits on their ability to utilize certain disclosure and
offering-related benefits.\188\ Congress and the Commission also have
imposed restrictions on certain felons and other bad actors in
connection with certain types of securities offerings when deemed
necessary and appropriate.\189\ For example, the offering exemptions
[[Page 31042]]
under Regulation D,\190\ Regulation A,\191\ and Regulation Crowdfunding
\192\ are unavailable for an offering by an issuer if, among other
things, an issuer, any of its predecessors, or any affiliated issuer is
subject to certain administrative orders, industry bars, injunctions
involving certain securities law violations, or specified criminal
convictions.\193\
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\186\ See, e.g., Baby Shelf Adopting Release (excluding shell
companies from amendments allowing certain issuers to conduct
primary securities offerings on short-form registration statements
without regard to public float or debt rating); Use of Form S-8,
Form 8-K, and Form 20-F by Shell Companies, Release No. 33-8587
(July 15, 2005) [70 FR 42234 (July 21, 2005)] (prohibiting the use
of Form S-8 by a shell company).
\187\ See, e.g., Revisions to Rules 144 and 145, Release No. 33-
8869 (Dec. 6, 2007) [72 FR 71546, 71550 (Dec. 17, 2007)] (making 17
CFR 230.144 unavailable for resales of securities of shell companies
and applying presumptive underwriter provision under 17 CFR 230.145
to transactions involving shell companies to protect against
potential abuses with respect to shell companies); Securities
Offering Reform Adopting Release at 44798 (``The reforms are not
available to offerings by a blank check company, offerings by a
shell company, and offerings of penny stock by an issuer. . . . We
have excluded these offerings from the reforms because they pose the
greatest risk of abuse of the reforms.''); Delayed Pricing for
Certain Registrants, Release No. 33-7393 (Feb. 20, 1997) [62 FR 9276
(Feb. 28, 1997)] (``Proposed Rule 430A Amendments'') (proposing to
not allow blank check and penny stock issuers to use delayed pricing
because of ``prior substantial abuses''); Penny Stock Definition for
Purposes of Blank Check Rule, Release No. 33-7024 (Oct. 25, 1993)
[58 FR 58099 (Oct. 29, 1993)] (stating that Congress found blank
check companies to be common vehicles for fraud and manipulation in
the penny stock market).
\188\ See, e.g., Securities Enforcement Remedies and Penny Stock
Reform Act, Public Law 101-429, 104 Stat. 931 (1990) (giving the
Commission the authority and tools to protect investors and deter
fraud and abuse by penny stock issuers); Securities Act section 27A
[15 U.S.C. 77z-2(b)] (excluding from safe harbor for forward-looking
statements issuers of blank check and penny stock securities, as
well as issuers previously convicted of certain felonies and
misdemeanors and issuers subject to a decree or order involving a
violation of the antifraud provisions of the Federal securities
laws); Exchange Act section 21E [15 U.S.C. 78u-5(b)] (same).
\189\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, sec. 926, 124 Stat. 1376, 1851 (July 21,
2010) (codified at 15 U.S.C. 77d note) (directing the Commission to
adopt rules disqualifying securities offerings involving certain
``felons and other bad actors'' from reliance on Rule 506 of
Regulation D); Jumpstart Our Business Startups Act, Public Law 112-
106, sec. 302(d), 126 Stat. 306, 320 (Apr. 5, 2012) (requiring the
Commission to adopt bad actor disqualification provisions for
offerings under Regulation Crowdfunding and Tier II Regulation A
offerings).
\190\ See 17 CFR 230.501 through 230.508.
\191\ See 17 CFR 230.251 through 230.263.
\192\ See 17 CFR 227.100 through 230.504.
\193\ See 17 CFR 230.262 (Regulation A disqualification
provision); 17 CFR 227.503 (Regulation Crowdfunding disqualification
provision); 17 CFR 230.506(d) (Regulation D disqualification
provision).
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As noted above,\194\ a ``BSP issuer,'' as we propose to define that
term in Rule 405, would be prohibited from using Form S-3. Under the
proposed amendments, however, an issuer that otherwise would be barred
from using Form S-3 solely because it or its predecessor was a
``special purpose acquisition company (SPAC),'' as defined in Item
1601(a) of Regulation S-K, during the prior three years would be
excepted from the three-year lookback for shell companies and,
therefore, able to use Form S-3 if it was not a shell company at the
time the issuer filed the form. In our view, former SPACs (which
initially were formed specifically for the purpose of identifying a
private target and that have successfully completed a de-SPAC
transaction by combining with such a target) should be eligible to use
Form S-3 to the same extent as a newly public company that conducted a
traditional IPO. This is consistent with the Commission's stated goal
when it adopted rules for SPACs in 2024.\195\ Accordingly, issuers that
otherwise would be barred from using Form S-3 solely because of their
former SPAC status would be eligible to use the form, assuming they
satisfied the form's other eligibility requirements.\196\
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\194\ See supra note 180 and accompanying text.
\195\ See Special Purpose Acquisition Companies, Shell
Companies, and Projections, Release No. 33-11265 (Jan. 24, 2024) [89
FR 14158, 14163 (Feb. 26, 2024)] (noting that the rules are intended
to align regulatory treatment between de-SPAC transactions and
traditional IPOs).
\196\ As discussed in section II.B.2 below, however, such an
issuer would not be permitted to take into account the Exchange Act
reporting history of the former SPAC for purposes of determining
whether it is eligible to file automatic shelf registration
statements under the proposed amendments.
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In addition, as noted above,\197\ an issuer would be prohibited
from using Form S-3 if, within the past three years, either the issuer
or one of its subsidiaries was the subject of certain judicial or
administrative decrees or orders arising out of governmental actions.
Under the proposed amendments, however, for purposes of Form S-3
eligibility, an issuer would be an ``ineligible issuer'' under
paragraph (vi) of the definition in Rule 405 only if the relevant
prohibition, requirement, or determination is based on an untrue,
false, or misleading statement of a material fact or an omission to
state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading, in each case in violation of the applicable antifraud
provision and arising from a registration statement filed under the
Securities Act, the Investment Company Act, or section 12 of the
Exchange Act, any offering materials provided to purchasers in
connection with an offering exempt from the registration requirements
of the Securities Act, or a filing required by section 13(a), 14(a),
14(c), or 15(d) of the Exchange Act or the Commission's rules
thereunder. This proposed amendment reflects our belief that Form S-3
eligibility should depend on whether investors can readily obtain
issuer-specific information to make an informed investment decision. As
such, the proposed amendment is intended to limit application of
paragraph (vi) of the definition of ``ineligible issuer,'' for purposes
of Form S-3 eligibility, to the types of antifraud violations that are
most likely to suggest that the issuer may pose a greater risk of non-
compliance with Exchange Act reporting requirements (i.e., disclosure-
based violations arising out of a registration statement, offering
materials provided to purchasers in connection with an exempt offering,
or certain Exchange Act filings).\198\
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\197\ See supra note 183 and accompanying text.
\198\ The proposed amendment also would apply for purposes of
assessing Short-Form N-2 eligibility. See infra section II.D.2.a.
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Although Form S-3 has not previously included a disqualifying
provision similar to proposed new General Instruction I.A.2 (with the
exception of shell companies being unable to rely on General
Instruction I.B.6), we believe it would be appropriate for the
protection of investors to prohibit the specified categories of issuers
from using Form S-3.\199\ This is due to the additional accommodations
that would be afforded by our proposed amendments and our view that
these categories of issuers may pose a greater risk of non-compliance
with Exchange Act reporting requirements and, therefore, present
greater potential for abuse. We believe these types of issuers,
therefore, should not be eligible to conduct offerings that are not
subject to staff review (i.e., shelf offerings). Instead, we believe
the staff should have the opportunity to review those issuers'
offerings (by requiring, for example, those issuers to use Form S-1
rather than Form S-3), as staff review may mitigate risks of non-
compliance and potential abuse. In proposing these restrictions on the
use of Form S-3, we note that some commenters have previously stated
that excluding certain categories of issuers from specific registration
and other offering-related benefits is appropriate.\200\ Although we
recognize that the proposed amendment would not eliminate all potential
risks that may arise from the proposed expansion of Form S-3, we
believe this restriction would address a significant area of risk.
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\199\ The proposed scope of issuers that would be ineligible to
use Form S-3 under this proposed instruction would be narrower than
the full scope of the term ``ineligible issuer'' as defined in Rule
405. For example, although paragraph (iv) of the definition of
``ineligible issuer'' covers certain issuers that have been in
bankruptcy within the past three years, under our proposed
amendments, an issuer's Form S-3 eligibility would not be affected
by its bankruptcy status. As discussed in section II.A.2.a.ii above,
we believe such criteria would be inappropriate to include for Form
S-3 eligibility purposes because it goes to the ``quality'' of the
issuer. In addition, paragraph (iii) of the definition of
``ineligible issuer'' covers limited partnerships offering and
selling securities other than through a firm commitment underwritten
offering. Under our proposed amendments, these issuers would not be
precluded from using Form S-3 because, as discussed infra note 305,
we believe concerns related to these entities have been adequately
addressed by other Commission rules. Paragraph (1)(i) of the
definition of ``ineligible issuer'' covers issuers that have not
filed all Exchange Act reports required to be filed during the
preceding 12 months (or such shorter period that the issuer was
required to file such reports). Proposed General Instruction I.A.1.b
to Form S-3 would require an issuer to have filed all reports and
other materials required to be filed under sections 13(a), 14(a),
14(c), and 15(d) of the Exchange Act. While the scope of filings
required to be filed under proposed General Instruction I.A.1.b is
narrower than what is required under paragraph (1)(i) of the
definition of ``ineligible issuer,'' we believe an issuer that has
provided the filings specified in proposed General Instruction
I.A.1.b would have provided the type of information necessary to
qualify for Form S-3 eligibility.
\200\ See, e.g., letter in response to Securities Offering
Reform, 33-8501 (Nov. 3, 2004) [69 FR 67391 (Nov. 17, 2004)]
(``Securities Offering Reform Proposing Release'') from the American
Bar Association (Feb. 11, 2005) (``We agree with the Commission that
the definition of ineligible issuer should include blank check
companies, shell companies and penny stock issuers. We also agree
that the definition should encompass issuers that are in bankruptcy
proceedings and issuers that have been the subject of a refusal or
stop order under the Securities Act.''). The comment letters
submitted in response to the Securities Offering Reform Proposing
Release are available at <a href="https://www.sec.gov/files/rules/proposed/s73804.shtml">https://www.sec.gov/files/rules/proposed/s73804.shtml</a>.
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The Commission has adopted a number of measures over the years to
address concerns related to certain types of ``BSP issuers.'' Examples
include Rule 419, which imposes certain
[[Page 31043]]
requirements on offerings by blank check companies issuing penny stock,
prohibitions on the use of Form S-8 by shell companies,\201\
restrictions on the ability to rely on 17 CFR 230.144 to resell
restricted securities,\202\ deemed underwriter status for certain
parties involved in business combination transactions involving a shell
company,\203\ and the imposition of specific disclosure requirements
for an issuer that completes a transaction that causes it to cease
being a shell company.\204\ We believe, however, that those types of
provisions do not address the higher risk of non-compliance with
Exchange Act reporting requirements that these issuers present. For
that reason, we are proposing to prohibit the use of Form S-3 by BSP
issuers. We seek comment on the appropriateness of the proposed
amendments, including whether each category of issuer we have
identified should be prohibited from using Form S-3 and whether the
three-year lookback period that applies to certain types of issuers is
necessary.\205\
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\201\ See 17 CFR 239.16b(a).
\202\ See 17 CFR 230.144(i).
\203\ See 17 CFR 230.145(c).
\204\ See Item 5.06 of Form 8-K.
\205\ We also are proposing certain other amendments to the
definition of ``ineligible issuer'' in Rule 405. Specifically, we
are proposing to add new paragraph (3)(iii), which would set forth
the date of determination of whether an issuer is an ineligible
issuer for purposes of determining whether it satisfies proposed
General Instruction I.A.2 of Form S-3. The proposed determination
date under this paragraph would align with the dates on which an
issuer must determine whether it has satisfied Form S-3's
eligibility requirements (which also are consistent with the current
date of determination for purposes of WKSI eligibility under
paragraph (3)(i) of the definition of ``ineligible issuer''). See
supra note 150.
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Request for Comment
15. We are proposing to prohibit use of Form S-3 by certain
``ineligible issuers,'' including BSP issuers, issuers previously
convicted of certain felonies and misdemeanors, issuers subject to a
decree or order involving a violation of the antifraud provisions of
the Federal securities laws, issuers that have been subject to any
refusal order or stop order under section 8 of the Securities Act
within the past three years, and issuers that are subject to pending
proceedings or examinations under section 8 or 8A of the Securities
Act. Should we adopt the amendments as proposed? If not, please explain
why and suggest alternative methods for protecting investors the
Commission could consider.
16. Alternatively, should these issuers be permitted to use Form S-
3 if they meet the other conditions of the Form, but not be permitted
to avail themselves of the Enhanced Registration and Communication
Benefits that we propose to extend to Form S-3 eligible issuers, as
discussed in section II.B.2 below?
17. Are there any categories of issuers we are proposing to
prohibit from using Form S-3 that should not be prohibited solely on
the basis of issuer type? Are there any categories of issuers we are
not proposing to prohibit from using Form S-3 that should be excluded?
18. Under the proposed amendments, certain ineligible issuers would
not be eligible to use Form S-3 until three years after the issuer had
ceased being a ``BSP issuer,'' or since the date of the issuer's
conviction of the enumerated felonies and/or misdemeanors, or since the
date the issuer had entered into a decree or order involving a
violation of the antifraud provisions of the Federal securities laws,
or since the date of any refusal or stop order under section 8 of the
Securities Act. We note that under current Instruction I.B.6 of Form S-
3, there is only a one-year lookback period regarding shell company
status. Is the proposed three-year prohibition appropriate? Would a
shorter or longer ineligibility period be more appropriate?
19. If we adopt the proposed prohibition on the use of Form S-3 by
certain ineligible issuers, should issuers be ineligible to use Form S-
3 based on actions that occurred before the date on which the
requirement becomes effective? Or, similar to certain disqualification
provisions for Regulation A in 17 CFR 230.262, should an issuer only be
ineligible based on actions that occurred on or after the date on which
the requirement becomes effective? If we did limit the prohibition to
actions that occurred on or after the date on which the requirement
becomes effective, how would that affect an issuer's eligibility for
the Enhanced Registration and Communication Benefits, given the fact
that in order to be eligible for all of those benefits today as a WKSI,
an issuer must not be an ``ineligible issuer''?
20. Should other types of issuers, other than those we have
identified, be ineligible to use Form S-3? For example, should issuers
that are the subject of a going concern audit opinion or those in
bankruptcy be ineligible to use the form? Would such requirements be
consistent with the Commission's previously expressed views that
factors related to the quality of an issuer are not appropriate
considerations for Form S-3 eligibility, as discussed in section
II.A.2.a.ii above?
21. If the proposed amendments were adopted, should issuers that
were Form S-3 eligible prior to adopting the amendments remain eligible
to use the form with respect to any existing effective Form S-3
registration statement even if they fall within one of the categories
of ineligible issuer at the time the new rules become effective?
Alternatively, should there be a transition period during which such
issuers would retain their Form S-3 eligibility but after which their
eligibility would be assessed anew? If so, what is the appropriate
duration of such transition period?
22. Under the proposed amendments, an issuer that was formerly a
SPAC would be excepted from the three-year lookback for shell companies
and, therefore, eligible to use Form S-3 if the issuer was not a SPAC
at the time of filing the registration statement, had not otherwise
previously been a shell company, and otherwise met the form's
requirements. Should we adopt the amendment as proposed? Should SPACs
be eligible to use Form S-3 prior to identifying a target and
completing a de-SPAC transaction notwithstanding their shell company
status?
23. Form S-8 prohibits issuers from using the form if they are a
shell company or if they were a shell company during the previous 60
calendar days. Should we carve out former SPACs from this 60-calendar
day lookback period in Form S-8, similar to the carveout for former
SPACs in the proposed definition of BSP issuer?
24. Under the proposed new Form S-3 eligibility criteria, an issuer
would be ineligible to use Form S-3 if, within the past three years,
the issuer or any entity that at the time was a subsidiary of the
issuer was convicted of certain felonies or misdemeanors or was made
the subject of judicial or administrative decrees or orders arising out
of certain governmental actions. Should this criterion apply to both
the issuer and its subsidiaries, as proposed, or should it apply only
to the issuer itself? Alternatively, should it apply to certain, but
not all, subsidiaries? If so, how should we differentiate between
subsidiaries?
25. Under the proposed amendments, for purposes of Form S-3 and
Short-Form N-2 eligibility, an issuer would be an ``ineligible issuer''
under paragraph (vi) of the definition in Rule 405 only if the relevant
prohibition, requirement, or determination is based on an untrue,
false, or misleading statement of a material fact or an omission to
state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading, in each case in violation of the applicable antifraud
provision and arising from a registration
[[Page 31044]]
statement filed under the Securities Act, the Investment Company Act,
or section 12 of the Exchange Act, any offering materials provided to
purchasers in connection with an offering exempt from the registration
requirements of the Securities Act, or a filing required by section
13(a), 14(a), 14(c), or 15(d) of the Exchange Act or the Commission's
rules thereunder. Should we adopt this amendment as proposed? Would the
proposed amendments limit application of paragraph (vi) of the
definition of ``ineligible issuer,'' for purposes of Form S-3 and
Short-Form N-2 eligibility, to the types of antifraud violations that
are most likely to suggest that the issuer may pose a greater risk of
non-compliance with Exchange Act reporting requirements (i.e.,
disclosure-based violations arising out of a registration statement,
offering materials provided to purchasers in connection with an exempt
offering, or certain Exchange Act filings), as intended? In addition to
the registration statements and Exchange Act filings enumerated in the
proposed amendment, for purposes of Form S-3 and Short-Form N-2
eligibility, should paragraph (vi) of the definition of ``ineligible
issuer'' also cover prospectuses that do not form part of a
registration statement (e.g., free writing prospectuses)? Finally, for
purposes of Form S-3 and Short-Form N-2 eligibility, paragraph (vi) of
the definition of ``ineligible issuer'' would apply to antifraud
violations arising out of disclosures in reports that are both
``furnished'' and ``filed'' with the Commission. Should we instead
limit the applicability of paragrap
[…truncated; see source link]Indexed from Federal Register on May 26, 2026.
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