News

New SEC guidance on expiring shelf registration statements--Filing deadline is NOVEMBER 28 under Rule 415(a)(6)

News Brief
November 24, 2008

By Cydney Posner

On Friday, the SEC posted additional guidance regarding expiring shelf registration statements. The new guidance addresses how Rule 415(a)(5) and (6) work with regard to continued offerings of previously registered securities, the inclusion of these securities on a replacement registration statement and the use of previously paid fees to offset new fee obligations.

You might recall that, as part of securities offering reform in 2005, the SEC, in amendments to Rule 415, the SEC imposed a blanket three-year life on WKSI automatic shelf registration statements and on shelf registration statements that relate to offerings of securities that are (i) mortgage-related, (ii) to be sold on a continuous basis, or (iii) primary S-3 or F-3 delayed or continuous offerings (Rule 415(a)(vii), (ix), or (x)). As a result, registration statements may not be used for offers or sales once they are more than three years old. (The limitation does not apply to registration statements solely for resales; or for employee benefit plans (S-8s); DRIPs; options, warrants or rights; conversion of outstanding securities; securities pledged as collateral; business combinations; or closed-end management investment companies or business development companies.) As a result, in many cases, new shelf registration statements must be filed every three years.

The three-year period specified in Rule 415(a)(5) began to run as follows:

  • for a shelf registration statement that was effective before December 1, 2005, the three-year period began to run on December 1, 2005, regardless of the length of time the shelf registration statement was effective as of that date; and
  • for a shelf registration statement that became effective on or after December 1, 2005, the three-year period began on the effective date of that shelf registration statement.

If your company's shelf period began to run on December 1, 2005, this Friday, November 28, is the deadline for filing to update and consolidate its registration statements in accordance with Rule 415(a)(5). After November 30, 2008 an issuer may use a registration statement that was effective on or before December 1, 2005 to offer and sell securities only to the extent permitted by the grace period provisions of Rule 415(a)(5).

  • Deadline for registration statements effective on or before December 1, 2005 is November 28. A replacement registration statement filed pursuant to Rule 415(a)(6) must be filed on or before the expiration date of the expiring registration statement. EDGAR does not accept new registration statements for filing on Saturdays or Sundays. Therefore, with respect to registration statements effective on or before December 1, 2005, any replacement registration statement filed pursuant to Rule 415(a)(6) must be filed no later than Friday, November 28, 2008.
  • How to identify replacement securities on the registration statement. Under Rule 415(a)(6), an issuer may include on its replacement registration statement any unsold securities covered by the expiring registration statement. To do so, the issuer must identify on the facing page of the replacement registration statement (including any pre-effective amendments) the amount of the unsold securities being included on the replacement registration statement, any filing fee paid in connection with the unsold securities (which will continue to be applied to the unsold securities), and the file number of the expiring registration statement. The issuer is not required to pay any additional fee with respect to securities included in reliance on Rule 415(a)(6), because the unsold securities (and associated fees) are being moved from the expiring registration statement to the replacement registration statement. A filing fee is required, however, for any new securities registered on the replacement registration statement.
  • Use Rule 415(a)(6) only for unsold replacement securities. An issuer may use Rule 415(a)(6) to include on a new replacement registration statement only securities that remain unsold on an expiring registration statement. An issuer cannot change the class of securities replaced. For example, if the expiring registration statement had remaining unsold common stock with a value of $1 million, Rule 415(a)(6) permits the issuer to include on the replacement registration statement common stock with a value of $1 million. Rule 415(a)(6) does not, however, permit the issuer instead to include on the replacement registration statement $1 million in preferred stock.
  • EDGAR can be tricky here: When completing the EDGAR header tags for a replacement registration statement that is not an automatic shelf registration statement, the filer will be required to specify a "Proposed Maximum Aggregate Offering Price." The amount the issuer enters depends upon whether the issuer is including newly registered securities on the registration statement.
    • If the issuer is including newly registered securities, the EDGAR header tag should include only newly registered securities for which a fee will be payable at the time of filing the replacement registration statement. The amount of unsold securities that are being included on the replacement registration statement pursuant to Rule 415(a)(6) should not be included as part of the "Proposed Maximum Aggregate Offering Price" EDGAR header tag.
      If the issuer is not including any newly registered securities and the replacement registration statement will cover only replacement securities included from the expiring registration statement pursuant to Rule 415(a)(6), the filer should enter "$1" in the "Proposed Maximum Aggregate Offering Price" EDGAR header tag. The filer should enter "$0" as the fee paid. Including the $1 amount is necessary because the EDGAR system will not accept a Securities Act registration statement (other than an automatic shelf registration statement using the "pay-as-you-go" fee provisions of Rule 456(b)) unless a "Proposed Maximum Aggregate Offering Price" is specified in the EDGAR header tag. The $1 amount will not result in a fee assessment by the EDGAR system and will allow the filing to be accepted.
  • Reflecting sales from the expiring registration statement completed during the grace period specified in Rule 415(a)(5). Rule 415(a)(5) provides that, if an issuer has filed a replacement registration statement pursuant to Rule 415(a)(6) (not an automatic shelf), the issuer may continue to offer and sell securities covered by the expiring registration statement until the earlier of the effective date of the replacement registration statement or 180 days after the third anniversary of the initial effective date of the expiring registration statement. A continuous offering of securities covered by the expiring registration statement that commenced within three years of the initial effective date may continue until the effective date of the replacement registration statement if the offering is permitted under the replacement registration statement. To reflect sales completed during the Rule 415(a)(5) grace period, the issuer should file a pre-effective amendment that shows on the bottom of the facing page the correct amount of securities that will actually be included in reliance on Rule 415(a)(6) at effectiveness. Any SEC filings, such as prospectus supplements or free-writing prospectuses, related to offerings during the grace period should reflect the expiring registration statement file number.
  • Filing fee offsets under Rule 457(p) v. Rule 415(a)(5) grace period.If an issuer uses Rule 415(a)(6) to include securities on a replacement registration statement, the offering of securities on the expiring registration statement will not be deemed terminated until the replacement registration statement is effective. As a result, any securities that are identified in the replacement registration statement as included pursuant to Rule 415(a)(6) may still be offered and sold from the expiring registration statement during the Rule 415(a)(5) grace period prior to effectiveness of the new registration statement. If, instead, the issuer relies on Rule 457(p) to offset fees due upon filing of the replacement registration statement for the registration of new securities, the related securities from the expiring registration statement are deemed deregistered immediately upon the filing of the replacement registration statement. These deregistered securities do not have the benefit of a Rule 415(a)(5) grace period and may not be included as unsold securities on the new registration statement in reliance on Rule 415(a)(6).

An issuer can use Rule 415(a)(6) for a portion of the previously registered shares and Rule 457(p) in part to apply the fees already paid as an offset against any new fees due with respect to newly registered securities on the replacement registration statement. The cover page of the registration statement should clearly explain the amount of securities included (or the potential that they may be included) pursuant to Rule 415(a)(6), the amount of fees offset pursuant to Rule 457(p), and identify the related registration statements. The specific amounts of unsold securities that may be included do not need to be identified in the initial filing and may be included in a pre-effective amendment to the replacement registration statement (probably just before effectiveness of the replacement registration statement).

Here's the SEC's illustration: Under Rule 415(a)(6), an issuer files a new registration statement to replace a shelf registration statement that became effective November 1, 2005 and relates to a $2 million continuous offering of debt and $8 million in common stock to be offered on a delayed basis. The replacement registration statement reflects on the cover page the expiring registration statement and states that the issuer will identify in a pre-effective amendment the securities included in the replacement registration statement pursuant to Rule 415(a)(6) and the amount of any new securities to be registered. If the replacement registration statement does not include, at that time, any new securities being registered, the issuer would reflect in the "Proposed Maximum Aggregate Offering Price" EDGAR header tag an amount of $1 and a fee paid of $0.

Prior to the effectiveness of the replacement registration statement, the issuer then sells $1 million of debt and $2 million of common stock, using the expiring registration statement pursuant to Rule 415(a)(5). When the issuer is ready to request effectiveness of the replacement registration statement, it would then file a pre-effective amendment to reflect that the new registration statement is including the unsold securities from the expiring registration statement in the amounts of $1 million of debt and $6 million in common stock pursuant to Rule 415(a)(6). If the issuer does not register new securities in the pre-effective amendment, it will not need to record any "Proposed Maximum Aggregate Offering Price" in the EDGAR header tag.

Alternatively, instead of including the unsold securities from the expiring registration statement, the issuer may elect to use Rule 457(p) to use the fees relating to all or a portion of the unsold shares on the expiring registration statement as a fee offset. In that case, if the conditions of Rule 457(p) are satisfied, the issuer may offset fees previously paid in connection with all or a portion of the $1 million of debt and $6 million of common stock that remain unsold on the expiring registration statement against the fees due for any securities newly registered on the pre-effective amendment. The shares covered by the fees used as offsets would be deemed deregistered from the expiring registration statement and could not be offered or sold during the Rule 415(a)(5) grace period. The EDGAR header for the pre-effective amendment would reflect as the "Proposed Maximum Aggregate Offering Price" the amount of securities to be included on the replacement registration statement other than those securities included in reliance on Rule 415(a)(6). The issuer would also need to complete the fee offset header tags in EDGAR to reflect the fee offset claimed pursuant to Rule 457(p).

  • WKSI no more?A registration statement filed solely for purposes of complying with Rule 415(a)(5) will not be considered a reassessment of the issuer’s status as a WKSI for purposes of any outstanding Form S-3ASR or the Securities Act exemptions available to a WKSI. An issuer required to file a replacement Form S-3 to an expiring Form S-3ASR because the issuer no longer satisfies the WKSI definition at the time of filing the new Form S-3 may nevertheless continue to use its expiring automatic shelf for offers and sales during the Rule 415(a)(5) grace period.
  • WKSI no more during the grace period. If, during the Rule 415(a)(5) grace period, an issuer that is no longer a WKSI files a Form 10-K, the issuer’s status as a WKSI and its continued eligibility to use its expiring Form S-3ASR will be re-measured at the time of the filing of a Form 10-K (which acts as a Section 10(a)(3) update). If the issuer is not a WKSI at the time of the 10(a)(3) amendment to its expiring Form S-3ASR, the issuer may no longer use the Form S-3ASR until it post-effectively amends the Form S-3ASR to a form that the issuer is then eligible to use.
  • Conversion of Form S-3ASR using pay as you go. A Form S-3ASR using the "pay-as-you-go" fee provisions of Rule 456(b) may not be converted to another form using a post-effective amendment because fees cannot be paid to register securities via a post-effective amendment on any form other than an automatic shelf registration statement. Consequently, an issuer intending to convert a pay-as-you-go Form S-3ASR to another form, such as a Form S-3, should file an automatically effective post-effective amendment to the Form S-3ASR prior to the filing of the Form 10-K to pay a fee for securities it intends to offer and sell upon subsequent conversion to the new form. The filing of an automatically effective post-effective amendment for these purposes does not require a re-measurement of form eligibility as provided in Rule 401(c).

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