[Federal Register Volume 62, Number 93 (Wednesday, May 14, 1997)]
[Rules and Regulations]
[Pages 26386-26389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12637]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 228, 230, 239, 240 and 249
[Release Nos. 33-7419 and 34-38581; File No. S7-23-96]
RIN 3235-AG82
Expansion of Short-Form Registration To Include Companies With
Non-Voting Common Equity
AGENCY: Securities and Exchange Commission.
ACTION: Final rules.
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SUMMARY: The Securities and Exchange Commission (``Commission'') today
is adopting amendments to Forms S-3, F-2 and F-3 under the Securities
Act of 1933 (``Securities Act'') to include non-voting as well as
voting common equity in the computation of the $75 million aggregate
market value of common equity held by non-affiliates of the registrant.
The Commission also is adopting conforming amendments to include non-
voting as well as voting common equity in calculating the float used in
determining small business issuer status and in stating the amount of
the public float on Forms 10-K and 10-KSB under the Securities Exchange
Act of 1934 (``Exchange Act'').
EFFECTIVE DATE: The rule revisions are effective June 13, 1997.
FOR FURTHER INFORMATION CONTACT: Mary J. Kosterlitz, Special Counsel,
(202) 942-2900, Office of Chief Counsel, Division of Corporation
Finance, Securities and Exchange Commission, 450 Fifth Street, N.W.,
Mail Stop 3-3, Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: On August 30, 1996, the Commission published
for comment proposed amendments to
[[Page 26387]]
Forms S-3 1 and F-3 2 under the Securities Act
3 to include non-voting common equity in the computation of
the required public float. Conforming changes were also proposed to
Forms F-2,4 10-K,5 and 10-KSB 6 and to
the definition of ``small business issuer'' in Rule 405,7 in
Item 10 of Regulation S-B 8 under the Securities Act, and in
Rule 12b-2 9 under the Exchange Act.10 Having
considered the comments received, the Commission is adopting the
revisions as proposed.11
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\1\ 17 CFR 239.13.
\2\ 17 CFR 239.33.
\3\ 15 USC 77a et seq.
\4\ 17 CFR 239.32.
\5\ 17 CFR 249.310.
\6\ 17 CFR 249.310b.
\7\ 17 CFR 230.405.
\8\ 17 CFR 228.10.
\9\ 17 CFR 240.12b-2.
\10\ 15 U.S.C. 78a et seq.
\11\ The Commission received letters from two commenters. These
letters are available for inspection and copying in the Commission's
public reference room, File No. S7-23-96. Both commenters were
generally supportive of the proposed changes, but also suggested
that the proposed revisions be expanded to include certain types of
preferred stock in the calculation of the required public float.
After considering these suggested changes, the Commission has
determined to proceed with adoption of the revisions as proposed.
However, these comments will be considered by the Commission in
connection with future rulemaking.
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I. Discussion of Rule Changes
A. Changes to Forms S-3 and F-3
The Commission's short-form registration statements, Forms S-3 and
F-3, require as one condition to eligibility for registration of a
primary offering of non-investment grade securities that the company
have at least $75 million of voting stock held by non-affiliates
(referred to as the ``public float'').12 Some companies,
both domestic and foreign, that have significant amounts of non-voting
common stock held by non-affiliates (but not significant amounts of
voting stock) are not eligible to use these forms for such an offering
because non-voting stock is not included in the calculation of the
required public float. The revisions adopted today make Forms S-3 and
F-3 available to these issuers, provided they otherwise qualify for
these forms. These changes will provide additional flexibility for
registered capital raising transactions by extending the availability
of the short form registration statements.
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\12\ See General Instruction I.B.1 of Forms S-3 and F-3. General
registrant requirements for Forms S-3 and F-3 eligibility are
outlined in General Instruction I.A to these forms.
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The amendments relating to the use of Forms S-3 and F-3 for primary
offerings of non-investment grade securities change the transaction
requirements outlined in the General Instructions to the Forms to
provide that non-voting common equity is included in the calculation of
the $75 million float requirement.13 These changes are
accomplished by removing the term ``voting stock'' as it appears in
these sections and substituting the phrase ``shares of voting and non-
voting common equity.'' The meaning of the term ``common equity'' is as
defined in Rule 405 under the Securities Act.14
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\13\ The amendments do not alter any other requirements of Forms
S-3 or F-3, including the amount of the public float.
\14\ Rule 405 defines ``common equity'' as ``any class of common
stock, or an equivalent interest, including but not limited to a
unit of beneficial interest in a trust or a limited partnership
interest.''
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B. Conforming Changes to Other Commission Rules and Forms Referencing
Public Float
The Commission also is adopting the proposed conforming changes to
Forms F-2, 10-K and 10-KSB, as well as to the definition of ``small
business issuer'' in Rule 405 and in Item 10 of Regulation S-B under
the Securities Act and to Rule 12b-2 under the Exchange Act. Pursuant
to these changes, the public float calculations will include the
aggregate market value of both voting and non-voting common equity.
II. Cost-Benefit Analysis
The Commission solicited comment to assist in its evaluation of the
costs and benefits that might result from the expansion of the short-
form registration to include non-voting common equity in the
calculation of required float and to the proposed conforming revisions.
It was anticipated that the revisions would have a benefit to issuers
with filing obligations that would become eligible to use short form
registration, by decreasing their costs. It was also expected that a
small number of issuers currently able to use the small business issuer
disclosure system might have increased costs due to their inability to
use this system. No detrimental effects to investors were expected.
Commenters supported the position that revisions would have a benefit
to issuers that would become eligible to use short form registration.
No comments were received concerning the impact on small business
issuers. Consequently, the Commission has determined to adopt the
changes as proposed.
III. Summary of Final Regulatory Flexibility Analysis
A final regulatory flexibility analysis was prepared in accordance
with 5 U.S.C. 604 concerning the changes to Forms S-3 and F-3 under the
Securities Act to include non-voting common equity in the computation
of the required public float and conforming changes to Forms F-2, 10-K,
10-KSB and to the definition of ``small business issuer'' in Rule 405
and in Item 10 of Regulation S-B under the Securities Act and in Rule
12b-2 under the Exchange Act.
The final regulatory flexibility analysis notes that the amendments
will revise forms and rules, which may increase the availability of
Forms S-3, F-2 and F-3 and possibly decrease the availability of the
small business disclosure system (Forms SB-1, SB-2, 10-SB, 10-KSB and
10-QSB) for some issuers.
As discussed more fully in the analysis, the amendments may affect
persons that are small entities, as defined in the Commission's rules,
because the changes to the definition of small business issuer could
cause some issuers that have non-voting common equity held by non-
affiliates to become ineligible to use the small business disclosure
system. The Commission estimated that approximately three percent of
the small business issuers may become subject to more detailed
reporting obligations in the future, or may otherwise be impacted by
the rule revisions.
These estimates were the result of estimates provided by the staff
of the Division of Corporation Finance based on its expertise from the
review of corporate filings and on estimates provided by the
Commission's Office of Economic Analysis (``OEA''). The OEA estimates
confirmed the estimates made by the Division of Corporation Finance and
have been incorporated into the final regulatory flexibility analysis.
As a result, the Commission does not expect that the number of
companies that will become ineligible to meet the definition of small
business issuer will be significant. The Commission also does not
expect that materially increased reporting, recordkeeping and
compliance burdens will result from the changes.
The Commission sought comment on its preliminary estimates of the
number of small entities that would be impacted by the proposed rules
and on whether these proposed amendments would result in significant
new burdens for small entities. No comments were received concerning
the impact of the amendments on small entities.
As stated in the analysis, several possible significant
alternatives to the amendments were considered, including, among
others, establishing different compliance or reporting
[[Page 26388]]
requirements for small entities or exempting them from all or part of
the amended requirements. As discussed more fully in the analysis, the
nature of these amendments does not lend themselves to separate
treatment, nor would they impose significant additional burdens on
small entities. A copy of the final regulatory flexibility analysis may
be obtained by contacting Mary J. Kosterlitz, Office of Chief Counsel,
Division of Corporation Finance, Mail Stop 3-2, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
IV. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1965 (the
``Act'')(44 U.S.C. 3501 et seq.) the staff submitted to the Office of
Management and Budget (``OMB'') for review proposals to amend the
following forms under the Securities Act and the Exchange Act: ``Form
S-1,'' ``Form S-2,'' ``Form S-3,'' ``Form F-1,'' ``Form F-2,'' ``Form
F-3,'' ``Form SB-1,'' ``Form SB-2,'' ``Form 10-K,'' ``Form 10-Q,''
``Form 10-KSB,'' ``Form 10-QSB,'' ``Form 10,'' and ``Form 10-SB.'' The
collection of information contained in the fourteen forms at issue is
required for the registration of various securities for sale to the
public under the Securities Act and periodic reporting obligations
under the Exchange Act. The Commission solicited comment on the
compliance burdens associated with the proposals but received no public
comment on the burden estimates. The Commission is adopting the
amendments as proposed.
V. Statutory Basis for the Amendments
The amendments to the Commission's rules and forms are being
adopted by the Commission pursuant to Sections 6, 7, 8, 10, 19(a), and
27A of the Securities Act and Sections 12, 13, 14, 15(d), 21E, 23(a)
and 35A of the Exchange Act.
List of Subjects in 17 CFR Parts 228, 230, 239, 240 and 249
Reporting and recordkeeping requirements, Securities.
Text of the Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows:
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
1. The authority citation for Part 228 continues to read as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss,
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.
Sec. 228.10 [Amended]
2. By amending Sec. 228.10(a)(1) by removing the word
``securities'' in the Provided however sentence immediately following
Sec. 228.10(a)(1)(iv) and adding the words ``voting and non-voting
common equity'' in its place.
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
3. The authority citation for Part 230 continues to read in part as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30,
and 80a-37, unless otherwise noted.
* * * * *
Sec. 230.405 [Amended]
4. By amending Sec. 230.405 the definition of ``Small Business
Issuer'' by removing the words ``outstanding securities'' in the
Provided however clause and adding the words ``outstanding voting and
non-voting common equity'' in their place.
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
5. The authority citation for Part 239 continues to read in part as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l,
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m,
79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise
noted.
* * * * *
Sec. 239.13 [Amended]
Sec. 239.32 [Amended]
Sec. 239.33 [Amended]
6. 17 CFR 239 is amended by removing the words ``voting stock'' and
adding, in their place, the words ``voting and non-voting common
equity'' in the following sections:
(a) 17 CFR 239.13(b)(1)
(b) 17 CFR 239.32(b)(2)(i)
(c) 17 CFR 239.33(b)(1)
7. By amending Form S-3 (referenced in Sec. 239.13) by amending the
General Instruction I.B.1 of Form S-3, by removing the words ``voting
stock'' and adding, in their place, the words ``voting and non-voting
common equity'' and by revising the Instruction to General Instruction
I.B.1 to read as follows:
(Note: The text of Form S-3 does not and the amendments will not
appear in the Code of Federal Regulations.)
Form S-3
* * * * *
General Instructions
I. Eligibility Requirements For Use of Form S-3
* * * * *
B. Transaction Requirements * * *
1. Primary Offerings by Certain Registrants. * * *
Instruction. For the purposes of this Form, ``common equity'' is as
defined in Securities Act Rule 405 (Sec. 230.405 of this chapter). The
aggregate market value of the registrant's outstanding voting and non-
voting common equity shall be computed by use of the price at which the
common equity was last sold, or the average of the bid and asked prices
of such common equity, in the principal market for such common equity
as of a date within 60 days prior to the date of filing. See the
definition of ``affiliate'' in Securities Act Rule 405.
* * * * *
8. By amending Form F-2 (referenced in Sec. 239.32) by amending the
General Instruction I.B.2.(i) of Form F-2, by removing the words
``voting stock'' and adding, in their place, the words ``voting and
non-voting common equity'' and by revising Instruction 1 to General
Instruction I.B.2.(i) to read as follows:
(Note: The text of Form F-2 does not and the amendments will not
appear in the Code of Federal Regulations.)
Form F-2
* * * * *
General Instructions
I. Eligibility Requirements For Use of Form F-2
* * * * *
B. * * *
2. * * *
Instructions
1. For the purposes of this Form, ``common equity'' is as defined
in Securities Act Rule 405 (Sec. 230.405 of this chapter). The
aggregate market value of the registrant's outstanding common equity
shall be computed by use of the price at which the voting and non-
voting common equity was last sold, or the average of the bid and asked
prices of such common equity, in the principal market for such common
equity as of a date within 60 days prior to the date of filing. See the
definition of ``affiliate'' in Securities Act Rule 405.
* * * * *
9. By amending Form F-3 (referenced in Sec. 239.33) by amending the
General Instruction I.B.1 of Form F-3, by removing the words ``voting
stock'' and adding, in their place, the words ``voting and non-voting
common equity'' and by
[[Page 26389]]
revising the Instruction to General Instruction I.B.1 to read as
follows:
(Note: The text of Form F-3 does not appear in the Code of Federal
Regulations.)
Form F-3
* * * * *
General Instructions
I. Eligibility Requirements For Use of Form F-3
* * * * *
B. Transaction Requirements
* * * * *
1. Primary Offerings by Certain Registrants. * * *
Instruction
For the purposes of this Form, ``common equity'' is as defined in
Securities Act Rule 405 (Sec. 230.405 of this chapter). The aggregate
market value of the registrant's outstanding voting and non-voting
common equity shall be computed by use of the price at which the common
equity was last sold, or the average of the bid and asked prices of
such common equity, in the principal market for such common equity as
of a date within 60 days prior to the date of filing. See the
definition of ``affiliate'' in Securities Act Rule 405.
* * * * *
PART 240--GENERAL RULE AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
10. The authority citation for Part 240 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
Sec. 240.12b-2 [Amended]
11. By amending Sec. 240.12b-2 the definition of ``Small Business
Issuer'' by removing the words ``outstanding securities'' in the
Provided however clause and adding the words ``outstanding voting and
non-voting common equity'' in their place.
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
12. The authority citation for Part 249 continues to read in part
as follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
Sec. 249.310 [Amended]
13. By amending the front page of Form 10-K (referenced in
Sec. 249.310) by revising the paragraph before the ``Note'' to read as
follows:
(Note: The text of Form 10-K does not and the amendments will not
appear in the Code of Federal Regulations.)
Form 10-K
* * * * *
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant. The aggregate
market value shall be computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such
common equity, as of a specified date within 60 days prior to the date
of filing. (See definition of affiliate in Rule 405, 17 CFR 230.405.)
Note. * * *
14. By amending the front page of Form 10-KSB (referenced in
Sec. 249.310b) by revising the paragraph before the ``Note'' to read as
follows:
(Note: The text of Form 10-KSB does not, and the amendments will not
appear in the Code of Federal Regulations.)
Form 10-KSB
* * * * *
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price
at which the common equity was sold, or the average bid and asked price
of such common equity, as of a specified date within the past 60 days.
(See definition of affiliate in Rule 12b-2 of the Exchange Act.)
Note: * * *
Dated: May 8, 1997.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12637 Filed 5-13-97; 8:45 am]
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