Tuesday, August 22, 2017

Staff updates interpretations on emerging growth company filing requirements

By John Filar Atwood

An emerging growth company (EGC) may omit from its draft registration statements interim financial information that it reasonably believes it will not be required to present separately at the time of the contemplated offering, according to the staff of the Division of Corporation Finance. The staff provided clarification on what financial information EGCs and non-EGCs may omit from registration statements in an update to its Compliance & Disclosure Interpretations (C&DI) on the FAST Act and Securities Act forms.

In the FAST Act C&DI, the staff noted that under Section 71003 of the FAST Act, an EGC may omit from its filed registration statements annual and interim 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 that will be included in a longer historical period relates to that period, the staff stated.

Staff policy. As a result, interim financial information that will be included in a historical period that the issuer reasonably believes will be required to be included at the time of the offering may not be omitted from filed registration statements. However, the staff’s policy is to permit an EGC to omit from its draft registration statements interim financial information that it reasonably believes it will not be required to present separately at the time of the planned offering.

The staff offered the example of a calendar year-end EGC that submits a draft registration statement in November 2017 and reasonably believes it will commence its offering in April 2018 when annual financial information for 2017 will be required. According to the staff, the issuer may omit from its draft registration statements its 2015 annual financial information and interim financial information related to 2016 and 2017.

In addition, assuming that the company were to first publicly file in April 2018 when its annual information for 2017 is required, it must separately prepare or present interim information for 2016 and 2017, the staff said. If the issuer were to file publicly in January 2018, it may omit its 2015 annual financial information, but it must include its 2016 and 2017 interim financial information in that January filing, according to the staff, because the interim information relates to historical periods that will be included at the time of the public offering.

Non-EGCs. With respect to an issuer that is not an EGC, the relief provided by Section 71003 of the FAST Act is not available. However, the staff noted in the Securities Act Forms C&DI that its policy is to allow an issuer that is not an EGC to omit from its draft registration statements interim and annual financial information that it reasonably believes it will not be required to present separately at the time it files its registration statement publicly. The staff noted that the issuer may not omit any required financial information from its filed registration statements.

The staff cited the example of a calendar year-end issuer that is not an EGC that submits a draft registration statement in November 2017 and reasonably believes it will first publicly file in April 2018 when annual financial information for 2017 will be required. According to the staff, the issuer may omit from its draft registration statements its 2014 annual financial information and interim financial information related to 2016 and 2017 because the information would not be required at the time of its first public filing in April 2018.

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