As previously reported, President Obama signed into law the Fixing America’s Surface Transportation Act (FAST Act) on December 4. The transportation bill includes several provisions related to securities laws and capital-raising measures, which were summarized in the December 11 edition of the Corporate and Financial Weekly Digest. One provision of the FAST Act requires the Securities and Exchange Commission to revise Form S-1 and Form F-1 to permit emerging growth companies (EGCs) to omit Regulation S-X financial information for historical periods otherwise required at the time of filing (or confidential submission), provided that the issuer reasonably believes the omitted financial information will not be required in the Form S-1 or F-1 at the time of the contemplated offering and that, prior to the issuer distributing a preliminary prospectus, such registration statement is amended to include all required Regulation S-X financial information at the date of such amendment. On December 11, the SEC issued two new Compliance and Disclosure Interpretations (C&DIs) to provide further guidance as to how to apply this provision.
The first C&DI clarifies that an EGC may not omit interim financial statements from its filing or submission if the interim information will be included in financial statements covering a longer period of time at the time of the offering. By way of example, the SEC noted that a calendar year-end EGC that files or submits a registration statement in December 2015, and reasonably expects to commence its offering in April 2016, may omit its 2013 annual financial statements from the December filing but 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 ultimately be required at the time of the offering in April 2016.
The second C&DI provides that, in addition to omitting its own financial information for historical periods, an EGC may omit financial statements of other entities from its filing or confidential submission if it reasonably believes that those financial statements will not be required at the time of the offering. This would include, for example, an acquired business whose financial statements would otherwise be required by Rule 3-05 of Regulation S-X if the issuer reasonably believes that the financial statements will not be required at the time of the offering.
The complete text of the two new FAST Act C&DIs can be found here.
