9276 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

1 17 CFR 230.415.

2 17 CFR 230.424.

3 17 CFR 230.430A. In the release adopting the

Phase One Recommendations of the Task Force on

Disclosure Simplification, the Commission

rescinded the special filing rules for competitive

bidding, recognizing that Rule 430A could be used

for these purposes in accordance with staff

interpretation. Release No. 33–7300 (May 31, 1996)

[61 FR 30397]. Technical changes also are being

proposed today to remove references to competitive

bidding in paragraph (d) of current Rule 430A and

to remove Item 512(c) of Regulation S–B [17 CFR

228.512(c)] and Item 512(d) of Regulation S–K [17

CFR 229.512(d)].

4 17 CFR 230.434.

5 15 U.S.C. 77a et seq.

6 17 CFR 228.601(b).

7 17 CFR 229.601(b).

8The securities would have to be described in the

registration statement, but certain price-related and

other terms could be omitted until the price was

determined. See n. 16, below.

9Rule 415, the shelf registration rule, enumerates

the types of offerings that may be offered on a

delayed or continuous basis. Unless the securities

fall within one of the provisions of Rule 415

detailing the various traditional shelf offerings, for

example, securities to be offered and sold pursuant

to a dividend or interest reinvestment plan, a

company must be eligible to use short form

registration statement Form S–3 [17 CFR 239.13] or

F–3 [17 CFR 239.33].

For primary offerings on Form S–3, a company

must: (1) be subject to the reporting requirements

of Section 13 [15 U.S.C. 78m] or 15(d) [15 U.S.C.

78o(d)] of the Securities Exchange Act of 1934

(‘‘Exchange Act’’) [15 U.S.C. 78a et seq.]; (2) have

filed all material required to be filed pursuant to

Section 13, 14 [15 U.S.C. 77j(a)] or 15(d) for 12

calendar months immediately preceding the filing

of the registration statement; (3) have filed in a

timely manner all required reports; (4) have

satisfied certain fixed obligations; and (5) have $75

million or more in public float. General Instruction

I to Form S–3.

10Exchange Act Rule 15c2–8 [17 CFR 240.15c2–

8].

11 17 CFR 230.144.

12Release No. 33–7390 (February 20, 1997).

Under the amendments, the holding period for

resales of limited amounts of securities by any

person is reduced from two years to one year, and

the holding period for resales by non-affiliates is

reduced from three to two years.

13Release No. 33–7391 (February 20, 1997).

17 CFR Parts 228, 229, 230

[Release No. 33–7393; S7–9–97]

RIN 3235–AG86

Delayed Pricing for Certain Registrants

AGENCY: Securities and Exchange

Commission.

ACTION: Proposed rules.

SUMMARY: The Securities and Exchange

Commission (‘‘Commission’’) is

publishing for comment proposed

amendments to Rule 430A under the

Securities Act to permit certain smaller

reporting companies to price securities

on a delayed basis after effectiveness of

a registration statement, if they meet

specified conditions. These proposals

are intended to enhance flexibility and

efficiency for qualified companies,

consistent with investor protection, by

enabling them more easily to time their

offerings to advantageous market

conditions.

DATES: Comments should be submitted

on or before April 29, 1997.

ADDRESSES: All comments concerning

the rule proposals should be submitted

in triplicate to Jonathan G. Katz,

Secretary, U.S. Securities and Exchange

Commission, Mail Stop 6–9, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Comments also may be submitted

electronically at the following e-mail

address: rule-comments@sec.gov. All

comment letters should refer to File

Number S7–9–97; this file number

should be included on the subject line

if e-mail is used. Comment letters will

be available for inspection and copying

in the public reference room at the same

address. Electronically submitted

comment letters will be posted on the

Commission’s Internet Web site (http://

www.sec.gov).

FOR FURTHER INFORMATION CONTACT:

Barbara C. Jacobs, Office of Small

Business, Division of Corporation

Finance, at (202) 942–2950.

SUPPLEMENTARY INFORMATION: The

Commission today is proposing

amendments to Rules 415,1 424,2 430A,3

and 434 4 under the Securities Act of

1933 (‘‘Securities Act’’).5 In addition,

amendments are being proposed to

Items 512 and 601(b) of Regulations S–

B6 and S–K.7

I. Executive Summary

The Commission today is publishing

for comment proposals to permit certain

smaller companies, including small

business issuers, to delay pricing of

primary offerings after the registration

statement becomes effective in order to

provide them enhanced flexibility in the

marketplace. By having more control

over the timing of their offerings, these

companies could take advantage of

desired market conditions. Such

flexibility could enable such companies

to raise equity capital on more favorable

terms or to obtain lower interest rates on

debt. The proposals also would permit

a company to vary certain terms of the

securities being offered upon short

notice,8 in order to meet the

requirements of the public securities

markets. This increased flexibility could

result in smaller companies raising

more capital through the public markets

rather than through exempt offerings

conducted in the domestic and offshore

markets.

There are significant regulatory

constraints on the flexibility of smaller

companies to time their primary

offerings to avail themselves of

advantageous market conditions. Under

the current rules, smaller companies

must coordinate the effectiveness of

their registration statements with the

time that they would like to offer and

sell securities. They then must price the

securities promptly after effectiveness,

subject to the limited flexibility

provided by current Rule 430A. Smaller

companies may face risks associated

with changing market conditions during

the pendency of possible Commission

staff review. Larger companies have

much more flexibility because they are

allowed to use ‘‘shelf’’ registration,

which permits them to register in

advance of offerings and take the

securities ‘‘off the shelf’’ either in one

offering or in segments (i.e., tranches)

without further staff review when

market conditions are right.9

The Commission understands that the

timing concerns of smaller companies

have led some of these companies to

forego registered offerings. The

Commission is considering whether

additional flexibility could be given to

smaller companies without sacrificing

investor protection. The proposals

would not go so far as to extend full

shelf registration to smaller companies.

They would, however, permit certain

smaller companies to price on a delayed

basis after effectiveness, subject to

important registrant and offering

requirements designed to ensure that

adequate company disclosure is

available to the public securities

markets. There would be no reduction

in the information required to be

disclosed or delivered to investors or in

the issuer’s liabilities under the federal

securities laws. There would, however,

be a change in the timing of delivery of

information to investors, namely,

information would have to be delivered

to investors at least 48 hours before

delivery of the confirmation of sale.

This would be analogous to the

preliminary prospectus delivery

requirement for initial public

offerings.10

This delayed pricing proposal is one

of four Commission initiatives being

issued today. Two of these releases

relate to Rule 144,11 the non-exclusive

safe harbor for resales of ‘‘restricted’’

securities and securities held by

affiliates of the issuer. The Commission

is shortening the holding period

requirements in Rule 144 to reduce the

costs of private capital formation.12 In

addition, the Commission proposes to

amend Rule 144 to simplify and clarify

the rule and to codify staff

interpretations.13 Finally, the

Commission is proposing amendments
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9277

14 17 CFR 230.901–904.

15Release No. 33–7392 (February 20, 1997).

16Current Rule 430A eliminates the need for preeffective amendments to registration statements

filed solely to provide this information. This

information consists of information with respect to

the public offering price (e.g., interest rate, dividend

rate, day of month of redemption), underwriting

syndicate, underwriting discounts or commissions

to dealers, amount of proceeds, conversion rates,

call prices and other items dependent upon the

offering price, delivery dates, and terms of the

securities dependent upon the offering date.

As with a current Rule 430A prospectus, under

the proposal a prospectus used after effectiveness

but prior to pricing would have to be clearly

marked on the cover page to indicate that it is

subject to completion or amendment. Items

501(a)(8) of Regulation S–K [17 CFR 229.501(a)(8)]

and Regulation S–B [17 CFR 228.501(a)(8)].

17Rule 430A(a)(3). When a supplemented

prospectus is not filed within the prescribed time,

a post-effective amendment to the registration

statement is filed. This post-effective amendment

either restarts the 15-day pricing period or contains

the omitted information.

18Proposed Rule 430A(e). For purposes of this

release, Rule 430A as it stands today is referred to

as ‘‘current Rule 430A’’ while this proposal is

referred to as ‘‘expanded Rule 430A’’ or ‘‘delayed

pricing.’’ Registrants not eligible to use expanded

Rule 430A could continue to use current Rule

430A.

The genesis for this delayed pricing proposal is

a recommendation from the Report of the Task

Force on Disclosure Simplification, which was

published on March 5, 1996.

19For example, current Rule 430A is limited to

offerings of securities for cash and to registration

statements that are declared effective.

20As with current Rule 430A, a complete

description of securities would be required to be set

forth in the prospectus contained in the registration

statement declared effective. Item 202 of Regulation

S–K [17 CFR 229.202].

Only S–3 eligible companies are permitted to

register aggregate amounts of securities without

allocation among classes. (General Instruction II.D

of Form S–3 pertains to unallocated shelf

registration statements.)

21Current Rule 430A permits a registration

statement to be declared effective that contains a

prospectus that omits information on the

underwriting syndicate. Information on the

managing underwriter must be disclosed. See Rule

430A(a) and Release No. 33–6714 (May 27, 1987)

[52 FR 21252] at Section II.A.2. See Section

II.A.2.b.1, below, for further information regarding

identifying managing underwriters. Expanded Rule

430A could be used for self-underwritten offerings.

22 In addition to supplying the omitted

information, the supplemented prospectus would

be updated as needed. In addition to the

information expressly required in any federal

securities law document, there must be added such

further material information, if any, as may be

necessary to make the required statements, in light

of the circumstances under which they were made,

not misleading. See Securities Act Rule 408 [17 CFR

230.408] and Exchange Act Rule 12b–20 [17 CFR

240.12b–20].

23 15 U.S.C. 80a–1 et seq.

24These rules are generally found in Regulation

S–T [17 CFR Part 232].

25 17 CFR 229.512(a) and 228.512(a). For purposes

of this release, references to specific items of

Regulation S–K [17 CFR 229.10 et seq.] also pertain

to analogous provisions of Regulation S–B [17 CFR

228.10 et seq.].

26 17 CFR 249.308a.

27 17 CFR 249.308b.

28 17 CFR 249.308.

29 15 U.S.C. 77j(a).

30The proposal would not affect requirements

concerning the age of financial statements

contained in the registration statement at the time

of effectiveness or the exhibits required to be filed

as part of the registration statement before

effectiveness. Rule 3–12 of Regulation S–X [17 CFR

Continued

to Regulation S, 14 the Securities Act

safe harbor for offshore offerings or

resales, in order to curtail Regulation S

abuses.15

II. Proposals

A. Proposed Rule 430A(e)

1. Overview and General Considerations

Current Rule 430A permits

companies, if specified conditions are

satisfied, to omit information

concerning the public offering price,

other price-related information and the

underwriting syndicate from the

prospectus contained in the registration

statement at the time that the

registration statement is declared

effective.16 Typically, this information is

provided in a supplemented prospectus

within fifteen business days after the

effectiveness of the registration

statement.17

The purpose of today’s proposal is to

provide pricing flexibility beyond that

permitted by current Rule 430A. The

rule would be amended to add a new

paragraph providing an alternative

procedure—a ‘‘delayed pricing’’

procedure with no fifteen day

requirement.18 To be eligible to use the

new procedure, a company would have

to satisfy the requirements of current

Rule 430A, 19 and could omit the same

information from the prospectus before

pricing.20 In addition, expanded Rule

430A would permit the company to

omit the name of the managing

underwriter, if any, from the registration

statement that is declared effective.21

The company ultimately would provide

all omitted information in a

supplemented prospectus, but would

not be required to do so within any

specified time period—only when it

decided to price and offer the

securities.22

To be eligible for this flexibility in

timing, the company would have to

satisfy the following registrant and

offering requirements:

• Registrant requirements.

• The company would have to have been

subject to the reporting provisions of the

Exchange Act during the most recent 12

months preceding the filing of the

registration statement and have filed all

required reports for this period. In addition,

the company would have to have filed all

required reports at the time of offering and

sale.

• The company would have to be a

domestic issuer, except that a foreign private

issuer could rely upon the rule if it had filed

the same Exchange Act reports as domestic

issuers.

• The company could not be an investment

company registered under, or a business

development company regulated under, the

Investment Company Act of 1940.23

• The company could not be a blank check

company or a company that issues penny

stock.

• The company would have to have

satisfied specified electronic filing provisions

under the Commission’s electronic filing

rules.24

• Offering requirements

• The company would be required to file

a post-effective amendment to its registration

statement to: provide annual audited

financial statements; furnish financial

statements for probable acquisitions over the

50% materiality level and pro forma financial

information; and satisfy the undertakings for

updating a registration statement as required

by Item 512(a) of Regulation S–K or

Regulation S–B, as applicable.25

• Each time a prospectus was delivered, it

would be accompanied by the most recent

Form 10–Q 26 or 10–QSB27 and Forms 8–K 28

(or a supplement would provide the

information included in those reports). All

forms of the prospectus filed with the

Commission pursuant to Securities Act Rule

424 in connection with the offering as well

as the Exchange Act information would be

deemed part of the registration statement for

liability purposes as of the date of first use.

In addition, the Exchange Act information

would be deemed to be a part of the

prospectus as of the date of first use.

• The supplemented prospectus

containing any updating information and the

name of the managing underwriter(s), if any,

together with any quarterly and Form 8–K

information, would be delivered to any

person who is expected to receive a

confirmation of sale at least 48 hours before

the sending of any confirmation of sale.

Further, the supplemented prospectus

containing any updating information and all

the omitted information, along with any

quarterly and Form 8–K information, would

accompany or precede any confirmation of

sale.

These requirements are designed to

assure that investors have adequate and

current disclosure available to them to

be able to make informed investment

decisions at the time the securities are

offered and sold.

The proposed new procedure would

not reduce the level of liability under

the Securities Act that applies to the

information on which the investment

decision is based; all information

delivered would be deemed to be part

of the registration statement for liability

purposes and a part of the prospectus as

of the date of first use. Informational

requirements of a final prospectus

meeting the requirements of Section

10(a) of the Securities Act 29 would

remain the same. 30 Further, the rule
9278 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

210.3–12] and Item 601 of Regulation S–K [17 CFR

229.601].

As with current Rule 430A, trust indentures

would not have to be filed in executed form at the

time of effectiveness of the registration statement.

The filing requirement may be satisfied by

submission of the final form of the document to be

used; the form must be complete, except that

signatures and related matters could be omitted.

31The Commission estimates that at least 3,200

companies would qualify to use these proposals

that do not qualify to use shelf registration. The

average eligible company has a market

capitalization of $27.5 million, assets of $80.1

million, and annual sales of $57.8 million. The

median eligible company has a market

capitalization of $22.3 million, assets of $27.0

million, and annual sales of $20.9 million.

32Under the proposal, as under current Rule

430A, the pricing terms of preferred stock that may

be set by the board of directors under state law,

such as the timing of an interest rate reset, could

be set forth at the time of pricing.

33Proposed Rule 430A(e)(1)(i). The provisions of

this rule would be available to a successor

registrant. Proposed Instruction to Rule 430A(e)

uses the same definition as General Instruction

I.A.7 of Form S–3 and General Instruction I.F. of

Form S–2 [17 CFR 239.12].

34Proposed Rule 430A(e)(1)(i). This requirement

would need to be met at the time of using both the

48-hour prospectus and the pricing prospectus

discussed below.

35 General Instruction I.C. to Form S–2 and

General Instruction I.A.3 of Form S–3.

36 General Instruction I.D. to Form S–2 and

General Instruction I.A.5 to Form S–3.

37 15 U.S.C. 77h.

38Proposed Rule 430A(e)(1)(ii).

proposal is not intended to permit

‘‘generic’’ registration statements that

contain only minimum information

about a proposed offering.

The due diligence efforts performed

by underwriters, accounting

professionals and others play a critical

role in the integrity of our disclosure

system. Under the current offering

process for smaller companies, ample

time exists for these ‘‘gatekeepers’’ to

carry out due diligence activities.

Concerns have been raised that the

expedited access to the markets that

would be provided by these proposals

could make it difficult for gatekeepers,

particularly underwriters, to perform

adequate due diligence for the smaller

companies that would be eligible to use

expanded Rule 430A. 31 This may be

particularly true if a company is able to

seek aggressive competitive bids from

several underwriters in a very short time

frame immediately before offering its

securities. While the nature of the due

diligence investigation will vary

considerably from one company to

another because of the nature of the

company, the underwriter’s or other

gatekeeper’s involvement with the

company over time, and the type of

security being offered, is due diligence

practical for offerings under these

proposals? Could an underwriter

perform the same quality of due

diligence in a much shorter period of

time? If not, should reliance on

underwriters’ due diligence continue if

it would slow down the rapid access to

the capital markets for smaller

companies contemplated by these

proposals? Has there been a change in

the role other parties play concerning

smaller companies, such as analysts or

rating agencies, that should be

considered? Should a waiting period

between the company’s determination

to sell its securities and the

commencement of the offering be

imposed to permit greater time for due

diligence? The rule proposal includes a

number of safeguards and comment is

solicited on whether additional

safeguards should be included.

Commenters should address whether

these safeguards would adequately

address the due diligence issues.

In addition, comment is solicited as to

whether all the items of information that

are permitted to be omitted under

current Rule 430A(a) are appropriate for

an offering under expanded Rule 430A.

Is additional flexibility to omit

information needed? In this regard,

should certain terms of preferred or debt

securities, such as financial covenants,

be permitted to be omitted, or would

this flexibility be inappropriate for

smaller issuers? 32 Is it likely that

expanded Rule 430A would be used for

such securities, or is it likely that only

common equity would be sold under

this rule? Should the new provision be

limited to common equity?

2. Conditions for Use of Expanded Rule

430A

Today’s proposal would permit

smaller companies to delay pricing their

offerings so long as they otherwise met

the requirements of current Rule 430A,

other than the requirement to identify

the managing underwriter(s) at the time

the registration statement is declared

effective, and they satisfied certain

registrant and offering requirements.

These latter requirements would assure

that investors receive accurate and

current information and the liabilities of

the parties remain the same.

a. Registrant Requirements

First, expanded Rule 430A would be

available only to a company that has

been subject to the reporting provisions

of Section 13(a) or 15(d) of the Exchange

Act during the most recent twelve

calendar months immediately preceding

the filing of the registration statement

and has filed all the material required to

be filed pursuant to Section 13(a), 14 or

15(d) for this period.33 In addition, the

company must have filed all such

required material at the time of offering

and sale.34 This proposed condition

should help assure adequate and current

public information concerning these

companies. Comment is solicited as to

whether a shorter (e.g., six months) or

longer (e.g., two years) reporting period

would be preferable. Should expanded

Rule 430A be available in initial public

offerings?

Comment also is solicited as to

whether there should be qualitative

conditions on the use of expanded Rule

430A. For example, to use Form S–2 or

Form S–3, a company must be timely as

well as current in its reporting

obligations.35 In addition, a company

must not have failed to pay any

dividend or sinking fund installment on

preferred stock or defaulted on any

installment or installments of

indebtedness or on any rental on one or

more long-term leases.36 Should a

company using the rule be required to

satisfy any of these conditions, any

combination of these conditions, or all

of these conditions? Are such

conditions necessary, given the other

protections of expanded Rule 430A?

In addition, comment is solicited as to

whether there are certain significant

events (e.g., a company, a majority

shareholder, director, or executive

officer found by a court or

administrative body to have violated the

federal securities laws) that should

disqualify a company from using

delayed pricing even though the

expanded Rule 430A registration

statement had been declared effective?

Should a company be precluded from

using expanded Rule 430A if it chooses

a managing underwriter that was the

underwriter of securities covered by any

registration statement that is the subject

of any pending proceeding or

examination under Section 8 of the

Securities Act,37 or was the subject of

any refusal order or stop order entered

thereunder within 5 years? Should a

company be permitted to use expanded

Rule 430A where it names a managing

underwriter that is, or was, subject to a

permanent injunction for federal

securities law violations? Comment also

is solicited as to whether a company

should be precluded from using the rule

if its audited financial statements

contain a ‘‘going concern’’ opinion from

its accountants.

Second, the proposal would be

available to foreign private issuers only

if they file the same reports under

Section 13(a) or 15(d) of the Exchange

Act and meet the same disclosure

requirements as domestic companies.38

This limitation appears appropriate,

given that foreign private issuers can file
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9279

39Under the foreign integrated disclosure system,

reporting foreign private issuers file an annual

report on Form 20–F [17 CFR 249.220f]. All other

interim financial information required to be made

public is based upon home-country rules and

practices. Consequently, foreign private issuers are

not required to file quarterly reports on Form 10–

Q or current reports on Form 8–K in accordance

with U.S. disclosure practices. Rule 13a–16 [17 CFR

240.13a–16].

40Proposed Rule 430A(e)(1)(iii).

41Proposed Rule 430A(e)(1)(iv). A ‘‘blank check’’

company is defined at Securities Act Rule 419(a)(2)

[17 CFR 230.419(a)(2)], while ‘‘penny stock’’ is

defined at Exchange Act Rule 3a51–1 [17 CFR

240.3a51–1].

42Pub. L. No. 104–67, 109 Stat. 737 (December 22,

1995). As part of the Act, Section 27A was added

to the Securities Act [15 U.S.C. 77z–2] and Section

21E was added to the Exchange Act [15 U.S.C. 78u–

5] to create a statutory safe harbor from private

liability for certain forward-looking statements.

Among other matters, the 1995 Act excludes from

the safe harbor statements made by the issuer and

certain persons if the statements were made within

three years after the maker of the statement had

been found responsible for certain securities law or

related violations. See Section 27A(b)(1)(A) of the

Securities Act and Section 21E(b)(1)(A) of the

Exchange Act.

43Forms SB–1 [17 CFR 239.9] and SB–2 [17 CFR

239.10] relating only to initial public offerings may

be filed in paper at the Commission’s Headquarters

until May 5, 1997. Release No. 33–7373 (December

16, 1996) [61 FR 67200].

44The Commission’s Internet Web site address is

http://www.sec.gov.

45 General Instructions I.H to Form S–2 and I.A.8

to Form S–3.

46Proposed Rule 430A(e)(1)(v).

47Proposed Rule 430A(e)(1)(v). Financial data

schedules are required to be submitted as exhibits

to filings containing updated annual or interim

financial information, other than by incorporation

by reference. Item 601(c) of Regulation S–K [17 CFR

229.601(c)].

48Proposed Rule 430A(e)(1)(v).

49 In contrast, Form S–3 (and F–3) registrants may

incorporate by reference certain information rather

than filing a post-effective amendment. These

registrants do not have a requirement to file posteffective amendments in the same set of

circumstances.

50Each post-effective amendment would contain

a completely updated prospectus, which would

supersede all prior prospectuses. Proposed Rule

430A(e)(2)(i).

51Proposed Rule 430A(e)(2)(i). This requirement

would be in addition to its requirement under

Section 13(a) or 15(d) to file its 10–K or 10–KSB

with the Commission.

If a company changes its fiscal year end, it must

file a transition report on Form 10–K where the

transition period is six months or more. For

transition periods of less than six months,

Continued

periodic reports less frequently than

domestic companies.39 To permit

smaller companies to delay pricing,

there must be sufficient and current

public information available in the

marketplace and delivered to investors

to assure investor protection. Comment

is solicited as to whether there are

alternative conditions that could be

placed on foreign private issuers not

eligible to use Form F–3 so that they

could rely upon the proposals.

Third, investment companies

registered under, and business

development companies regulated

under, the Investment Company Act of

1940 would be excluded from the use of

expanded Rule 430A since these

companies have special flexibility and

restrictions on their securities that make

delayed pricing unnecessary.40

Comment is solicited, however, as to

whether there are circumstances under

which the flexibility of delayed pricing

would be a useful tool for certain types

of registered investment companies and

business development companies.

Fourth, blank check and penny stock

issuers would be ineligible to use the

proposed rule, given the substantial

abuses that have arisen in such

offerings.41 Are there any additional

classes of issuers that should be

excluded from expanded Rule 430A

either because of the nature of the

investment vehicle (e.g., partnership or

other similar programs) or potential for

abuse (e.g., blind pools that will not

commit a material portion of the net

proceeds of the offering to specified

assets)? Should the same securities law

violation disqualification provisions

that are used in the Private Securities

Litigation Reform Act of 1995 42

preclude the use of this rule?

The final registrant condition would

pertain to the Electronic Data Gathering,

Analysis, and Retrieval (‘‘EDGAR’’)

system of the Commission. As of May 6,

1996, the Commission has required all

domestic companies to file most of their

documents electronically via EDGAR, 43

absent a hardship exemption. One of the

advantages of EDGAR is that it

facilitates the dissemination of timesensitive information to the nation and

the world in a matter of minutes, giving

investors and financial markets the

benefit of immediate access to the

information. In September 1995, the

Commission established its own

Internet Web site and began to post

EDGAR filings and other materials on a

24-hour delayed basis.44

Since the proposals would extend the

flexibility of delayed pricing to

companies not eligible for Form S–3,

adequate and current information

regarding these companies must be

broadly disseminated and available to

the public. As EDGAR filings help

assure such dissemination, the

proposals would require that the

company satisfy the same two EDGARrelated eligibility requirements as for

Forms S–2 and S–3.45 First, the

company must have filed all required

electronic filings, including confirming

electronic copies of documents

submitted in paper pursuant to a

hardship exemption.46 Second, the

company must have submitted all

required financial data schedules.47 In

addition, to ensure that companyrelated information about these non-S–

3 eligible companies is on the EDGAR

database and thus widely disseminated,

the proposals also would require that

the company not have obtained a

continuing hardship exemption under

Rule 202(a) of Regulation S–T from the

electronic filing requirements of the

Commission during the 12 months

immediately preceding the filing of the

registration statement.48 These EDGAR

requirements would apply both at the

time the registration statement is filed

and the time of offer and sale.

Comment is solicited as to whether

these EDGAR-related conditions are

necessary to permit delayed pricing.

The continuing hardship exemption

condition would be limited to Rule

202(a) hardship exemptions since under

this provision a registrant is not

required to follow up the paper filing,

which was the subject of the request,

with an electronic confirming copy. If a

registrant obtained a Rule 202(d)

hardship exemption, however, then it

would be required to file an electronic

confirming copy of its paper filing

within some agreed-upon period of

time. Should this continuing hardship

exemption condition be expanded to

encompass Rule 202(d) hardship

exemptions where the required

electronic confirming copy was filed a

significant period of time after the paper

filing to which it relates? Is the one-year

period for not having received a

continuing hardship exemption under

Rule 202(a) warranted? Or should a

longer (e.g., two years) or shorter (e.g.,

six months) period be required?

b. Offering Requirements

(1) Post-Effective Amendments

In addition to the above registrant

requirements, expanded Rule 430A

would require the company to file a

post-effective amendment to its

registration statement under certain

circumstances.49 The purpose of this

requirement is to assure that the staff

has an opportunity to review the revised

disclosure before the company proceeds

with additional offerings.

Today’s proposals would require the

company to file a post-effective

amendment to its registration statement

in three circumstances. First, no later

than 90 days after its fiscal year end, the

company would have to file a posteffective amendment to its registration

statement to update the document 50 and

provide annual audited financial

statements.51 This requirement would
9280 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

companies have the option to file transition reports

on either Form 10–Q or Form 10–K. See Exchange

Act Rules 13a–10 [17 CFR 240.13a–10] and 15d–10

[17 CFR 240.15d–10]. With respect to expanded

Rule 430A, a post-effective amendment would have

to be filed by the due date of the transition report

on Form 10–K, namely, within 90 days of the close

of the transition period or the date of the

determination to change the fiscal year end,

whichever is later.

52 17 CFR 210.3–05.

53 17 CFR 228.310(c). Proposed Rule

430A(e)(2)(i).

54Article 11 of Regulation S–X [17 CFR 210.11–

01 et seq.] and Item 310(d) of Regulation S–B [17

CFR 228.310(d)].

55Rule 210.01–02(w) of Regulation S–X and Rule

310(c)(2) of Regulation S–B [17 CFR 210.1–02(w)

and 228.310(c)(2)]. In October 1996, the

Commission adopted amendments to streamline

financial statement requirements of significant

acquisitions to facilitate the Securities Act

registration process. Release No. 33–7355 (October

10, 1996) [61 FR 203].

56Within 15 days of consummation of the

significant acquisition, a company must file a Form

8–K reporting the event. Pursuant to staff position,

the Form 8–K need not include more recent

financial statements of the acquired business if no

more than two interim periods have passed since

the latest balance sheet date of the previously filed

financial statements. However, audited financial

statements must be updated in the Form 8–K to the

company’s most recently completed fiscal year

pursuant to Item 310(g) of Regulation S-B [17 CFR

228.310(g)] and Rule 3–12(b) of Regulation S–X [17

CFR 210.3–12(b)].

57 Items 2 and 7 of Form 8–K. The Form 8–K

would contain: an accountant’s report as required

by Rule 2–02 of Regulation S–X [17 CFR 210.2–02];

and an accountant’s consent to having his or her

opinion deemed to be a part of the expanded Rule

430A registration statement. Section II.B, below,

sets forth proposed amendments to the exhibit

requirements of Regulations S–K and S–B to

facilitate the filing of consents.

58Under Section 10(a)(3) of the Securities Act [15

U.S.C. 77j(a)(3)], where a prospectus is used more

than nine months after the effective date of the

registration statement, the information contained

therein must be of a date not more than sixteen

months old. The nine-month period is calculated

from the effective date of the registration statement,

not of any later post-effective amendment.

59 Item 512(a)(1) of Regulation S–K [17 CFR

229.512(a)(1)].

60 Item 512(a)(2) of Regulation S–K [17 CFR

229.512(a)(2)].

61 Item 512(a)(3) of Regulation S–K. Foreign

issuers would be ineligible to use the proposed

delayed pricing procedure unless they filed the

same forms as domestic issuers, as discussed in

Section II.A.2.a. As a result, paragraph (a)(4) of Item

512, which relates to foreign private issuers, would

generally be inapplicable.

62Rule 415 at one time required a post-effective

amendment to the registration statement to be filed

when a managing underwriter was added or

deleted. The Commission removed this requirement

in Release No. 33–6423 (September 2, 1982) [47 FR

39799].

As with delayed shelf filings, a company using

expanded Rule 430A could (but would not be

required to) name a group of possible underwriters

in the preliminary prospectus. (See n. 63, below, for

when a company must identify any managing

underwriter.) All of the other information required

by Item 508 of Regulation S-K [17 CFR 229.508]

regarding the plan of distribution would be

included in the preliminary prospectus before

requesting acceleration of the registration statement.

63As discussed below, at least 48 hours before

sending any confirmation of sale, the supplemented

prospectus containing any updating information

along with the Exchange Act information would be

required to be delivered. This supplement would

have to name any managing underwriter. Proposed

Rule 430A(e)(2)(iii).

assure that Commission staff has the

opportunity to review information

regarding the company and the offering

on an annual basis and that prospectus

information distributed to investors is

current. Comment is solicited as to

whether this safeguard is needed, and if

so, whether the time frame for filing the

post-effective amendment should be

tied to the filing of the Form 10–K (or

Form 10–KSB) so that if the registrant

determines to file its Form 10–K before

its due date, the post-effective

amendment would be required at the

same time.

Second, a company would be required

to file a post-effective amendment when

it was required to file audited financial

statements for significant probable

business acquisitions pursuant to Rule

3–05 of Regulation S–X 52 and Item

310(c) of Regulation S–B53 and pro

forma financial information.54 Under

recent amendments, this would occur

where the pending acquisition exceeds

the 50% significance level.55 The posteffective amendment would be filed as

soon as the acquisition was probable.56

Again, this requirement would assure

that Commission staff has the

opportunity to review the information.

To the extent that the pending

acquisition falls below the 50%

threshold level, the company would be

required by Form 8–K to file audited

financial statements of each significant

acquired business within 75 days of

consummation of the acquisition.57

Comment is solicited as to whether

under the proposed delayed pricing

procedure, a company should be

required to file a post-effective

amendment in addition to a Form 8–K,

where the acquisition falls below the

50% significance criterion. For example,

should a 20% significance test be used?

Finally, since the proposal would

permit delayed pricing, the rule would

require the company to furnish the

undertakings for updating registration

statements required by Item 512(a) of

Regulation S–K or Regulation S–B, as

applicable. These undertakings require a

post-effective amendment to be filed in

specific circumstances, and would be in

lieu of the similar undertakings required

by Item 512(i) of Regulation S–K for

other Rule 430A offerings. These

undertakings would be as follows:

• The company must file a posteffective amendment to: (1) include any

updated prospectus required by Section

10(a)(3) of the Securities Act; 58 (2)

reflect any facts or events that represent

a fundamental change in the

information set forth in the registration

statement; and (3) include any new or

changed material information with

respect to the plan of distribution.59

• The company must state that each

post-effective amendment ‘‘shall be

deemed to be a new registration

statement relating to the securities

offered therein and the offering of such

securities at that time shall be deemed

to be the initial bona fide offering

thereof.’’ 60

• Finally, the company must

deregister by means of a post-effective

amendment any securities that remain

unsold at the termination of the

offering.61

Comment is solicited as to whether

these undertakings, coupled with the

other conditions of the proposed rule,

would assure that investors receive

adequate and current information. Are

there any other circumstances that

should require a post-effective

amendment to be filed?

As noted above, under the proposal,

a company would not need to name the

managing underwriter(s) in its

expanded Rule 430A registration

statement. Given the important role of

underwriters in an offering, should a

company be required to identify the

underwriter in the registration statement

if it is known? Should a company be

required to file a post-effective

amendment to its registration statement

when a managing underwriter has been

selected? 62 A requirement to file a posteffective amendment could help assure

that underwriters have necessary time to

conduct a due diligence investigation

before the securities are sold.

Alternatively, when a managing

underwriter was selected, would a

supplemented prospectus be sufficient,

as proposed? 63 If only a supplemented

prospectus is required, should the form

of underwriting agreement be filed in a

post-effective amendment that becomes

effective automatically or should it be

filed in a required Form 8–K?

If a change in the managing

underwriter(s) occurs from that initially

disclosed in the registration statement

that had been declared effective, should

the company be required to file a posteffective amendment, or would a

supplement suffice? If only a

supplement is needed either to add the

managing underwriter or reflect a

change in the managing underwriter,

should there be a waiting period before

the company can sell its securities?

Should a change in the managing

underwriter solely to add or delete a comanager necessitate a post-effective
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9281

64Rule 430A(e)(2)(ii). Exhibits that had been filed

with the Commission with these reports would not

have to be delivered to security holders.

A registrant using delayed pricing would not

need to deliver its Form 10–K [17 CFR 249.310] or

Form 10–KSB [17 CFR 249.310b], since it would be

required to file a post-effective amendment to the

registration statement to include a new prospectus

with the new annual audited financial statements

each fiscal year. Proposed Rule 430A(e)(2)(i).

65The complete package would have to be

delivered any time the prospectus was delivered.

66Form S–2 does not require the delivery of

Forms 8–K; it does, however, require a company to

describe any and all material changes to its affairs

that have occurred since the end of the fiscal year

for which certified financial statements were

included in the information delivered to security

holders and not described in the Form 10–Q, 10–

QSB or quarterly report to security holders

delivered to investors. Item 11 of Form S–2.

One of the recommendations of the Commission’s

Task Force on Disclosure Simplification was to

eliminate Form S–2/F–2, and permit smaller

companies that have been timely reporting for 12

months, to deliver, along with their prospectuses,

periodic reports in lieu of restating information

regarding themselves in the prospectuses contained

in registration statements filed on Form S–1/F–1 [17

CFR 239.31]. This recommendation may be

considered at a later time. If it were implemented,

it could operate together with delayed pricing to

reduce the costs of registration by eliminating

printing and other costs associated with the

preparation of the traditional prospectus and give

even greater flexibility to registrants to time their

offerings with favorable market conditions.

67Electronic media may be used as a means of

delivering this information to security holders in

certain circumstances. See Release Nos. 33–7233

(October 6, 1995) [60 FR 53458] and 33–7288 (May

9, 1996) [61 FR 24644], in which the Commission

expressed its views with respect to the use of

electronic media for information delivery under the

federal securities laws.

68Proposed Rule 430A(e)(3). Proposed Rule

430A(e)(3) would maintain liability on all forms of

prospectus filed with the Commission pursuant to

Rule 424 in connection with the offering by

deeming them to be part of the registration

statement at the date of first use. This would be true

for the delivered Exchange Act information as well.

The rule also would provide that the Exchange Act

reports that are deemed to be a part of the

registration statement would be a part of the

prospectus as of the date of first use.

The documents also would be subject to antifraud liability under Securities Act Section 17(a)

[15 U.S.C. 77q(a)], Exchange Act Section 10(b) [15

U.S.C. 78j(b)] and Rule 10b–5 [17 CFR 240.10b–5]

thereunder.

69Proposed Rule 430A(e)(2)(iii). Of course, the

supplemented prospectus containing any updating

information and all the omitted information,

including the name of the managing underwriter(s),

if any, along with the quarterly and Form 8–K

information, would accompany or precede any

confirmation of sale. Proposed Rule 430A(e)(2)(iv).

70Securities Act Rule 408 and Exchange Act Rule

12b–20.

71This would be analogous to the Item 11 line

item requirement in Form S–2, discussed above.

72Rule 430A(a)(3).

amendment or a supplement? Is the

term ‘‘managing underwriter’’

sufficiently clear based upon industry

practice or should a definition be

developed for delayed pricing?

(2) Delivery of Information

The final proposed delayed pricing

conditions would pertain to delivery of

updated company-related information.

The company would be required to

deliver a supplemented prospectus

containing the omitted information and/

or any updating information, together

with its Form 10–Q or Form 10–QSB as

of the end of the most recent fiscal

quarter not included in the registration

statement. The company also would be

required to deliver all Forms 8–K filed

since effectiveness of the registration

statement, other than those solely

relating to Item 5 of that form that are

voluntary filings.64 Instead of delivering

such Exchange Act reports as separate

documents at no charge, the company

could elect to integrate all Exchange Act

information into a single supplement to

the prospectus that would include

pricing and/or updated company

information.65

This information delivery condition,

which is substantially similar to that

required in Form S–2,66 would assure

that potential investors receive adequate

and current information about the

registrant and its offering.67 The

delivered information would be deemed

a part of the registration statement and

the prospectus as of the date that the

information is first used in the offering

of securities, and thus have liability

under Sections 11 and 12(a)(2) of the

Securities Act.68

To assure that investors have time to

review the information in connection

with making the investment decision, a

supplemented prospectus containing

any updating information and the name

of the managing underwriter, if any (but

not necessarily the other omitted

information), would have to be

delivered with the Exchange Act

information referenced above to

potential investors at least 48 hours

before sending the confirmation of

sale.69 The quarterly and Form 8–K

information would be a part of the

package. This would be analogous to the

preliminary prospectus delivery

requirement in Rule 15c2–8 for initial

public offerings. Comment is solicited

on whether this condition would be

practicable for issuers and whether it

would afford advantages to the investing

public. Would these potential benefits

justify the possible reduction in

flexibility provided by the new

procedure? If such a requirement is

justified, should a longer period be

required, such as five or ten business

days?

Comment is solicited as to whether

voluntary Item 5 Forms 8–K should be

required to be delivered to each person

who receives a prospectus and the other

information specified by the rule.

Alternatively, are there specified

matters that should be required to be

included in the supplemented

prospectus itself rather than in the other

delivered materials? Should the

quarterly report to shareholders be

permitted to be delivered in lieu of the

Form 10–Q or Form 10–QSB if it

includes the information required by

those forms? If voluntary Forms 8–K are

not required to be delivered, should

they still be incorporated by reference

into the registration statement in order

to maintain liability, as would be true

for Form S–3 offerings?

In this regard, companies are

reminded that in addition to the

information expressly required to be

included in any federal securities law

document, there must be added such

further material information, if any, as

may be necessary to make the required

statements, in light of the circumstances

under which they were made, not

misleading.70 Comment is solicited as to

whether there should be an express

requirement for a company using

delayed pricing to describe any and all

material changes in the company’s

affairs that were not described in the

updated information delivered with the

prospectus.71

c. Additional or Alternative Conditions

Comment is solicited as to whether

other conditions to delayed pricing are

needed. For example, should a company

be required to file a supplemented

prospectus with the omitted information

within a certain period of time after

effectiveness of the registration

statement? If the company did not price

and offer its securities within this

period, then a post-effective amendment

could be required, as in current Rule

430A.72 If a definite period for filing an

expanded Rule 430A supplemented

prospectus is needed, would three

months be sufficient? Or, would a

shorter (e.g., one month) or longer

period (e.g., six months) be sufficient?

Should a minimum time period be

imposed between the filing of Exchange

Act reports, such as a Form 10–Q or 10–

QSB or other updating information with

material developments, and the offering

of securities even though this

information would be delivered to

investors? If such a waiting period

between the filing of an Exchange Act

report and the offering of securities is

warranted in order to assure

dissemination of information to the

marketplace, would a sufficient time be

five business days? Alternatively,

should a shorter (e.g., three business

days) or longer period of time (e.g.,
9282 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

73 17 CFR 242.100 et seq. Release No. 34–38067

(December 20, 1996) [62 FR 520].

74See 17 CFR 242.101 and 102.

75Release No. 34–38067, 62 FR at 526.

76Under prior Commission interpretation, if the

aggregate amount of securities registered on the

shelf and the possibility of using special selling

efforts existed, each takedown was deemed to be

part of a single distribution, regardless of the

amount of the securities sold or the manner of their

sale. See Release No. 34–23611, 51 FR 33242.

77 17 CFR 242.105.

78 Items 512(a) and 512(i) of Regulation S–K,

respectively.

79One minor conforming change is being

proposed to Rule 434. Paragraph (b)(2) would be

amended to add a reference to Rule 430A(e) to the

existing reference to Rule 430A(b).

80 Item 601 of Regulations S–K and S–B would be

amended to state that where the filing of a written

consent is required with respect to material deemed

to be a part of an expanded Rule 430A registration

statement, the consent may be filed as an exhibit

to the material that is deemed to be a part of the

registration statement (e.g., a Form 8–K containing

financial statements for acquisitions below the 50%

threshold). See Section II.A.2.b, above.

81Proposed paragraph (a)(1)(xii) to Rule 415.

Paragraph (a)(2) of Rule 415, which provides that

securities may only be registered in an amount

which, at the time the registration statement

becomes effective, is reasonably expected to be

offered and sold within two years from the date of

the registration, would be amended to add a

reference to Rule 430A(e) offerings. Finally,

paragraph (a)(3) of Rule 415 would be revised to

add a reference to Item 512(a) of Regulation S–B,

which relates to the Rule 415 undertakings. This

reference was inadvertently omitted from this

paragraph when Regulation S–B was adopted in

1992. Release No. 33–6949 (July 30, 1992) [57 FR

36442].

Since Rule 430A(e) would be a type of Rule 415

offering, a registrant relying on the rule would have

to check the Rule 415 box on the facing page of the

registration statement.

seven business days) be imposed? Or

would any required delay significantly

reduce the flexibility that the rule is

designed to provide?

Another condition to assure that

adequate and current information

regarding the company is widely

available could be to require a waiting

period between the company’s

determination to sell its securities and

the commencement of the offering. For

example, a company could be required

to file a Form 8–K announcing its intent

to offer its securities within a specified

period of time. Since the trading market

for certain smaller issuers may be

relatively illiquid, this condition could

give the market time to respond to this

news. If such a period were to be

imposed, would five business days be

sufficient? Or would a shorter (e.g., two

business days) or longer (e.g., seven

business days) period of time be

needed? Should the length of any

waiting period be tied to the average

daily trading volume of the company so

that a longer waiting period could be

required if the company has a low

average daily trading volume, and thus

less liquidity? Should average daily

trading volume for such a test be

determined in a manner consistent with

recently adopted Regulation M? 73 If an

average daily trading volume test is

incorporated into expanded Rule 430A,

should a public float component also be

used as in Regulation M? 74 Activelytraded companies could be excluded

from any waiting period. If a waiting

period is desirable, should it be

structured so that an announcement of

the offering could not be made more

than a certain period of time before the

commencement of the offering?

As proposed, the rule would not limit

the number of offerings that could be

done from the registration statement.

Like Form S–3, the delayed offering may

be done as one offering or in several

tranches. Should the rule be limited to

a single delayed offering? Or should

some other limit be placed on the

number of offerings?

The Commission recently adopted

Regulation M to prevent manipulative

conduct by persons interested in a

securities offering. At that time, the

Commission modified the application of

anti-manipulation regulation to shelfregistered distributions. The

Commission explained that, for

purposes of Regulation M, each

takedown off a shelf is to be

individually examined to determine

whether the offering of that tranche

constitutes a distribution (i.e., whether

it satisfies the ‘‘magnitude’’ and ‘‘special

selling efforts and selling methods’’

criteria of a distribution).75 This

position is intended to provide greater

flexibility to participants in shelfregistered distributions, which for

primary offerings are now limited to

larger issuers.76

The Commission has considered the

appropriate application of antimanipulation regulation to offerings

with delayed pricing under proposed

Rule 430A(e). Because the proposed rule

is expected to be used principally by

smaller issuers, many of which are lessseasoned and can have relatively

illiquid markets for their securities, the

Commission proposes to require

compliance with the full applicable

restricted period of Regulation M prior

to pricing of each offering relying on

proposed Rule 430A(e). Thus, issuers

and underwriters participating in an

offering using delayed pricing would be

subject to a restricted period of one or

five business days before pricing of each

tranche. Commenters are invited to

provide their views on this

interpretation. Is it necessary to

expressly amend Rules 101 and 102 of

Regulation M to incorporate this

position?

Additionally, Rule 105 of Regulation

M is intended to preclude manipulative

short selling in anticipation of a public

offering.77 The rule prohibits the

covering of a short sale with offered

securities purchased from an

underwriter or broker or dealer

participating in the offering, if the short

sale occurred during the period

commencing five business days before

pricing the offering. The rule excludes

offerings filed under Rule 415. It is

uncertain whether offerings relying on

proposed Rule 430A(e) and the

accompanying amendment to Rule 415

will be conducted similarly to primary

offerings off the shelf by larger issuers.

Accordingly, the Commission seeks

comment on whether to revise Rule 105

of Regulation M to exclude offerings

filed under Rule 415, other than those

filed pursuant to proposed Rule

415(a)(1)(xii).

Finally, comment is solicited as to

whether a company should have the

market flexibility to proceed under

either expanded Rule 430A or current

Rule 430A so long as it includes both

sets of undertakings 78 in the initial

filing or in a pre-effective amendment.

At the time of requesting acceleration of

the registration statement, the company

could advise the staff as to which rule

it would use.

The conditions discussed above are

intended to strike a balance between the

needs of certain smaller companies to

price their securities on a primary

delayed basis and the needs of investors

to have adequate and current

information regarding these registrants

available to them to be able to make

informed investment decisions.

Comment is solicited as to whether the

foregoing conditions, taken together,

accomplish this objective or whether

only certain combinations of these

conditions are needed. If the latter,

commenters are requested to specify the

combinations that would be desirable

and the reasons for their views.

B. Other Proposed Amendments

Corresponding amendments to

Securities Act Rules 415, 424 and 434 79

and Item 601(b) of Regulations S–K and

S–B80 also are being proposed.

Securities Act Rule 415 would be

amended to add a new paragraph

permitting delayed pricing under Rule

430A(e).81

Securities Act Rule 424, which

pertains to the filing of prospectuses,

would be revised to add two new

paragraphs (8) and (9) relating to the

filing of delayed pricing prospectuses so

as to facilitate access and use of the
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9283

82Proposed paragraph (b)(8) to Rule 424. For

example, where a company determined to update

its prospectus supplement to include a recent

developments section, it would file such

supplement under proposed paragraph (b)(8) of

Rule 424.

83Release No. 33–6714 (May 27, 1987) [52 FR

21252] at Section II.B.

84Proposed paragraph (b)(8) to Rule 424.

85Proposed paragraph (b)(9) to Rule 424. This

time frame would mirror that of current Rule 430A

offerings. Rule 424(b)(1).

information. If a company elected to use

delayed pricing, supplemented

prospectuses would be filed under Rule

424(b)(8) or (b)(9). Any prospectus filed

under paragraph (b)(8) would reflect

information, facts, or events that would

constitute a substantive change from, or

addition to, the information set forth in

the last form of prospectus filed with

the Commission under Rule 424 or as

part of the expanded Rule 430A

registration statement.82 ‘‘Substantive,’’

as in current Securities Rule 424, refers

to additions or modifications that

supplement, update or correct the

content and substance of the

information contained in a prospectus,

except for typographical, grammatical,

format, and clarifying changes that do

not affect an investor’s understanding of

the information.83

Also under paragraph (b)(8), a

company would file any supplemented

prospectus containing any updating

information and the name of the

managing underwriter(s), if any, that it

delivers to any person, with quarterly

information and Forms 8–K, who is

expected to receive a confirmation of

sale at least 48 hours before the sending

of any confirmation of sale. Any

prospectus filed under Rule 424(b)(8)

would be required to be filed no later

than the second business day following

the date it is first used after

effectiveness in connection with a

public offering or sale, or transmitted by

a means reasonably calculated to result

in filing with the Commission by that

date.84 Comment is solicited as to

whether a shorter period is needed—

either one business day after first use, or

on the day of first use in order for the

market to have this information.

The supplemented prospectus

containing any updating information

and all omitted price and price-related

information that was omitted from the

registration statement at the time of

effectiveness would be required to be

filed with the Commission under Rule

424(b)(9) no later than the second

business day following the earlier of the

date of the determination of the offering

price or the date it is first used after

effectiveness in connection with a

public offering or sales, or transmitted

by a means reasonably calculated to

result in filing with the Commission by

that date.85 This short period, which is

the same as for current Rule 430A,

coupled with the fact that the filing

would be made via EDGAR, would

facilitate prompt availability of the

information to the investing public and

the Commission. Comment is solicited

as to whether this time frame should be

shorter (e.g., one business day) or longer

(e.g., three business days).

Comment is solicited as to whether

expanded Rule 430A prospectuses, like

current Rule 430A prospectuses,

warrant separate classification for

purposes of Rule 424. Alternatively,

existing paragraphs of Rule 424 could be

revised to reflect the filing of expanded

Rule 430A prospectuses; however, ready

identification by the Commission staff

and public of these prospectuses could

be hampered.

With respect to the tracking or

monitoring of new delayed pricing

offerings in general, would separate

EDGAR submission form types for these

registration statements be warranted?

Currently, Rule 430A registration

statements are not separately identified

for purposes of EDGAR.

III. General Request for Comment

Any interested persons wishing to

submit comment on any of the

proposals set forth in this release are

invited to do so by submitting them in

triplicate to Jonathan G. Katz, Secretary,

U.S. Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington D.C. 20549. Comments also

may be submitted electronically at the

following e-mail address: rulecomments@sec.gov. All comment letters

should refer to File Number S7–9–97;

this file number should be included on

the subject line if e-mail is used.

Comments received will be available for

public inspection and copying in the

Commission’s public reference room,

450 Fifth Street, N.W., Washington, D.C.

20549. Electronically submitted

comment letters will be posted on the

Commission’s Internet Web site (http://

www.sec.gov). Comments are solicited

from the point of view of issuers,

underwriters and the investing public.

IV. Cost-Benefit Analysis

To assist the Commission in

evaluating the costs and benefits that

may result from these proposals,

commenters are requested to submit

their views and empirical data relating

to any costs and benefits associated with

these proposals. It is anticipated that

expanded Rule 430A, if adopted, could

facilitate the capital-raising efforts of

smaller companies that meet certain

conditions by permitting them to delay

pricing their offerings after the

registration statement becomes effective

so as to take advantage of favorable

market conditions. Such flexibility

could enable such companies to raise

equity capital on more advantageous

terms or to obtain lower interest rates on

debt. In addition, issuers would be able

to vary certain terms of the securities

being offered upon short notice,

enabling them to more efficiently meet

the competitive requirements of the

public securities markets.

There would be certain costs

associated with expanded Rule 430A,

but they should be more than offset by

its benefits. A company would be

required to file a post-effective

amendment to its registration statement

at least annually until the offering is

terminated. In addition, a company

would be required to deliver its most

recent Form 10–Q and non-voluntary

Forms 8–K to investors along with its

supplemented prospectus. This updated

information could either be included in

the supplemented prospectus itself or be

set forth in separate documents that are

delivered along with the prospectus. As

noted in the release, the supplemented

prospectus containing any updating

information and the name of the

managing underwriter(s), if any, along

with the quarterly and Form 8–K

information, would be delivered to any

person who is expected to receive a

confirmation of sale at least 48 hours

before the sending of any confirmation

of sale. These costs are necessary

safeguards to the use of the rule in order

to assure investor protection. The

benefits of pricing flexibility should

outweigh these costs.

The Commission is aware that many

companies that may want to use delayed

pricing may also be subject to state

regulation. It is possible that the full

benefits of this rule may not be available

unless some modifications to state

regulation are made.

Over 1,700 companies filed

registration statements for securities

offerings on Forms S–1, SB–2, and S–11

in 1996. Approximately half of these

companies would have qualified for

expanded Rule 430A if the rule had

been in effect at that time. Of those

companies that would not have

qualified under the rule, 99% were

disqualified because they were making

their initial public offering (‘‘IPO’’).

Based on an analysis of 100 non-IPO

securities offerings, the Commission

estimates that 860 companies would

have met the proposed eligibility

criteria for expanded Rule 430A in
9284 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

1996. The 860 companies registered

securities with an estimated offering

value of $52 billion. The Commission

estimates that approximately 11% of

these offerings might have availed

themselves of the expanded Rule 430A

had it been available. This estimate is

based upon the Commission’s

experience with the number of

registrants that file Form S–3 for shelf

offerings.

Expanded Rule 430A should not

result in a major increase in costs or

prices for consumers or individual

industries; likewise, it should not have

significant adverse effects on

competition, investment, or innovation.

However, comment is requested on

these preliminary views. Commenters

are asked to provide empirical data or

other facts to support their views.

Comment is requested on whether the

proposed rules are likely to have a $100

million or greater annual effect on the

economy. Commenters should provide

empirical data or other facts to support

their views.

The Commission requests comment

on the foregoing analysis and its

preliminary views. Commenters are

encouraged to provide their own

analysis and views on these issues and

any empirical data that would help the

Commission assess the costs and

benefits of these proposals. Commenters

also are encouraged to suggest

alternative or additional ways of

providing more pricing flexibility to

smaller companies, consistent with

investor protection.

V. Summary of Initial Regulatory

Flexibility Analysis

An Initial Regulatory Flexibility

Analysis (‘‘IRFA’’) has been prepared in

accordance with 5 U.S.C. 603

concerning expanded Rule 430A and

other amendments discussed in this

release. The analysis notes that

expanded Rule 430A, if adopted, would

benefit certain smaller companies,

including small entities, in connection

with their needs to raise capital. This

goal would be accomplished by giving

these companies flexibility to delay

pricing after their registration statement

becomes effective, thus permitting them

to time their offerings to advantageous

market conditions.

As discussed more fully in the IRFA,

the Commission is aware of

approximately 1019 Exchange Act

reporting companies that currently

satisfy the definition of ‘‘small entity’’

under Securities Act Rule 157. These

Exchange Act reporting companies

could potentially avail themselves of

expanded Rule 430A assuming that the

other conditions of the rule are satisfied

(e.g., having reported under the

Exchange Act for at least a year, not

being a blank check company or penny

stock issuer, etc.). It is estimated that

approximately 734 of these 1019

companies would be eligible to use the

rule, if adopted. There is no reliable way

to determine how many of these entities

will want to use expanded Rule 430A or

how many businesses may become

subject to reporting obligations in the

future.

As noted in the IRFA, it is not

anticipated that increased

recordkeeping burdens would result

from expanded Rule 430A. To the extent

that a small entity uses expanded Rule

430A, there would be an increase in its

reporting obligations since it would be

required to file a post-effective

amendment to its registration statement

at least annually until the offering is

terminated. Compliance burdens also

would increase since the company

would be required to deliver updated

company-related information along with

the supplemented prospectus. This

Exchange Act information could be

included in a supplement to the

prospectus or delivered in separate

documents along with the prospectus.

In addition, the supplemented

prospectus containing any updating

information and the name of the

managing underwriter(s), if any, along

with the quarterly and Form 8–K

information would be delivered to any

person who is expected to receive a

confirmation of sale at least 48 hours

before the sending of any confirmation

of sale. The IRFA also indicates that

there are no current federal rules that

duplicate, overlap or conflict with the

rules to be amended.

As more fully discussed in the IRFA,

other possible significant alternatives to

the proposals were considered,

including establishing different

compliance or reporting requirements

for small entities. These alternatives are

not appropriate since they would be

inconsistent with the goals of the

Securities Act as they relate to the

protection of investors. Another

alternative would be to exempt small

entities from all, or a part, of expanded

Rule 430A. Small entities would benefit

from the pricing flexibility from the rule

so they would not want to be exempt

from its coverage. To exempt small

entities from certain conditions of

expanded Rule 430A, for example, the

requirement to file post-effective

amendments under specified

circumstances would be contrary to the

goals of the Securities Act since

investors in small entities should have

the same protections as investors in

larger companies. The opportunity for

staff review of these post-effective

amendment filings is considered to be

an important safeguard to the use of the

rule.

Written comments are encouraged

with respect to any aspect of the IRFA.

In particular, comment is solicited on

the number of small entities that would

be affected by the proposed rules and

the determination that the proposed

rules would not increase recordkeeping

but would increase reporting and other

compliance requirements. If

commenters believe that the proposals

would significantly impact a substantial

number of small entities, the nature of

the impact and an estimate of the extent

of the impact should be provided. For

purposes of the Small Business

Regulatory Enforcement Fairness Act of

1996, the Commission also is requesting

information regarding the potential

impact of the proposed rules on the

economy on an annual basis.

Commenters should provide empirical

data to support their views. Comments

will be considered in the preparation of

the Final Regulatory Flexibility Analysis

if the proposed amendments are

adopted. A copy of the IRFA may be

obtained by contacting Barbara C.

Jacobs, Division of Corporation Finance,

Mail Stop 7–8, 450 Fifth Street, N.W.,

Washington, D.C. 20549.

VI. Paperwork Reduction Act

The staff has consulted with the

Office of Management and Budget

(‘‘OMB’’) and has submitted the

proposals for review in accordance with

the Paperwork Reduction Act of 1995

(‘‘the Act’’) (44 U.S.C. 3501 et seq.). The

titles to the affected information

collections are: ‘‘Form S–1,’’ ‘‘Form SB–

2,’’ ‘‘Form S–11,’’ ‘‘Form SB–1,’’

‘‘Regulation S–K,’’ and ‘‘Regulation S–

B.’’ The specific information that must

be included is explained in the forms

themselves, and generally relates to the

issuer and the securities being offered.

The information is needed for

prospective investors to make informed

investment decisions.

The proposals, if adopted, would

permit certain smaller companies to

delay pricing of primary offerings after

the registration statement becomes

effective in order to provide them

flexibility in the marketplace. By having

more control over the timing of their

offerings, these companies could take

advantage of desired market conditions,

thus enabling them to raise equity

capital on more favorable terms or to

obtain lower interest rates on debt. This

increased flexibility could result in

smaller issuers raising more capital

through the public markets rather than

through exempt offerings conducted in
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9285

86These estimates are based on the number of

such filings made in calendar year 1996 and assume

that there are no increases or decreases each year.

the domestic and offshore markets.

Consequently, it is anticipated that the

proposals, if adopted, would result in

companies filing Forms S–1, SB–2, S–

11, and SB–1 rather than making

exempt offerings. The collections of information in the

four forms and two regulations are

required for the registration of various

securities for sale to the public. The

likely respondents to each form are: (i)

for Form S–1, generally all issuers

registering offerings of securities under

the Securities Act that are not eligible to

use other forms; (ii) for Form SB–2,

generally small business issuers, as

defined in Rule 405 of the Securities

Act, registering securities offerings

under the Securities Act; (iii) for Form

S–11, generally real estate companies

registering offerings of securities under

the Securities Act; and (iv) and for Form

SB–1, generally small business issuers

registering up to $10 million of

securities under the Securities Act in a

continuous 12-month period. While the

Commission cannot estimate the

number of respondents that may use

expanded Rule 430A, there are

approximately 1,210 Forms S–1, 471

Forms SB–2, 58 Forms S–11, and 8

Forms SB–1 filed each year.86 If

expanded Rule 430A is adopted, the

estimated burden for responding to the

collections of information in each form

is expected to increase given the

requirement to file post-effective

amendments to the registration

statements under the three

circumstances specified. The former

estimates per respondent were as

follows: (i) for Form S–1, 1,267 burden

hours; (ii) for Form SB–2, 877 burden

hours; (iii) for Form S–11, 858 burden

hours; and (iv) for Form SB–1, 711

burden hours. The new estimates per

respondent are as follows: (i) for Form

S–1, 1,290 burden hours; (ii) for Form

SB–2, 894 burden hours; (iii) for Form

S–11, 873 burden hours; and (iv) for

Form SB–1, 740 burden hours. For Form

S–1, this would result in an estimated

per year increase burden of 27,426

hours in the aggregate. For Form SB–2,

this would result in an estimated per

year increase burden of 8,242 hours in

the aggregate. For Form S–11, this

would result in an estimated per year

increase burden of 10,309 hours in the

aggregate. For Form SB–1, this would

result in an estimated per year increase

of 236 in the aggregate. Regulations S–

K and S–B will continue to show an

estimated burden hour of one. The

information collection requirements

imposed by the forms and regulations

are mandatory to the extent that a

company elects to do a registered

offering. The information is made

publicly available. The Commission

may not require a response to the

collection of information if the forms

and regulations do not display a

currently valid OMB control number. In accordance with 44 U.S.C.

3506(c)(2)(B), the Commission solicits

comment on the following: whether the

proposed changes in the collection of

information is necessary; on the

accuracy of the Commission’s estimate

of the burden of the proposed changes

to the collection of information; on the

quality, utility and clarity of the

information to be collected; and

whether the burden of collection of

information on those who are to

respond, including through the use of

automated collection techniques or

other forms of information technology,

may be minimized. Persons desiring to submit comments

on the collection of information

requirements should direct them to the

Office of Management and Budget,

Attention: Desk Officer for the

Securities and Exchange Commission,

Office of Information and Regulatory

Affairs, Washington, D.C. 20503, and

should also send a copy of their

comments to Jonathan G. Katz,

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549, with reference

to File No. S7–9–97. The Office of

Management and Budget is required to

make a decision concerning the

collection of information between 30

and 60 days after publication, so a

comment to OMB is best assured of

having its full effect if OMB receives it

within 30 days of publication.

VII. Statutory Basis for the Proposals

The foregoing amendments are

proposed pursuant to Sections 6, 7, 8,

10 and 19(a) of the Securities Act.

List of Subjects in 17 CFR Parts 228,

229, and 230

Registration requirements, Reporting

and recordkeeping requirements,

Securities.

Text of the Proposals

In accordance with the foregoing,

Title 17, Chapter II of the Code of

Federal Regulations is proposed to be

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.

2. In § 228.512 (Item 512 of Regulation

S–B), remove paragraph (c) and

redesignate paragraphs (d) through (f) as

paragraphs (c) through (e).

3. In § 228.601, revise the second note

to the Exhibit Table of Item 601(a) under

paragraph (a) and amend paragraph

(b)(23)(ii) by revising the heading and

first sentence to read as follows:

§ 228.601 (Item 601) Exhibits.

* * * * *

Exhibit Table

* * * * *

* * * Where the opinion of the

expert or counsel has been incorporated

by reference or has been deemed to be

a part of a previously filed Securities

Act registration statement.

* * * * *

(b) * * *

(23) Consent of experts and counsel.

* * *

(ii) Exchange Act reports. If required

to file a consent for material

incorporated by reference into or

deemed to be a part of a previously filed

registration statement under the

Securities Act, the dated and manually

signed consent to the material

incorporated by reference or deemed to

be a part of. * * *

* * * * *

PART 229—STANDARD

INSTRUCTIONS FOR FILING FORMS

UNDER SECURITIES ACT OF 1933,

SECURITIES EXCHANGE ACT OF 1934

AND ENERGY POLICY AND

CONSERVATION ACT OF 1975—

REGULATION S–K

4. The authority citation for Part 229

continues to read in part as follows:

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j,

77k, 77s, 77aa(25), 77aa(26), 77ddd, 77eee,

77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c,

78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll (d),

79e, 79n, 79t, 80a–8, 80a–29, 80a–30, 80a–37,

80b–11, unless otherwise noted.

* * * * *

§ 229.512 [Amended]

5. In § 229.512 (Item 512 of Regulation

S–K), remove paragraph (d) and

redesignate paragraphs (e) through (j) as

paragraphs (d) through (i).

6. In § 229.601, revise footnote 2 to

the Exhibit Table of Item 601 and

amend paragraph (b)(23)(ii) by revising

the first sentence to read as follows:

§ 229.601 (Item 601) Exhibits.

* * * * *

Exhibit Table

* * * * *
9286 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

2. Where the opinion of the expert or

counsel has been incorporated by

reference or has been deemed to be a

part of a previously filed Securities Act

registration statement.

* * * * *

(b) * * *

(23) * * *

(ii) Exchange Act reports. Where the

filing of a written consent is required

with respect to material incorporated by

reference in or deemed to be a part of

a previously filed registration statement

under the Securities Act, such consent

may be filed as an exhibit to the

material incorporated by reference or

deemed to be a part of. * * *

* * * * *

PART 230—GENERAL RULES AND

REGULATIONS, SECURITIES ACT OF

1933

7. 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.

* * * * *

8. By amending § 230.415 by adding

paragraph (a)(1)(xii) and revising (a)(2)

and (a)(3) to read as follows:

§ 230.415 Delayed or continuous offering

and sale of securities.

(a) * * *

(1) * * *

(xii) Securities registered (or qualified

to be registered) that are to be offered

and sold on a delayed basis pursuant to

§ 230.430A(e) by or on behalf of the

registrant, a subsidiary of the registrant

or a person of which the registrant is a

subsidiary.

(2) Securities in paragraphs (a)(1)

(viii) through (x) and (xii) of this section

may only be registered in an amount

which, at the time the registration

statement becomes effective, is

reasonably expected to be offered and

sold within two years from the initial

effective date of the registration.

(3) The registrant furnishes the

undertakings required by Item 512(a) of

Regulation S–K (§ 229.512 of this

chapter) or Regulation S–B (§ 228.512 of

this chapter) as applicable.

* * * * *

9. By amending § 230.424 by adding

paragraphs (b)(8) and (b)(9) before

Instructions 1 and 2 to read as follows:

§ 230.424 Filing of prospectuses, number

of copies.

* * * * *

(b) * * *

(8) A form of prospectus used in

connection with a primary offering of

securities on a delayed basis pursuant to

§ 230.415(a)(1)(xii) that discloses

information, facts, or events that

constitute a substantive change other

than those covered in paragraph (b)(9) of

this section shall be filed with the

Commission no later than the second

business day following the date it is first

used after effectiveness in connection

with a public offering or sales, or

transmitted by a means reasonably

calculated to result in filing with the

Commission by that date.

(9) A form of prospectus used in

connection with a primary offering of

securities on a delayed basis pursuant to

§ 230.415(a)(1)(xii) that discloses

information previously omitted from the

prospectus filed as part of an effective

registration statement in reliance upon

§ 230.430A(a) shall be filed with the

Commission no later than the second

business day following the earlier of the

date of the determination of the offering

price or the date it is first used after

effectiveness in connection with a

public offering or sales, or transmitted

by a means reasonably calculated to

result in filing with the Commission by

that date.

* * * * *

10. By amending § 230.430A by

removing paragraph (d) and

redesignating paragraph (e) as paragraph

(d) and adding paragraph (e) before the

Note to read as follows:

§ 230.430A Prospectus in a registration

statement at the time of effectiveness.

* * * * *

(e) A registrant that complies with all

the requirements of this section other

than the requirements to identify the

managing underwriter(s) in the

registration statement that is declared

effective pursuant to paragraph (a) of

this section and the fifteen business day

period of paragraph (a)(3) of this section

may offer and sell securities on a

delayed basis if the following registrant

and offering requirements are satisfied.

(1) Registrant requirements. (i) The

registrant has been subject to the

reporting provisions of Section 13(a) (15

U.S.C. 78m(a)) or 15(d) (15 U.S.C.

78o(d)) of the Exchange Act during the

most recent twelve calendar months

immediately preceding the filing of the

registration statement and has filed all

the material required to be filed

pursuant to Sections 13(a), 14 (15 U.S.C.

77j(a)) or 15(d) for this period. The

registrant also must have filed all

material required to be filed by Sections

13(a), 14 or 15(d) at the time of first use

of the prospectus supplements required

by paragraphs (e)(2)(iii) and (e)(2)(iv) of

this section.

(ii) The registrant is organized under

the laws of the United States or any

State or Territory or the District of

Columbia and has its principal business

operations in the United States or its

territories, except that a foreign issuer,

other than a foreign government, that

satisfies all of the provisions of this

section except for this one shall be

deemed to have met the eligibility

requirements of this section if such

foreign issuer files the same reports with

the Commission under Section 13(a) (15

U.S.C. 78m(a)) or 15(d) (15 U.S.C.

78o(d)) of the Exchange Act as domestic

registrants pursuant to paragraph

(e)(1)(i) of this section.

(iii) The registrant is not an

investment company registered under,

or a business development company

regulated under, the Investment

Company Act of 1940 (15 U.S.C. 80a–1

et seq.).

(iv) The registrant is not a blank check

company as defined in § 230.419 or a

company that issues penny stock as

defined in Section 3(a)(51) (15 U.S.C.

78(c)(a)(51)) of the Exchange Act and

§ 240.3a51–1 of this chapter.

(v) The registrant has: filed with the

Commission all required electronic

filings, including confirming electronic

copies of documents submitted in paper

pursuant to a hardship exemption; not

obtained a continuing hardship

exemption from electronic filing

pursuant to § 232.202(a) of this chapter

during the twelve months immediately

preceding the filing of the registration

statement; and submitted all Financial

Data Schedules required by Item 601(c)

of Regulation S–K or S–B (§ 229.601(c)

or § 228.601(c) of this chapter), as

appropriate. These requirements must

be met at the time of filing the

registration statement and at the time of

first use of the prospectus supplements

required by paragraphs (e)(2)(iii) and

(e)(2)(iv) of this section.

(2) Offering requirements. (i) A

registrant shall file a post-effective

amendment to its registration statement

to: provide annual audited financial

statements for its latest fiscal year as

required by §§ 210.3–01, 210.3–02, and

210.3–04 of this chapter no later than 90

days after the fiscal year end of the

registrant; provide financial statements

and pro forma information for probable

acquisitions over the 50% materiality

level as required by § 210.3–05 of this

chapter and § 228.310 of this chapter as

soon as the acquisition is probable; and

satisfy any of the undertakings of Item

512(a) of Regulations S–K or S–B

(§ 229.512(a) or § 228.512(a) of this

chapter). Each post-effective

amendment shall be deemed to be a new

registration statement relating to the
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9287

securities offered therein and the

offering of such securities at the time

shall be deemed to be the initial bona

fide offering thereof. Each such posteffective amendment shall contain a

completely updated prospectus that

supersedes all prior prospectuses.

(ii) To each person to whom the

registrant delivers its supplemented

prospectus containing the omitted

information and/or any updating

information, the registrant also shall

deliver: its Form 10–Q (§ 249.308a of

this chapter) or Form 10–QSB

(§ 249.308b of this chapter) for the end

of the most recent fiscal quarter not

reflected in the registration statement;

and Forms 8–K (§ 249.308 of this

chapter) filed after the effectiveness of

the registration statement, other than

those solely relating to Item 5 of that

form that are voluntary filings. Exhibits

to such forms need not be provided

except upon request. In lieu of

delivering the quarterly or Form 8–K

information as separate documents at no

charge, the registrant may elect to

include this information in any

prospectus supplement delivered.

(iii) The supplemented prospectus

containing any updating information

and the name of the managing

underwriter(s), if any, along with the

quarterly and Form 8–K (§ 249.308 of

this chapter) information set forth in

paragraph (e)(2)(ii) of this section, shall

be delivered to any person who is

expected to receive a confirmation of

sale at least 48 hours before the sending

of any confirmation of sale.

(iv) The supplemented prospectus

containing any updating information

and all the omitted information,

including the name of the managing

underwriter(s), if any, along with the

quarterly and Form 8–K (§ 249.308 of

this chapter) information set forth in

paragraph (e)(2)(ii) of this section, shall

accompany or precede any confirmation

of sale.

(3) For purposes of determining

liability under the Act, the following

shall be deemed to be a part of the

registration statement as of the date of

first use in connection with an offering

of securities: all forms of prospectus

filed with the Commission pursuant to

§ 230.424(b) in connection with the

offering; and all Forms 10–Q (17 CFR

249.308a), 10–QSB (17 CFR 249.308b),

and 8–K (17 CFR 249.308) (other than

those solely relating to Item 5 of Form

8–K that are voluntary filings) filed

before the date the offering is

terminated. In addition, the Forms 10–

Q, 10–QSB, and Forms 8–K that are

deemed to be a part of the registration

statement shall also be a part of the

prospectus as of the date of first use.

Instructions to Paragraph (e)

1. If the registrant is a successor registrant,

it shall be deemed to have met the conditions

of paragraph (e)(1) if: (a) its predecessor and

it, taken together, do so, provided that the

succession was primarily for the purpose of

changing the state of incorporation of the

predecessor or forming a holding company

and that the assets and liabilities of the

successor at the time of the succession were

substantially the same as those of the

predecessor, or (b) all predecessors met the

conditions at the time of succession and the

registrant has continued to do so since the

succession.

2. Registrants who use Rule 430A(e) shall

provide the undertakings of Item 512(a) of

Regulation S-K or S-B (§§ 229.512(a) or

228.512(a) of this chapter) in lieu of those

specified in Item 512(i) of Regulation S-K or

S-B (§ 229.512(i) or § 228.512(i) of this

chapter).

11. By amending § 230.434 by revising

paragraph (b)(2) to read as follows:

§ 230.434 Prospectus delivery

requirements in firm commitment

underwritten offerings of securities for

cash.

* * * * *

(b) * * *

(2) Such prospectus subject to

completion and term sheet, together, are

not materially different from the

prospectus in the registration statement

at the time of its effectiveness or an

effective post-effective amendment

thereto (including, in both instances,

information deemed to be a part of the

registration statement at the time of

effectiveness pursuant to § 230.430A(b)

or (e)); and

* * * * *

By the Commission.

Dated: February 20, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4669 Filed 2–27–97; 8:45 am]

BILLING CODE 8010–01–P