SEC's Division of Corporation Finance Issues C&DIs on Ability of EGCs to Omit Certain Financial Information from Registration Statements Under the FAST Act | Practical Law

SEC's Division of Corporation Finance Issues C&DIs on Ability of EGCs to Omit Certain Financial Information from Registration Statements Under the FAST Act | Practical Law

The SEC's Division of Corporation Finance issued compliance and disclosure interpretations (C&DIs) clarifying the ability of emerging growth companies (EGCs) to omit certain financial information from their registration statements under the Fixing America's Surface Transportation Act (FAST Act).

SEC's Division of Corporation Finance Issues C&DIs on Ability of EGCs to Omit Certain Financial Information from Registration Statements Under the FAST Act

by Practical Law Corporate & Securities
Published on 14 Dec 2015 • USA (National/Federal)
The SEC's Division of Corporation Finance issued compliance and disclosure interpretations (C&DIs) clarifying the ability of emerging growth companies (EGCs) to omit certain financial information from their registration statements under the Fixing America's Surface Transportation Act (FAST Act).
On December 10, 2015, the SEC's Division of Corporation Finance issued two new compliance and disclosure interpretations (C&DIs) clarifying the ability of emerging growth companies (EGCs) to omit certain financial information from their registration statements under the Fixing America's Surface Transportation Act (FAST Act). Among other things, the FAST Act requires the SEC to revise Forms S-1 and F-1 to indicate that a registration statement filed (or confidentially submitted) by an EGC prior to an IPO may omit financial information for historical periods that are otherwise required by Regulation S-X as long as both:
  • The omitted financial information relates to a historical period that the issuer reasonably believes will not be required to be included in the Form S-1 or F-1 at the time of the contemplated offering.
  • Prior to the issuer distributing a preliminary prospectus to investors, the registration statement is amended to include all financial information required by Regulation S-X at the date of that amendment.
The new FAST Act C&DIs clarify that:
  • An EGC may not omit interim financial statements from its filing or submission for a period that has financial information that will be included within required financial statements covering a longer interim or annual period at the time of the offering, even though the shorter period will not be presented separately at that time. This C&DI gives an example of a calendar year-end EGC that submits or files a registration statement in December 2015 and reasonably expects to commence its offering in April 2016 when annual financial statements for 2015 and 2014 will be required. Under the FAST Act, this EGC may omit its 2013 annual financial statements from the December filing because it reasonably believes those financial statements will not be required at the time of the offering in April 2016. However, this EGC may not omit its nine-month 2014 and 2015 interim financial statements because those statements include financial information that relates to annual financial statements that will be required at the time of the offering in April 2016. (Question 1.)
  • An EGC may omit financial statements of other entities from its filing or submission if it reasonably believes that those financial statements will not be required at the time of the offering. For example, an EGC may omit financial statements of an acquired business required by Rule 3-05 of Regulation S-X if it reasonably believes that those financial statements will not be required at the time of the offering. This situation could occur when an issuer updates its registration statement to include its 2015 annual financial statements prior to the offering and, after that update, the acquired business will have been part of the issuer's financial statements for a sufficient amount of time that separate financial statements are no longer necessary. (Question 2.)
To learn more about the FAST Act, see Legal Update, President Obama Signs the FAST Act, Codifying a New Resale Exemption and Creating Additional Accommodations for EGCs.
To learn more about the requirements of Regulation S-X, see Practice Note, Regulation S-X: What Lawyers Need to Know.