The Securities and Exchange Commission (SEC) has proposed amendments governing registered offerings that increase efficiency, flexibility, and cost savings for public companies.
In addition, the commission is proposing rule amendments to simplify its public company reporting framework and better calibrate disclosure obligations with a company’s size and maturity.
The SEC notes that compounding regulatory requirements over recent decades has contributed to a decrease in the number of public companies. These proposed amendments look to incentivize companies to go and stay public.
“Today, the Commission proposed two rulemakings that serve as the foundation for my agenda to Make IPOs Great Again. These proposals build upon the legislative and regulatory concepts that have proven successful in the past and aim to extend that success to more companies – particularly small and mid-sized companies – and incentivize them to go and stay public,” SEC Chairman Paul Atkins said. “Today’s proposed rulemakings are among the first important steps toward transforming the SEC’s regulatory framework for public companies.”
The registered offering reform proposal would mean:
- A greater number of public companies would be able to conduct shelf offerings, which allow quicker access to the public capital markets, regardless of the company’s public float.
- More public companies would be able to utilize certain registration and offering communication flexibilities that currently are reserved for companies with a large public float defined as “well-known seasoned issuers.”
- Broker-dealers would be able to provide research report coverage for a greater number of public companies.
- State securities law registration and qualification requirements would be preempted for all registered offerings, which would mitigate the costs and complexity of conducting a multi-state registered offering.
- Parity between certain Form N-2 filers and operating companies across registration, offering, and communication provisions would be maintained, and access to broad-based advertising for certain non-variable annuity insurance products would be expanded.
- Other aspects of the registration process would be streamlined, such as the ability to incorporate information by reference into Form S-1.
The emerging growth company accommodations reform would extend disclosure scaling and other accommodations currently utilized by smaller or emerging companies to approximately 81 percent of all current public companies.
Further, the proposed rule amendments would raise the threshold for a public company to become a large accelerated filer from $700 million to $2 billion. A company would not become a large accelerated filer for at least 60 months following its IPO regardless of its public float, effectively providing it an “IPO on-ramp” to stabilize and grow while benefiting from disclosure scaling and other accommodations.
All other public companies would be categorized as non-accelerated filers and would benefit from nearly all disclosure scaling and other accommodations currently available to smaller and emerging companies.
In addition, the proposed rules would establish a subcategory of small non-accelerated filers that would receive an additional 30 days to file their Form 10-K annual reports and an additional five days to file their Form 10-Q quarterly reports.