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Staff Responds to Securities Offering Reform Transition Questions

The SEC's Division of Corporation Finance has issued responses to transition questions that have arisen with respect to the securities offering reform rules that are effective December 1, 2005. The subject areas include the new communication rules, the inclusion of new undertakings, automatic shelf registration statements and the amendments to Forms 10-K, 20-F and 10-Q.

The staff advised that an eligible issuer or offering participant may rely on Rules 134, 163, 163A, 164, 168, 169 and 433 for communications that occur on or after December 1, 2005, even if the offering commenced before then. Whether an issuer is an eligible issuer for purposes of Rules 164 and 433 will be determined at the commencement of the offering, even if it occurs prior to December 1, 2005.

The new undertakings in Regulation S-K Item 512 must be included in all registration statements or the first amendments to the registration statements filed on or after December 1, 2005. The incorporation by reference of a Exchange Act report that updates a registration statement for purposes of Securities Act Section 10(a)(3) is not considered an amendment for Item 512 purposes. The Item 512 undertakings do not have to be included in a registration statement before it becomes effective if the issuer does not file a pre-effective amendment after December 1, 2005. If a pre-effective amendment is filed after December 1, 2005, it must include the undertakings. The issuer is not required to file a pre-effective amendment solely for the purpose of including the undertakings.

The staff advised that an issuer is not required to take any action solely to include the undertakings in a registration statement, unless the issuer otherwise files a post-effective amendment after December 1, 2005. Once again, the staff advised that an issuer is not required to make such a filing solely for the purpose of including the undertakings and the staff will not request such a filing. If an issuer wishes to include the new undertakings in a registration statement that became effective before December 1, 2005, it may file a new registration using Rule 429 to combine the new registration with the prior registration statement and include the undertakings in the new registration statement. Or, the issuer may file a post-effective amendment to an effective registration statement and include the undertakings in the post-effective amendment.

An effective Form S-3 or F-3 that was not an automatic shelf registration statement when it became effective cannot be amended to become one. The issuer must file a new registration statement and designate it as an automatic shelf registration statement. The staff advised that the issuer may rely on Rule 457(p) to carry forward any unused filing fees for unsold securities from an effective registration statement. This approach is necessary, according to the staff, because automatic shelf registration statements filed on Form S-3 or Form F-3 and post-effective amendments to those registrations will be designated separately from other registration statements on Form S-3 or F-3 to enable them to become effective immediately.

When an issuer files an automatic shelf registration statement, it can register any primary offerings for cash, including continuous offerings that were previously registered on a shelf registration statement. The offerings may include non-allocated shelf offerings, dividend reinvestment programs with direct stock purchase plans and offerings of securities by selling security holders. The issuer cannot use the automatic shelf registration statement for business combination transactions such as acquisition shelf registration statements. When an issuer includes an ongoing offering that was registered on an effective shelf registration on a subsequently filed automatic shelf registration statement, it may carry forward the filing fees that were paid for any unsold securities.

An issuer with an effective resale registration statement may rely on Rule 430B and may file prospectus supplements pursuant to Rule 424(b) to make material amendments to the plan of distribution or to add or replace security holders as long as the filing of the prospectus supplement is on or after December 1, 2005. When adding or replacing selling security holders, the other conditions of Rule 430B regarding naming the selling security holders by prospectus supplement must be satisfied.

On or after December 1, 2005, an issuer that has an effective Form S-3 or F-3 registration statement disclosing that it may be used for at-the-market offerings and that meets the conditions of the revised provisions of Rule 415(a)(4) may conduct the offering in compliance with the revised provisions of the rule. The issuer would not have to file a post-effective amendment to add the names of underwriters and would not be subject to the previous 10 percent limit.

An issuer that is eligible to engage in at-the-market offerings may amend the plan of distribution after December 1, 2005, by a prospectus supplement that is deemed to be part of the registration statement to provide for at-the-market offerings in accordance with the revised provisions of Rule 415(a)(4).

For any shelf registration statement that is effective before December 1, 2005, the three-year period specified in Rule 415(a)(5) will begin on December 1, 2005, regardless of the length of time that it has been effective. For any shelf registration statement that becomes effective on or after December 1, 2005, the three-year period will begin on the effective date of that shelf registration statement.

The amendments to Forms 10-K, 10K-SB and 20-F requiring the disclosure of risk factors, unresolved comments, well-known seasoned issuer status and voluntary filer status apply to fiscal years ending on or after December 1, 2005. An issuer must begin to include the required risk factor disclosure in its Form 10-Q only after it is first required to include the disclosure in the Form 10-K. For issuers with fiscal years ending on or after December 1, 2005, the Form 10-K for that fiscal year must include the risk disclosure as would all subsequent Forms 10-Q.