U.S. SEC Staff Issues Guidance Regarding On-Going Exchange Act Reporting And Registered Securities Offerings In Light Of COVID-19

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On May 4, 2020, the U.S. SEC’s Division of Corporation Finance (the “Staff”) published four “FAQs” relating to the application of the Commission’s March 25, 2020 Order (the “COVID-19 Order”) providing extended deadlines for certain filings under the Securities Exchange Act of 1934 (the “Exchange Act”).[1] The FAQs address the means of establishing an extended deadline for Exchange Act reports, the use of Securities Act of 1933 (the “Securities Act”) Form S-3 while subject to an extended deadline pursuant to the COVID-19 Order, and the application of Section 10(a)(3) of the Securities Act to issuers relying on the COVID-19 Order.

The Staff made clear that these FAQs should be considered in the context of the COVID-19 Order only. In this regard, the Staff stated, “[b]ecause these responses relate to unique circumstances arising from COVID-19, the staff is not including them within our Compliance and Disclosure Interpretations.”

FAQ #1 – “What disclosure is required under the COVID-19 Order?”

The Staff restated the requirements for reliance on the COVID-19 Order. In this regard, an issuer intending to rely on an extended deadline pursuant to the COVID-19 Order is required to make six specified disclosures. Four of these disclosures are required to be included in the required Form 8-K (or Form 6-K, if applicable) filed by the original deadline, and two of the required disclosures are required to be included in the report, schedule, or form that is filed on a delayed basis.

In the Form 8-K (or Form 6-K), the issuer must disclose:

(1)   that it is relying on the COVID-19 Order;

(2)   a brief description of the reasons why the registrant could not file the subject report, schedule, or form on a timely basis;

(3)   the estimated date by which the report, schedule, or form is expected to be filed; and

(4)   a company-specific risk factor or factors explaining the impact, if material, of COVID-19 on the registrant’s business.[2]

In the report, schedule, or form filed on a delayed basis pursuant to the COVID-19 Order, the registrant or other filing person must disclose that it is relying on the COVID-19 Order and state the reasons why it could not file such report, schedule, or form on a timely basis.

FAQ#2 – “May a registrant continue to conduct takedowns using an already-effective registration statement while relying on the COVID-19 Order for a periodic report, including a Form 10-K?”

The Staff indicated that an issuer may continue to conduct takedowns in this situation; however, the Staff included the important caveat that an issuer intending to conduct such a takedown must determine that “the prospectus used complies with Section 10(a) of the Securities Act.”

While the COVID-19 Order provides a delay in the due date for periodic reports required under the Exchange Act, “the COVID-19 Order does not delay or exempt compliance with requirements for Securities Act registration statements.” (Emphasis added). Section 10(a)(3) provides such a requirement, stating:

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.

The sixteen-month period in Section 10(a)(3) is particularly timely, as that time period expired on April 30 for calendar year-end issuers.

Although not included in the Securities Act itself, Rule 415 requires issuers conducting a shelf offering to include an undertaking in the registration statement stating that they will reflect in the prospectus any facts or events arising after the effective date of the registration statement that, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.

In FAQ#2, the Staff noted the provision in Section 10(a)(3) that permits an issuer to continue to use a prospectus, even if the information in the prospectus is more than sixteen months old, if “that updated information cannot be furnished without unreasonable effort or expense.” The Staff provided guidance regarding this determination, stating that issuers “are responsible for the accuracy and completeness of their disclosure,” and issuers and their legal advisers “will need to determine when it is appropriate to update the prospectus.”

FAQ#3 – “With respect to an effective Form S-3, when must a registrant reassess its eligibility to remain on the form if it has relied on the COVID-19 Order to delay filing a Form 10-K that will serve as a Section 10(a)(3) update?”

Background: The Staff first noted the standards for applying Section 10(a)(3) to this situation:

Under Securities Act Rule 401(b), if an amendment to a registration statement and prospectus is filed for the purpose of meeting the requirements of Section 10(a)(3), the form and contents of that amendment must conform to the applicable rules and forms as in effect on the date it is filed.

An issuer is required to reassess its Form S-3 eligibility when it files the Form 10-K that serves as a Section 10(a)(3) update.

Application to issuers relying on the COVID-19 Order: The Staff notes that proper reliance on the COVID-19 Order has two effects with regard to this question:

(1)    the due date for filing the Form 10-K is extended; and

(2)    the issuer must reassess its eligibility to use Form S-3 when it files the Form 10-K.

At the time of filing the Form 10-K, the registrant must meet all of the requirements of Form S-3. Among these requirements, the issuer must have “filed all the material required to be filed pursuant to Section 13, 14 or 15(d) for a period of at least twelve calendar months immediately preceding the Section 10(a)(3) update, to remain on Form S-3.” The Staff referred issuers to the Commission’s statements in its March 20, 2020 press release (available at: https://www.sec.gov/news/press-release/2020-73) and stated “[t]he Form 10-K will be considered timely if all the conditions of the COVID-19 Order are met with respect to the filing.”

FAQ#4 – “Is a registrant relying on the COVID-19 Order to delay a required filing eligible to file a new Form S-3 registration statement between the original due date of a filing and the extended due date, and will the staff accelerate the effectiveness of registration statements that do not contain all required information?”

The Staff provided a multi-part response to this question. First, the Staff expressed its general view:

“Between the original due date of a required filing and the due date as extended by the COVID-19 Order, a registrant may file a new Form S-3 registration statement even if the registrant has not filed the required periodic report prior to the filing of the registration statement. The staff will consider the registrant to be current and timely in its Exchange Act reporting if the Form 8-K disclosing reliance on the COVID-19 Order is properly furnished. The registrant will no longer be considered current and timely, and will lose eligibility to file new registration statements on Form S-3, if it fails to file the required report by the due date as extended by the COVID-19 Order.”[3]

Second, the Staff expressed a follow-up view that differentiates the operation of this interpretation depending on whether Staff action (through delegated authority) is required for the Form S-3 registration statement to become effective. In this regard, the Staff stated:

“Registrants with compelling and well-documented facts may contact the staff to discuss their specific capital raising needs. However, registrants relying on the COVID-19 Order should note that the staff will be unlikely to accelerate the effective date of a Form S-3 until such time as any information required to be included in the Form S-3 is filed.”

In this statement, the Staff differentiates between those Form S-3 registration statements that become effective automatically upon filing and those Form S-3 registrations statements that may become effective only pursuant to Staff action (pursuant to delegated authority) to accelerate the effective date:

  • for Form S-3 registration statements that become effectively automatically upon filing, no Staff action is required and issuers should consider the Staff guidance provided in response to FAQ#2 in filing those registration statements (issuers “are responsible for the accuracy and completeness of their disclosure,” and issuers and their legal advisers “will need to determine when it is appropriate to update the prospectus”); and
  • for Form S-3 registrations statements that may become effective only upon Staff action (pursuant to delegated authority) to accelerate the effective date, the Staff will consider “compelling and well-documented facts,” but it is “unlikely” that the Staff will take action to accelerate the effectiveness of those registration statements.
Our Take

In its May 4 FAQs, the Staff continues to provide useful and practical guidance regarding the implications of the COVID-19 Order. Our takes on this guidance are:

The Staff reiterated the significance of the Form 8-K (or Form 6-K, if applicable) required by the COVID-19 Order – that filing must be made by the original due date of the Exchange Act filing, and it must include all of the information specified by the COVID-19 Order. The proper invocation of the Exchange Act filing extension under the COVID-19 Order will provide issuers with flexibility well beyond that provided by Rule 12b-25 in circumstances outside of the relief provided by the COVID-19 Order.

While the COVID-19 Order provides a delay in the due date for periodic reports required under the Exchange Act, “the COVID-19 Order does not delay or exempt compliance with requirements for Securities Act registration statements,” including the Section 10(a)(3) sixteen‑month requirement.

While issuers may continue to conduct takedowns off of shelf registration statements during the period between the original due date of an Exchange Act filing and the extended due date provided by the COVID-19 Order, issuers are responsible for determining that the prospectus continues to comply with Section 10(a). In this regard, where a prospectus contains information that is more than sixteen months old, an issuer will have to consider whether:

  • it continues to have in place appropriate disclosure controls and procedures and internal control over financial reporting while arguing “that updated information cannot be furnished without unreasonable effort or expense;” and
  • in light of the significant uncertainty presented by COVID-19 and the extended age of the information in the prospectus, that the prospectus continues to be “accurate and complete” and that it is not “appropriate to update the prospectus.”

The Rule 401(b) requirement to assess form eligibility will not become applicable until the actual time of filing of the issuer’s Form 10-K, so long as reliance on the COVID-19 Order is established properly, and the Form 10-K will be considered timely if made in compliance with an extended due date pursuant to the COVID-19 Order.

During the period between the original due date of a required Exchange Act filing and the extended due date permitted by proper reliance on the COVID-19 Order:

  • issuers will continue to be considered current and timely in their Exchange Act reporting between the original due date of a required Exchange Act filing and the extended due date permitted by proper reliance on the COVID-19 Order, permitting those issuers to file a new Form S-3 registration statement, even if the issuer has not filed the required periodic report prior to the filing of the registration statement;
  • issuers should be cautious of filing a Form S-3 registration statements that will become effectively automatically upon filing, given the significant uncertainties presented by COVID-19 and the age of information in the prospectus; and
  • while due consideration will be given to unique facts and circumstances, issuers should not expect the Staff to take action to accelerate the effective date for a Form S-3 registration statement that will become effective only upon Staff action.

COVID-19 has had a unique effect on the on-going reporting of each public company. Further, the capital needs of public companies vary significantly. The COVID-19 Order and the Staff’s guidance have provided broad flexibility while remaining cognizant of investor protections under the Securities Act and the Exchange Act – issuers should continue to consult with their legal advisers to assess the appropriate means to comply with their reporting obligations and meet their capital needs during these uncertain times.


[1] See Release No. 34-88465 (March 25, 2020).

[2] If the reason the subject report cannot be filed timely relates to the inability of any person, other than the issuer, to furnish any required opinion, report, or certification, the issuer must include, as an exhibit to the Form 8-K or Form 6-K, a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report, or certification on or before the original due date of such report.

[3] In Securities Act Forms C&DI Question 119.03, the Staff noted that Exchange Act Rule 12b-25(d) may necessitate a different response with regard to the operation of Rule 12b-25 (the general rule for providing extensions for Exchange Act reporting due dates). Question 119.03 reads:

“Question: May a company continue to use a registration statement that is predicated on timely filed reports (such as Form S-3) during the Rule 12b-25 extension period for a periodic report?

Answer: Rule 12b-25(d) provides that, during the extension period, a company ‘will not be eligible to use any registration statement form under the Securities Act the use of which is predicated on timely filed reports until the subject report is actually filed.’ The staff interprets the term ‘use’ contained in the rule to mean that a company would not be eligible to file a new registration statement on Form S-3 until the subject report is filed within the extension period. The staff does not interpret the term to mean that the company cannot continue to use an already effective Form S-3 to make offers and sales during the extension period. Rather, the company’s ability to continue to make such offers or sales will depend on whether it determines that the prospectus included in the Form S-3 is a valid Section 10(a) prospectus and there are no Section 12(a)(2) or anti-fraud concerns with the prospectus. If the company determines that it does not have a valid Section 10(a) prospectus, it should cease making any offers or sales under the registration statement that includes that prospectus. [September 30, 2008]”

[View source.]

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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