On April 8, 2020, the Securities and Exchange Commission (SEC) voted to adopt a series of rule and form amendments that are intended to modernize the registration, communication and offering processes for business development companies (BDCs) and registered closed-end investment companies (CEFs) under the Securities Act of 1933 (Securities Act).1 (CEFs and BDCs are collectively defined in the Adopting Release and referred to herein as the “affected funds.”) The amendments allow affected funds to use the securities offering rules that have been available to operating companies since 2005. The amendments were approved substantially in the form in which they were proposed in March 2019.2 Notably, however, the final amendments differ from the proposed amendments in several ways, including by incorporating changes that eliminate proposed Form 8-K filing requirements and expand the scope of Rule 486 under the Securities Act.
The amendments are intended to, among other things:
The Adopting Release also includes amendments intended to further harmonize the existing disclosure and regulatory framework for affected funds with that of operating companies. In particular, the amendments impose on affected funds structured data requirements (i.e., a requirement to tag certain information using Inline eXtensible Business Reporting Language (Inline XBRL)) and new annual reporting disclosure requirements. Additionally, CEFs that make periodic repurchase offers pursuant to Rule 23c-3 under the Investment Company Act of 1940 (1940 Act), commonly referred to as interval funds, will be permitted to pay securities registration fees using the same method currently used by mutual funds and exchange-traded funds (ETFs).
These amendments will have broad application in the closed-end fund and BDC3 industries, impacting funds in varying degrees depending on size and type. The rule and form amendments will become effective on August 1, 2020, except for the amendments related to registration fee payments by interval funds and certain exchange-traded products, which will become effective on August 1, 2021.
An annotated chart detailing impacts of the amendments on affected funds is provided in Appendix A.
In 2005, the SEC adopted sweeping reforms of its rules governing the registration, communications and offering processes under the Securities Act (2005 Reforms).4 At the time, investment companies were specifically excluded from the scope of the 2005 Reforms, with the SEC in the adopting rule release stating, “[I]t would be more appropriate to consider changes to [its] requirements as they apply to registered investment companies and business development companies in the context of a broader reconsideration of the separate framework applicable to such issuers.” However, for over 12 years, similar reforms were not proposed for investment companies.
The amendments are a result of the SBCA and the Consumer Protection Act, which generally directed the SEC to propose rules that would permit affected funds to use the securities offering rules available to operating companies. For BDCs, Section 803 of the SBCA required the SEC, no later than one year after the date of the enactment, to revise Form N-2, as well as numerous specific rules under the Securities Act, the Securities Exchange Act of 1934 (Exchange Act) and Regulation FD, to allow BDCs to rely on the offering, proxy and communication rules previously available only to operating companies.
For CEFs, Section 509 of the Consumer Protection Act instructed the SEC to propose rules that would permit any CEF that is listed on a national securities exchange or that is an interval fund to “use the securities offering and proxy rules, subject to conditions the Commission determines appropriate, that are available to other issuers that are required to file reports under Section 13 or Section 15(d) of the Securities Exchange Act of 1934.” Unlike the SBCA, the Consumer Protection Act did not specifically identify required revisions with respect to CEFs, but instead imposed a broader principles-based mandate on the SEC, reserving for the SEC the authority to impose conditions that it determined to be appropriate to securities offering and proxy rules for CEFs. In the Adopting Release, the SEC noted that while the Consumer Protection Act only required the SEC to consider interval funds and listed CEFs, the agency determined to exercise its discretion to extend the proposed amendments to all CEFs, as applicable.
Registration Process: Short-Form Registration Statement and Incorporation by Reference
The amendments will allow eligible affected funds to use the more streamlined and cost-effective registration process currently available to operating companies. Notably, eligible affected funds are less likely to experience gaps between the expiration of one registration statement and the effectiveness of a new shelf registration statement, which could require untimely suspensions of their offerings. In addition, eligible affected funds will benefit from reduced costs associated with updating their prospectuses. Under existing Securities Act rules and applicable SEC staff guidance,5 issuers (including affected funds) that meet the eligibility requirements of Form S-36 may conduct primary “off-the-shelf” offerings under Rule 415(a)(1)(x) of the Securities Act and then later take down securities “off the shelf” for sale in a public offering as market conditions warrant. The existing offering rules for operating companies, however, are more flexible than those for affected funds. Eligible operating companies are permitted to use a short-form registration statement on Form S-3. They also may rely on Rule 430B of the Securities Act to omit certain information from the base prospectus when the registration statement is declared effective and later provide such information in a subsequent Exchange Act report incorporated by reference, a prospectus supplement or a post-effective amendment. Affected funds, however, currently are not permitted to use a short-form registration statement or forward incorporate information from subsequently filed Exchange Act reports. When an affected fund sells securities, including as part of an off-the-shelf offering, its registration statement must include all required information.
The amendments will permit eligible affected funds to:
Short-Form Registration Statement. Under the amendments, an affected fund will be permitted to file a short-form registration statement on Form N-2 if it meets the registrant and transaction requirements of Form S-3 (an affected fund that meets such requirements is referred to herein as a “seasoned fund”). An affected fund would meet the registrant and transaction requirements if it has:
Additionally, for a CEF, the fund also must have been registered under the 1940 Act for at least 12 calendar months immediately preceding the filing of the registration statement and have filed all reports required to be filed under Section 30 of the 1940 Act in a timely manner.
A seasoned fund relying on the short-form registration instructions will be required to:
The ability to backward and forward incorporate information by reference will allow seasoned funds using a short-form registration statement to avoid the need to file a post-effective amendment in connection with annual updates or a lengthy prospectus supplement in connection with takedowns. However, affected funds should consider that the amendments could increase their liability with respect to information contained in such reports that has not previously been incorporated into their registration statements.
Certain affected funds, including unlisted interval funds and unlisted BDCs, that do not list their securities on a national securities exchange, and therefore do not have a “public float,” will not be able to satisfy the transaction requirement necessary to file a short-form registration statement, and therefore would not be able to qualify as seasoned funds. Such affected funds, however, may find some relief under amended Rule 486(b).
Registration Statements Filed Pursuant to Rule 486. Rule 486 under the Securities Act currently permits interval funds to file post-effective amendments that are immediately effective upon filing under Rule 486(b) and certain new registration statements that are automatically effective 60 days after filing under Rule 486(a). Through no-action letters, the SEC staff has historically provided relief to BDCs and certain CEFs conducting offerings under Rule 415(a)(1)(x) to make filings under Rule 486(b). No such relief, however, has been provided under Rule 486(a), so such affected funds still needed to file new registration statements on Form N-2 in order to make material changes to the funds’ disclosure or to register additional shares. In response to comments on the Proposing Release, the SEC adopted amendments to Rule 486 to memorialize such no-action letters into rules and allow any registered CEF or BDC that conducts a continuous offering under Rule 415(a)(1)(ix) to rely on Rule 486, and to expand the scope of registration statements that Rule 486 covers. In the Adopting Release, the SEC declared that such no-action letters will be withdrawn effective August 1, 2021 (one year from the effective date of the final rule). On April 9, 2020, the SEC Division of Investment Management issued an information update listing the specific no-action letters that will be withdrawn consistent with the amendments.7 Funds with existing 486(b) or shelf offering no-action relief should review their no-action letters and the amendments to determine whether any negative or disruptive impacts may occur as a result of the withdrawal of the letters.
Affected funds that will newly be eligible to rely on Rule 486 generally are currently required to file new registration statements every three years under Rule 415(a)(5) and (a)(6). The amendments to Rule 486 will allow these registration statements to be immediately or automatically effective under Rule 486, depending on the substance of the disclosure. Specifically, a registration statement a fund files to comply with Rule 415(a)(5) and (a)(6) will be immediately effective upon filing if it is filed for no purpose other than to comply with those provisions of Rule 415 or for other purposes listed in Rule 486(b), such as making non-material changes or updating the fund’s financial statements under Section 10(a)(3) of the Securities Act. If the registration statement does not qualify under Rule 486(b) because, for example, it includes material changes to the fund’s disclosure, the registration statement could be automatically effective 60 days after filing under Rule 486(a). As a result of the amendments, affected funds that make continuous offerings under Rule 415(a)(1)(ix) will be able to rely on Rule 486 for registration statements filed to comply with Rule 415(a)(5) and (a)(6).
Incorporating Information by Reference Into Registration Statements on Form N-14. In the Proposing Release, the SEC requested comment on whether it should modify incorporation by reference provisions in other registration forms filed by affected funds to provide parity or consistency across registration statements. In response to comments supporting the approach, the amendments will modify Form N-14 to allow BDCs to incorporate by reference into their registration statements on Form N-14 to the same extent as registered CEFs. Additionally, the amendments will eliminate the requirement that registrants file documents that contain information that is incorporated by reference into the prospectus or SAI with their registration statements on Form N-14.
Omitting Information From a Base Prospectus and Filing Prospectus Supplements. As previously noted, Rule 430B of the Securities Act permits WKSIs and certain issuers eligible to use Form S-3 to omit specified information from its base prospectus and later provide such information in a subsequent Exchange Act report incorporated by reference, a prospectus supplement or a post-effective amendment.8 Under the amendments, seasoned funds will be permitted to use Rule 430B in parity with operating companies. By relying on Rule 430B, seasoned funds that qualify as WKSIs will be permitted to omit the plan of distribution and information regarding whether the offering is a primary one or an offering on behalf of selling security holders from their registration statements. Additionally, all seasoned funds will be permitted to omit the identities of selling security holders and the amount of securities to be registered on their behalf, subject to certain conditions.
Rules 424 and 497 of the Securities Act currently provide different processes for operating companies and investment companies to file prospectuses. Operating companies follow Rule 424, which requires companies to file only a prospectus that makes substantive changes from, or additions to, a previously filed prospectus and provides companies additional time to do so. In contrast, Rule 497 currently requires funds to file every prospectus that varies from a previously filed prospectus before it is first used or given to any person, regardless of the substance of the changes. Under the amendments, all affected funds will be able to rely on Rule 424 to file any type of prospectus enumerated in Rule 424(b) to update or to include information omitted from a prospectus (including information omitted from an initial public offering (IPO) prospectus pursuant to Rule 430A) 9or in connection with a shelf takedown, which will reduce the number of prospectus filings that a fund will be required to make.10 The SEC also adopted an amendment to Rule 497 to provide that Rule 424 will be the exclusive rule for affected funds to file a prospectus or prospectus supplement other than an advertisement that is deemed to be a prospectus under Rule 482 of the Securities Act.
Under the amendments, affected funds relying on Rule 430B — similar to operating companies — will undertake that, for purposes of determining liability under the Securities Act with respect to any purchaser, each prospectus supplement is deemed part of the corresponding base prospectus as of the earlier of the date of first use after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus.
Additional Information in Periodic Reports. Under the amendments, seasoned funds will be permitted to forward incorporate information from their Exchange Act reports. The SEC noted that these funds may wish to include information in their periodic reports that is not required to be included in order to update their registration statements. The amendments include a new instruction to Form N-2 that will allow a fund to provide such additional information in their Exchange Act reports.
Well-Known Seasoned Issuer Status
The SEC’s offering rules provide WKSIs with certain registration and communication flexibilities because, among other reasons, they have a demonstrated market following, which contributes to the greater extent to which the market absorbs information about WKSIs that is ultimately reflected in the price of WKSIs’ securities. Pursuant to the amendments, affected funds are now eligible to qualify as WKSIs. When an issuer qualifies as a WKSI, it can register an unspecified amount of different types of securities under the Securities Act on a shelf registration statement that becomes effective automatically upon filing. The ability to use an automatic shelf registration statement means that such registration statement will not be subject to review by the SEC staff prior to becoming effective and will be available for use immediately upon filing. This streamlined registration process provides flexibility for WKSIs to time securities sales to meet market conditions without waiting for the SEC staff to review and comment on a registration statement and declare it effective. Additionally, subject to certain conditions, a WKSI also can communicate at any time, including through a free writing prospectus, without violating the gun-jumping provisions of the Securities Act.
To qualify as a WKSI, an affected fund is required to file Exchange Act reports with the SEC and meet the following requirements: (1) it must be a seasoned fund; (2) it must, as of a date within 60 days of filing its shelf registration statement, either (a) have a worldwide market value of its outstanding common stock held by nonaffiliates of at least $700 million or (b) have issued in the last three years at least $1 billion aggregate principal amount of nonconvertible securities, other than common equity, in registered primary offerings for cash; and (3) it is not an “ineligible issuer.”11
Final Prospectus Delivery Reforms
Under Rule 172 of the Securities Act, issuers, brokers and dealers are permitted to satisfy final prospectus delivery obligations if a final prospectus is filed with the SEC within the time required and other conditions are satisfied. Rule 173 of the Securities Act requires a notice stating that a sale of securities was made pursuant to a registration statement or in a transaction in which a final prospectus would have been required to have been delivered in the absence of Rule 172. Currently, affected funds are specifically excluded from the group of issuers that may rely on these rules, which means issuers and their distributors are required to deliver prospectuses. To implement the SBCA and to provide parity for CEFs consistent with the Consumer Protection Act, the amendments remove the exclusion for offerings by affected funds in Rules 172 and 173. This means that physical or electronic copies of an affected fund’s final prospectus will no longer be required to be delivered to investors in IPO transactions and other registered offerings, provided the conditions of these rules are met.
Offering Communications: Overview. The gun-jumping provisions of the Securities Act restrict the types of offering communications that issuers or other parties subject to the Securities Act’s provisions may use in connection with a proposed registered offering of securities. As part of its 2005 Reforms, the SEC adopted rules that provided operating companies and other parties increased flexibility in their communications with the public in connection with an offering. The applicability of the gun-jumping provisions is determined based on the stage of the offering process during which the communications are made:
Pre-Filing Period Restrictions and Safe Harbors12
Publicity about a company or its business during the pre-filing period may be deemed to constitute an unlawful offering if the SEC or a court were to determine that such publicity was designed to stimulate interest in the securities to be offered, even absent a specific reference to any proposed offering. The SEC has adopted a number of safe harbors applicable to pre-filing communications that specify the types of communications and information that are permitted to be distributed without being considered “gun-jumping,” including, for example:
During the waiting period, other than for the delivery of a preliminary prospectus, issuers, underwriters and dealers are permitted to engage only in limited written communications with prospective investors, including soliciting offers, without violating the gun-jumping rules. The following is a summary of communications with security holders and the general public that are permitted during the waiting period:
Offering Communications: Amendments. The amendments will extend flexibility to the affected funds. Specifically, the amendments will permit affected funds to:
The amendments to the communication rules will provide affected funds with incremental flexibility in their communications. Affected funds will be permitted to take advantage of this additional flexibility or continue to rely on Rule 482, the primary advertising rule for investment companies, and other rules currently applicable to their communications. For example, small affected funds will be able to take advantage of new communication options not previously afforded to them, including Rule 163A and Rule 169. Additionally, the amendments to the free writing prospectus rules will permit broker-dealers to engage in such communications on behalf of the affected fund issuer. Accordingly, broker-dealers that once used Rule 482 ads may rely on the amended Rule 433 to publish and distribute similar communications, and will no longer be required to file these communications with the Financial Industry Regulatory Authority.
Broker-Dealer Research Reports. Rule 138 permits a broker-dealer participating in a distribution of securities to publish or distribute research reports about that issuer if the broker-dealer publishes or distributes such research reports in the regular course of its business and if the issuer has filed all periodic reports required during the preceding 12 months on Forms 10-K and 10-Q. The amendments will amend Rule 138’s references to shelf registration statements filed on Form S-3 to include a parallel reference to registration statements filed on Form N-2 under the new short-form registration statement instruction. The amendments also will amend Rule 138 to include parallel references to the reports that registered CEFs are required to file (i.e., reports on Forms N-CSR, N-Q, N-CEN and N-PORT). Broker-dealers that once used Rule 482 advertisements styled as research reports, may instead rely on amended Rule 138, as adopted, to publish or distribute similar communications without being subject to filing requirements for these communications.
The SEC did not adopt any amendments to Rule 139, which provides a safe harbor for a broker-dealer’s publication or distribution of research reports where the broker-dealer is participating in the registered offering. Instead, the SEC determined that newly adopted Rule 139b satisfied the directives of the SBCA and the Consumer Protection Act by extending Rule 139’s safe harbor to research reports on affected funds.13 It is important to note, however, Rule 139b imposes certain exclusions not contemplated by Rule 139, including that research reports published or distributed by a broker-dealer that is affiliated with an investment adviser to an affected fund are not covered under the safe harbor contained in Rule 139b.
Registration Fee Payment Method for Interval Funds. Currently, interval funds are required to pay a registration fee to the SEC at the time of filing a registration statement, regardless of when or if they sell the securities being registered. In contrast, as provided by Section 24(f)(2) of the 1940 Act, mutual funds and ETFs pay registration fees based on their net issuance of shares, no later than 90 days after the fund’s fiscal year end. Under the amendments, interval funds will be permitted to pay registration fees on the same annual net issu-ance basis as mutual funds and ETFs. Interval funds also will be required to submit information regarding the computation of the fee and other incorporation on Form 24F-2 in a structured data format.
Registration Fee Payment Method for WKSIs. Under Rule 456(b) of the Securities Act, WKSIs using automatic shelf registration statements are permitted to pay filing fees on a “pay as you go” basis. Affected funds that qualify as WKSIs as a result of the amendments will gain this payment flexibility.
Registration Fee Payment Method for Continuously Offered Exchange-Traded Products. Similar to interval funds, issuers that offer exchange-traded vehicle securities (exchange traded products, or ETPs) that are not registered under the 1940 Act currently are required to pay a registration fee to the SEC at the time of filing a registration statement, regardless of when or if they sell the securities being registered. In response to comments received on the Proposing Release, the amendments will permit certain ETPs to register an indefinite number of securities and pay registration fees on the same annual net issuance basis as mutual funds and ETFs.
Disclosure and Reporting Framework
The SEC adopted amendments to its rules and forms that are intended to tailor the disclosure and regulatory framework for affected funds in light of the amendments to the offering rules. Although many of these amendments are not expressly required by the SBCA or the Consumer Protection Act, the SEC stated in its Adopting Release that it believes such amendments “are consistent with the respective Acts’ requirements to increase regulatory parity of affected funds with otherwise similarly-situated issuers.” The amendments include:
Structured Data Requirements. Under the amendments, affected funds will be required to report certain information in a structured data format. The SEC amended:
Under the amendments, affected funds will be required to submit “Interactive Data Files” (i.e., machine-readable computer code that presents information in XBRL format) with (1) any registration statements and post-effective amendments; (2) any prospectus filed pursuant to Rule 424; and (3) for seasoned funds, any Exchange Act report that a seasoned fund filing a short-form registration statement on Form N-2 is required to tag using Inline XBRL format.
New Annual Reporting Requirements. The Adopting Release includes new annual report requirements applicable to all affected funds. Under the amendments, seasoned funds that file short-form registration statements will be required to include key information in their annual reports that is currently disclosed in their prospectuses, including the fee and expense table, share price data and the senior securities table. Additionally, a seasoned fund that files short-form registration statements will be required to forward incorporate all Exchange Act reports into its registration statement.
The amendments also set forth other disclosure requirements, including, among other things:
On extending MDFP disclosure requirements to CEFs, the SEC staff noted in the Adopting Release that investors in these funds, like investors in mutual funds, ETFs, BDCs and operating companies, similarly would benefit from annual report disclosures that aid investors in assessing a fund’s performance over the prior fiscal year and complement other information in the report, which may make the annual report disclosure more understandable as a whole. Under the amendments, Form N-2 will be amended to require CEFs to provide a narrative description of the factors that materially affected their performance during the most recently completed fiscal year. CEFs also will be required to include a line graph comparing the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the fund against an appropriate broad-based securities market index for the same period, and a table of the fund’s average annual returns for the one-, five-, and 10-year periods as of the last day of the fund’s most recent fiscal year. The final account values for listed CEFs will be shown based on the market price per share, whereas unlisted CEFs will provide such information based on net asset value (NAV). We note that while market value is an important performance metric, discounts to NAV often are out of a fund’s control, and, therefore, listed CEFs may wish to show NAV performance supplementally. Finally, CEFs will be required to discuss in their annual reports the effect of any policy or practice of maintaining a specified level of distributions to shareholders on the fund’s investment strategies and NAV per share during the last fiscal year, as well as the extent to which the registrant’s distribution policy resulted in distributions of capital.
Proposed Form 8-K Reporting Requirement for CEFs Not Adopted. Form 8-K under the Exchange Act generally requires reporting companies subject to the periodic reporting requirements of the Exchange Act, including BDCs, to publicly disclose major events relevant to shareholders on a timely basis. The Proposing Release proposed amendments that would have required CEFs that are reporting companies under Section 13(a) or 15(d) of the Exchange Act to respond to reporting items on Form 8-K. However, in response to comments opposing this new requirement for CEFs in light of the differences between the types of events that are important to CEFs and those that are important to operating companies, and the fact that CEFs currently may disclose substantially similar information through other mechanisms, such as prospectus supplements, post-effective amendments and press releases, the SEC did not adopt the proposed new Form 8-K reporting requirement for CEFs. In the Adopting Release, the SEC noted that adopting the new Form 8-K reporting requirement “may not substantially improve the flow of important current information to investors and the market and, as a result, would not justify the additional burdens associated with Form 8-K reporting.”
Online Availability of Incorporation by Reference. Form N-2’s current General Instruction for Incorporation by Reference permits affected funds to backward incorporate their financial information into the prospectus or SAI, but requires the funds to provide new investors with copies of all previously filed materials that the funds incorporated by reference into the prospectus and/or SAI. Under the amendments, affected funds will no longer be required to deliver such information to new investors. Instead, affected funds will be required to make their prospectuses, their SAIs and the incorporated materials readily available and accessible on a website.
Enhancements to Certain CEFs’ Annual Report Disclosure. Rule 8b-16 under the 1940 Act requires all registered investment companies to update their 1940 Act registration statements on an annual basis. CEFs, however, may rely on Rule 8b-16(b) to forgo an annual update provided that they disclose certain key changes that occurred during the prior year in their annual reports. The SEC proposed amending Rule 8b-16, noting its concern that “funds disclosing important changes may not always provide enough context for investors to understand the implications of those changes.” Accordingly, under the amendments, Rule 8b-16 will be amended to require CEFs to describe such key changes in enough detail to allow investors to understand each change and how it may affect the fund. Such disclosures must be prefaced with a legend clarifying that the disclosures provide only a summary of certain changes that have occurred over the past year and may not reflect all of the changes that have occurred since the investor purchased the fund. For example, to the extent a fund’s principal investment objectives and policies or principal risk factors have changed, the fund should describe its investment objectives or principal risk factors before and after the change. Additionally, the amendments will require any affected fund that relies on Rule 8b-16(b) to describe the fund’s current investment objectives, investment policies and principal risks in its annual report, even if there were no changes in the past year. In the Adopting Release, the SEC stated that it believes that funds could increase the effectiveness of this disclosure by presenting it concisely, in accordance with “plain English” principles for organization, wording and design. The SEC encourages funds to tailor their disclosures to how the fund operates rather than relying on generic, standard disclosures about the fund’s investment policies and risks. Finally, the SEC encourages funds to describe principal risks in order of importance, with most significant risks appearing first (i.e., not listing risks in alphabetical order).
The final rule will be effective August 1, 2020. However, the SEC adopted a transition period after the publication of a final rule in the Federal Register to allow affected funds sufficient time to comply with the following three requirements:
This table has been adapted from the summary table provided by the SEC in the Adopting Release.
1 Securities Offering Reform for Closed-End Investment Companies, Securities Act Release No. 33-10771 (April 8, 2020) (Adopting Release). The amendments were adopted pursuant to the direction of Congress under the Small Business Credit Availability Act (SBCA) and the Economic Growth, Regulatory Relief, and Consumer Protection Act (Consumer Protection Act). For additional information regarding the SBCA and the Consumer Protection Act, please refer to our April 9, 2018, and November 1, 2018, articles.
2 Securities Offering Reform for Closed-End Investment Companies, Securities Act Release No. 33-10619 (March 20, 2019) (Proposing Release).
3 Section 803 of the SBCA provided that if the SEC did not revise its rules and forms by the one-year anniversary of the SBCA, BDCs would be entitled to treat such provisions as self-implementing until such revisions were completed by the SEC. Accordingly, reliance on Section 803 has been available to BDCs since March 23, 2019. However, the adopting of the amendments will provide BDCs with important regulatory clarity.
4 Securities Offering Reform (70 Fed. Reg. 44722; published August 3, 2005).
5 See Nuveen Virginia Premium Income Municipal Fund, SEC Staff No-Action Letter (Oct. 6, 2006); Pilgrim America Prime Rate Trust, SEC Staff No-Action Letter (May 1, 1998).
6 Form S-3 is a short-form registration statement that allows an issuer to register and conduct primary offerings “off the shelf” under Rule 415 of the Securities Act. It permits issuers to update disclosure prospectively by incorporating by reference into the registration statement subsequently filed reports of the issuer on Form 8-K, Form 10-Q and Form 10-K.
7 Division of Investment Management Staff Statement Regarding Withdrawal of Staff Letters Related to Securities Offering Reform for Closed-End Investment Companies Rulemaking, IM-INFO-2020-04 (April 9, 2020).
8 Under Rule 430B, a prospectus filed as part of an automatic shelf registration statement may omit the following: information that is unknown or not reasonably available to the issuer; whether the offering is a primary or secondary offering or a combination of the two; the plan of distribution for the securities; a description of the securities registered other than an identification of the name or class of such securities; the identity of other issuers; and the names of any selling security holders and amounts of securities to be registered on their behalf.
9 Rule 430A of the Securities Act permits, if specified conditions are met, a registration statement to be declared effective without containing final pricing information
10 The Adopting Release noted that the amendments to Rule 424(f ) will not apply to open-end or other registered companies. Those investment companies will continue to file prospectuses pursuant to Rule 497.
11 Rule 405 of the Securities Act defines an “ineligible issuer” as, among other things, an issuer that has not filed all required reports during the preceding 12 months (or for such shorter period that the issuer was required to file such reports); an issuer that has (or whose subsidiary has) been convicted of a felony or misdemeanor; or an issuer that has violated (or whose subsidiary has violated) the anti-fraud provisions of the federal securities laws. The amendments expand the anti-fraud prong for affected funds to provide that an affected fund would be an ineligible issuer if, within the past three years, its investment adviser, including any sub-adviser, was the subject of any judicial or administrative decree or order arising out of a governmental action that determines that the investment adviser aided, abetted or caused the affected fund to have violated the anti-fraud provisions of the federal securities law.
12 On September 26, 2019, the SEC adopted Rule 163B under the Securities Act, which permits all prospective issuers, including registered investment companies and BDCs, to engage in “test the waters” communications with prospective investors that the issuer reasonably believes are qualified institutional buyers and/or institutional accredited investors prior to, or following, the filing of a registration statement. For additional information, please refer to our September 27, 2019 article.
13 Covered Investment Fund Research Reports, Securities Act Release No. 33-10580 (Nov. 30, 2018).