SEC Announces Measures to Facilitate Capital Formation

Earlier this week, the U.S. Securities and Exchange Commission (SEC) announced that it is expanding the accommodations available for issuers that submit draft registration statements for nonpublic review. The SEC’s Division of Corporation Finance (Division) anticipates that these new measures will facilitate capital formation in the U.S. capital markets. In announcing the new measures, the Division stated that this expanded flexibility for companies builds on the 2012 Jumpstart Our Business Startups (JOBS) Act, as well as accommodations adopted by the Division in 2017, which we wrote about here. The JOBS Act originally allowed emerging growth companies to submit draft registration statements for initial public offerings (IPOs) confidentially to the SEC, and the 2017 accommodations expanded this nonpublic review process to all issuers within the twelve-month period following the effective date the IPO registration statement or the initial Section 12(b) registration statement under the Securities Exchange Act of 1934.

According to the Division’s announcement, the enhanced measures include the following:

• Expanding the availability of the nonpublic review process for the initial registration of a class of securities under the Exchange Act to include both Section 12(b) and Section 12(g) registration statements on Forms 10, 20-F or 40-F.
• Permitting issuers to submit draft registration statements regardless of how much time has passed since they became subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.
• Expanding the availability of the nonpublic review process for a de-SPAC (Special Purpose Acquisition Company) is the surviving entity (i.e., SPAC-on-top structure) as long as the target is eligible to submit a draft registration statement.
• Permitting issuers to omit the name of the underwriter(s) from their initial draft registration statement submissions, when otherwise required by Items 501 and 508 of Regulation S-K, provided that they include the name of the underwriter(s) in subsequent submissions and public filings.

Cicely LaMothe, the Division’s Acting Director, noted in the SEC press release that “[e]xpanding these popular accommodations will provide new and existing companies greater flexibility to explore and plan public offerings. These enhanced accommodations will further support capital formation while retaining investor protections available to purchasers in public offerings.” The Division’s action comes after Acting Chair Uyeda recently mentioned that he wanted the SEC to facilitate capital formation and make IPOs attractive again.