Staff Posts C&DIs on FAST Act

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See below guidance from the Staff of the Securities and Exchange Commission.

Question 1

Question: May an EGC issuer omit interim financial statements from its filing or submission for a period that has financial information that will be included within required financial statements covering a longer interim or annual period at the time of the offering, even though the shorter period will not be presented separately at that time?

Answer: No.

Section 71003 of the FAST Act allows an issuer to omit financial information that “relates to a historical period that the issuer reasonably believes will not be required to be included…at the time of the contemplated offering.” Interim financial information “relates” to both the interim period and to any longer period (either interim or annual) into which it has been or will be included.

For example, consider a calendar year-end EGC that submits or files a registration statement in December 2015 and reasonably expects to commence its offering in April 2016 when annual financial statements for 2015 and 2014 will be required. This issuer may omit its 2013 annual financial statements from the December filing. However, the issuer may not omit its nine-month 2014 and 2015 interim financial statements because those statements include financial information that relates to annual financial statements that will be required at the time of the offering in April 2016. [Dec. 10, 2015]

Question 2

Question: May an EGC issuer omit financial statements of other entities from its filing or submission if it reasonably believes that those financial statements will not be required at the time of the offering?

Answer: Yes.

Section 71003 of the FAST Act is not by its terms limited to financial statements of the issuer. Thus, the issuer could omit financial statements of, for example, an acquired business required by Rule 3-05 of Regulation S-X if the issuer reasonably believes those financial statements will not be required at the time of the offering. This situation could occur when an issuer updates its registration statement to include its 2015 annual financial statements prior to the offering and, after that update, the acquired business has been part of the issuer’s financial statements for a sufficient amount of time to obviate the need for separate financial statements. See Section 2030.4 of the Division of Corporation Finance’s Financial Reporting Manual. [Dec. 10, 2015]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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