JOBS Act Registration and Deregistration Thresholds under Exchange Act FAQs Released | Practical Law

JOBS Act Registration and Deregistration Thresholds under Exchange Act FAQs Released | Practical Law

The SEC's Division of Corporation Finance released frequently asked questions about the JOBS Act amendments to the Securities Exchange Act registration and deregistration thresholds.

JOBS Act Registration and Deregistration Thresholds under Exchange Act FAQs Released

Practical Law Legal Update 7-518-9045 (Approx. 4 pages)

JOBS Act Registration and Deregistration Thresholds under Exchange Act FAQs Released

by PLC Corporate & Securities
Published on 12 Apr 2012 • USA (National/Federal)
The SEC's Division of Corporation Finance released frequently asked questions about the JOBS Act amendments to the Securities Exchange Act registration and deregistration thresholds.
On April 11, 2012, the SEC's Division of Corporation Finance issued frequently asked questions (FAQs) clarifying the operation of newly amended Sections 12(g) and 15(d) of the Securities Exchange Act of 1934 (Exchange Act), which govern the thresholds at which companies must register (and may deregister) under the Exchange Act. Sections 12(g) and 15(d) were amended on April 5, 2012 by Titles V and VI of the Jumpstart Our Business Startups Act (JOBS Act).
The FAQs clarify:
  • When calculating the number of record holders of a class of securities, companies can now exclude holders who received their securities under an employee compensation plan in exempt transactions. The FAQs explain:
    • even though the JOBS Act calls for SEC rulemaking around this provision, the reform itself became effective on April 5, 2012; and
    • an issuer can exclude holders that received shares through an employee compensation plan, whether or not those holders are current employees. A senior member of the Division staff clarified in an oral statement on April 11 that the exclusion does not, however, extend to transferrees of these holders.
  • Companies (other than bank holding companies) that triggered the pre-JOBS Act threshold for Exchange Act registration, but that would not trigger the new threshold and have not yet completed registration:
    • do not have an obligation to register because of that pre-JOBS Act trigger; and
    • can withdraw an already-filed Exchange Act registration statement if it has not yet gone effective.
  • Bank holding companies that triggered the pre-JOBS Act threshold do not have an obligation to register as a result of that previous trigger, whether or not they would trigger the new standards. They can withdraw a not-yet-effective Exchange Act registration statement. They must re-assess their filing obligations under the new threshold as of each fiscal year end after April 5, 2012.
  • Any company (including any bank holding company) that has completed an Exchange Act registration must continue that registration until it is eligible to deregister.
  • A bank holding company can deregister under the new 1,200 holder deregistration threshold by filing a Form 15. Because Form 15 has not yet been amended to add a check-box indicating that the issuer is deregistering in reliance on the new threshold, the bank holding company should include an explanatory note indicating that it is relying on Section 12(g)(4) of the Exchange Act to terminate it duty to file reports with respect to the class of securities.
  • The FAQs highlight that, under Section 12(g)(4) of the Exchange Act, deregistration is not effective until 90 days after the Form 15 is filed. During the 90 day period, a bank holding company deregistering under the new 1,200 holder threshold must continue to file reports under:
    • Section 13(a) (periodic reports);
    • Section 14 (proxy statements); and
    • Section 16 (beneficial ownership reporting).
    While there is a rule (Rule 12g-4) immediately suspending a company's duty to file periodic reports when it files Form 15, this rule has not yet been amended to reflect the new threshold. Therefore, this suspension would not apply to a deregistering company unless it also met one of the old deregistration thresholds.
  • Bank holding companies taking advantage of the new 12(g) deregistration threshold must remember to address any Section 15(d) reporting obligation they have. The FAQs remind issuers that:
    • while 15(d) reporting obligations are suspended when an issuer has a class of securities registered under Section 12, once a company deregisters under Section 12 it may have a 15(d) reporting obligation depending on its use of a Securities Act registration statement during the fiscal year; and
    • a company may be eligible for no action relief from reporting if its only Securities Act activity during the fiscal year was a Section 10(a)(3) update of a registration statement under which no securities were issued.
For more information on the provisions of the JOBS Act relating to Exchange Act registration and deregistration, see Practice Notes, JOBS Act: Exchange Act Registration Thresholds Summary and Road Map to the Jumpstart Our Business Startups (JOBS) Act of 2012.