On August 17, 2017, the Securities and Exchange Commission (SEC) Staff issued new Compliance and Disclosure Interpretations (C&DIs) that clarify the financial information that Emerging Growth Companies (EGCs) and non-EGCs may omit from their draft registration statements. As we previously blogged, beginning on July 10, 2017, the SEC began to accept voluntary draft registration statements from all issuers for nonpublic review (not just EG). While these latest C&DIs provide useful examples about what financial statements to include in a registration statement, they are consistent with the SEC’s prior announcement, on June 29, 2017, regarding the expanded draft registration statement processing procedures, which was supplemented on August 17, 2017.

C&DI 101.04—Emerging Growth Companies

As the SEC Staff explains in C&DI 101.04, Section 71003 of Fixing America’s Surface Transportation (FAST) Act allows an EGC to omit from its filed registration statements annual and interim financial information that “relates to a historical period that the issuer reasonably believes will not be required to be included . . . at the time of the contemplated offering.” Furthermore, the SEC Staff allows an EGC to omit from its draft registration statements interim financial information that it reasonably believes it will not be required to present separately at the time of the contemplated offering.

To illustrate how this works, C&DI 101.04 provides the following example of a calendar year-end EGC that reasonably believes that it will commence an offering in April 2018 (when its annual financial information for 2017 would be required):

Scenario 1
EGC submits a draft registration in November 2017.

Allowed to omit:

• 2015 annual financial information
• 2016 interim financial information
• 2017 interim financial information

Must include:
2016 annual financial information

Scenario 2
EGC first publicly files registration in January 2018 (but still plans to commence offering in April 2018).

Allowed to omit:

• 2015 annual financial information

Must include:

• 2016 annual financial information
• 2016 interim financial information
• 2017 interim financial information

Scenario 3
EGC first publicly files registration statement in April 2018.

Must include:

• 2016 annual financial information
• 2017 annual financial information

C&DI 101.05—Non-Emerging Growth Companies

The relief provided by Section 71003 of the FAST Act is not available to non-EGCs. Nevertheless, the SEC Staff allows, as a policy matter, a non-EGC to omit interim and annual financial information from its draft registration statements that the non-EGC “reasonably believes it will not be required to present separately at the time it files its registration statement publicly.” Importantly, non-EGCs must look to the information that would be required in a registration statement at the time that it is anticipated to be first filed publicly—even if it does not anticipate commencing the contemplated offering until a time when such information would not be required. This differs from EGCs, which the SEC Staff allows to look to the time of the contemplated offering—and not the public filing—to determine what financial statements must be included in the registration statement.

To illustrate how this works, C&DI 101.05 provides the following example of a calendar year-end non-EGC that reasonably believes that it will first publicly file its registration statement in April 2018 (when its annual financial information for 2017 would be required).:

Scenario 1
Non-EGC submits a draft registration in November 2017.

Allowed to omit:

• 2014 annual financial information
• 2016 interim financial information
• 2017 interim financial information

Must include:

• 2016 annual financial information
• 2015 annual financial information

Scenario 2 
Non-EGC first publicly files registration statement in April 2018.

Must include:

• 2015 annual financial information
• 2016 annual financial information
• 2017 annual financial information