The SEC's Division of Corporation Finance has issued a short list of COVID-19-related FAQs. The responses address disclosure issues raised by a March 25, 2020 exemptive order, as well questions related to Form S-3 eligibility. The staff notes that these responses are not included within the Compliance and Disclosure Interpretations because they are unique to the circumstances arising from the COVID-19 pandemic. The staff may also supplement or amend the responses.
Disclosure. The first question addresses what disclosure is required under Release No. 34-88465. Issued on March 25, 2020, this exemptive order (the "COVID-19 Order") provides public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020. For each delayed report, however, companies must still convey through a current report on Form 8-K or Form 6-K a summary of why the relief is needed.
The question then is, what disclosures are required on those Forms 8-K or 6-K? The staff says that a registrant must disclose:
- that it is relying on the COVID-19 Order;
- a brief description of the reasons why the registrant could not file the subject report, schedule or form on a timely basis;
- the estimated date by which the report, schedule or form is expected to be filed; and
- a company-specific risk factor or factors explaining the impact, if material, of COVID-19 on the registrant’s business.
Form S-3. The FAQ also contains three questions related to Form S-3. First, the staff states that a registrant may 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 if the registrant determines that the prospectus used complies with Section 10(a) of the Securities Act. While registrants complying with the COVID-19 order may delay filings of periodic reports required under the Exchange Act, the order does not delay or exempt compliance with the requirements for Securities Act registration statements. Under Section 10(a)(3), a prospectus used more than nine months after the effective date of the registration statement cannot contain information dated over 16 months prior to that use. While Section 10(a)(3) may permit registrants relying on the COVID-19 Order to conduct a takedown using a prospectus that contains information older than 16 months if updated information cannot be furnished without unreasonable effort or expense, registrants and their legal advisers will need to determine when it is appropriate to update the prospectus.
Next, a registrant is required to reassess its Form S-3 eligibility when it files a Form 10-K that serves as a Section 10(a)(3) update. According to the staff, when a registrant relies on the COVID-19 Order, the due date for filing Form 10-K is extended and the registrant must reassess its eligibility 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, and the Form 10-K will be considered timely if all the conditions of the COVID-19 Order are met with respect to the filing. Here, the FAQ directs the reader's attention to the Commission's press release accompanying the COVID-19 Order for additional information on Form S-3 eligibility and Exchange Act filing requirements.
Finally, the FAQ states that a registrant relying on the COVID-19 Order 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. If the Form 8-K disclosing reliance on the COVID-19 Order is properly furnished, the staff will consider the registrant current and timely. But 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. Registrants may contact the staff to discuss their specific capital raising needs if they have compelling facts, but the staff will be unlikely to accelerate the effective date of a Form S-3 until any information required to be included in the Form S-3 is filed.