SEC Widens Scope of Eligibility for Confidential Draft Registration Statement Submissions

The recent announcement by the staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”) regarding the expansion of confidential draft registration statement (“DRS”) submissions is set to bring significant changes to the issuer community. These modifications provide eligible companies with the opportunity to engage in the registration process away from the public eye, offering them much-needed flexibility.

Originally established by the Jumpstart Our Business Startups Act in 2012, the DRS concept aimed to simplify the process for Emerging Growth Companies (“EGCs”) and qualifying foreign private issuers (“FPIs”) seeking to conduct initial public offerings (“IPOs”). With the latest updates implemented by the SEC, first-time issuers of any size can now take advantage of confidential reviews not only for IPOs but also for subsequent offerings within a year following the effectiveness of their IPO registration statement or Exchange Act Section 12(b) registration statement.

The key updates endorsed by the SEC encompass various facets that will impact how issuers approach the filing process:

Firstly, the expanded form eligibility for initial Exchange Act registrations now allows issuers to submit the initial registration of a class of securities on Forms 10, 20-F, or 40-F for nonpublic review under Exchange Act Section 12(g). This alteration broadens the avenues through which confidential reviews can be conducted, granting issuers more flexibility in structuring their offerings.

Moreover, the extension of the eligibility period for subsequent submissions removes the time limitations that previously constrained additional confidential submissions within a 12-month window. This change is especially beneficial for issuers subject to reporting requirements exceeding one year, as it allows them to leverage the confidential review process for subsequent offerings, enabling a smoother and more efficient filing journey.

Furthermore, in de-SPAC transactions where the SPAC emerges as the surviving entity, issuers now have the option to submit a DRS on Form S-4/F-4 for nonpublic review akin to an initial Securities Act registration statement. This modification provides clarity and predictability to sponsors and target companies engaged in SPAC transactions, enhancing the alignment between filing strategies and broader business objectives.

Lastly, the allowed flexibility on underwriter disclosures and financial information empowers issuers to initiate the review process without finalizing underwriting arrangements or certain financial disclosures. This could potentially expedite the overall filing process and streamline operations for issuers.

In terms of compliance considerations, issuers must adhere to cover letter requirements accompanying confidential submissions, confirming the planned public filings within specified timeframes and ensuring full disclosure of omitted information upon public filing. Timeliness is crucial, especially regarding Exchange Act registration statements, as specific filing periods must be observed for effective results.

In conclusion, the recent enhancements to the confidential DRS submission process by the SEC underscore a proactive approach to support issuers in navigating the complex regulatory landscape, paving the way for more efficient and streamlined filing procedures. These changes align with the SEC’s commitment to fostering transparency and compliance within the issuer community, promoting a robust and investor-friendly market environment.