[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Proposed Rules]
[Pages 35656-35662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16392]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 228, 239 and 249
[Release Nos. 33-7189; 34-35897; International Series No. 820; File No.
S7-19-95]
RIN 3235-AG47
Streamlining Disclosure Requirements Relating to Significant
Business Acquisitions and Requiring Quarterly Reporting of Unregistered
Equity Sales
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rules and forms.
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SUMMARY: In connection with its review of problematic practices
relating to Regulation S, the Commission is publishing for comment rule
revisions that reduce the need for reliance on Regulation S by
eliminating certain impediments to registered offerings of securities
under the Securities Act of 1933 by streamlining requirements with
respect to financial statements of significant acquisitions. Also, rule
revisions are proposed that would require registrants to report on a
quarterly basis recent sales of equity securities that have not been
registered under the Securities Act of 1933.
DATES: Comments should be received on or before September 8, 1995.
ADDRESSES: Comment letters should refer to File number S7-19-95 and
should be submitted in triplicate to Jonathan G. Katz, Secretary, U.S.
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission will make all comments available for public
inspection and copying in its Public Reference Room at the same
address.
FOR FURTHER INFORMATION CONTACT: Annemarie Tierney, (202) 942-2990,
Office of International Corporate Finance, or Douglas Tanner, (202)
942-2960, Office of Chief Accountant, Division of Corporation Finance,
U.S. Securities and Exchange Commission, Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: The Commission is publishing for comment
proposed amendments to the following rules and forms under the
Securities Act of 1933 (the ``Securities Act'') 1 and the
Securities Exchange Act of 1934 (the ``Exchange Act'') 2
concerning financial statements of acquired (or to be acquired)
businesses and quarterly reporting of unregistered equity offerings:
Rule 3-05 of Regulation S-X,3 Rule 310 of Regulation S-B,4
Item 17 of Form S-4,5 Item 17 of Form F-4,6 Item 7 of Form 8-
K,7 Item 2 of Form 10-Q,8 Item 2 of Form 10-QSB,9 Item 5
of Form 10-K,10 and Item 5 of Form 10-KSB.11
\1\ 15 U.S.C. 77a et seq.
\2\ 15 U.S.C. 78a et seq.
\3\ 17 CFR 210.3-05.
\4\ 17 CFR 228.310.
\5\ 17 CFR 239.25.
\6\ 17 CFR 239.34.
\7\ 17 CFR 249.308.
\8\ 17 CFR 249.308a.
\9\ 17 CFR 249.308b.
\10\ 17 CFR 249.310.
\11\ 17 CFR 249.310b.
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I. Introduction
The Commission adopted Regulation S 12 in April 1990 in order
to clarify the extraterritorial application of the registration
requirements of the Securities Act.13 Since adoption, a number of
problematic practices have developed involving unregistered sales of
equity securities of domestic reporting companies purportedly in
reliance upon Regulation S. In a companion release,14 the
Commission is publishing its views concerning problematic practices
under Regulation S and is requesting comment as to whether Regulation S
also should be amended to impose additional restrictions on its use.
\12\ 17 CFR 230.901-904.
\13\ Release No. 33-6863 (Apr. 24, 1990) [55 FR 18306] (the
``Adopting Release'').
\14\ Release No. 33-7190.
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Commenters have suggested that companies may be compelled to sell
securities offshore, rather than in registered transactions, because of
registration disclosure requirements relating to significant
acquisitions. The Commission is proposing to streamline these
requirements to reduce regulatory impediments to the use of registered
offerings. Also, in response to commenters' suggestions that investors
need information about private or offshore placements of equity
securities that is not currently disclosed, the Commission is proposing
to require quarterly reporting of unregistered equity offerings.
Commenters have suggested this public reporting may also have the
ancillary benefit of deterring abuses of Regulation S.
II. Proposed Simplification of Registration Disclosure of Significant
Acquisitions
Domestic companies subject to the reporting requirements of the
Exchange Act are required to report significant acquisitions on Form 8-
K within 15 days after consummation of the transaction; a grace period
of up to 60 days from the filing due date is given for filing the
required audited financial statements.15 On the other hand, a
[[Page 35657]]
company that registers securities under the Securities Act must provide
information in the registration statement about significant
acquisitions, including audited financial statements, from such time as
the acquisition is probable.16 One, two or three years of audited
financial statements may be required, depending on the relative
significance of the acquired business.17 If the registrant is
unable to obtain such financial statements from the potential acquiree
for inclusion in the registration statement, the issuer would have to
resort to alternative financings. Thus, reporting companies, including
those with shelf registrations of securities, may be compelled to forgo
public offerings and to undertake private or offshore offerings. The
rules proposed today are intended generally to allow companies to
provide information about significant acquisitions in Securities Act
registration statements on the same time schedule as for Exchange Act
reporting.18
\15\ See Item 2 and Item 7 of Form 8-K [17 CFR 249.308].
\16\ See Rule 3-05 of Regulation S-X and Item 310(c) of
Regulation S-B [17 CFR 210.3-05 and 17 CFR 228.310(c)].
Registered offerings that are not primarily of a capital raising
nature are permitted to go forward without those financial
statements until 75 days following the acquisition, as permitted by
Form 8-K. Specifically, the restriction on offerings registered
under the Securities Act does not apply to (a) offerings or sales of
securities upon the conversion of outstanding convertible securities
or upon the exercise of outstanding warrants or rights; (b) dividend
or interest reinvestment plans; (c) employee benefit plans; (d)
transactions involving secondary offerings; or (e) sales of
securities pursuant to Rule 144. The restriction also applies to
certain unregistered offerings as well. See Instruction 2 to Item 7
of Form 8-K.
\17\ The significance of an acquired business is evaluated based
on (i) the amount of the issuer's investment in the acquired
business; (ii) the total assets of the acquired business; and (iii)
the pre-tax income of the acquired business, all as compared to the
registrant's most recent comparable financial items.
\18\ The amendments would also permit certain private placements
under Rules 505 and 506 of Regulation D under the Securities Act [17
CFR 230.505 and 506] to go forward under the same conditions as a
registered offering.
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In addition, the Commission is proposing to provide an automatic
waiver of the earliest year of required audited financial statements
otherwise required to be provided for a consummated business
acquisition in filings made under either the Securities Act or the
Exchange Act if those financial statements are not readily available. A
similar waiver provision was previously adopted for small business
issuers and has proved quite useful in addressing significant practical
problems for issuers engaged in acquisitions.19
\19\ The Commission has established the Advisory Committee on
the Capital Formation and Regulatory Processes (the ``Advisory
Committee''), chaired by Commissioner Steven M.H. Wallman. The
Advisory Committee is considering fundamental issues relating to the
regulatory framework governing the capital formation process,
including whether the current system of registering securities
offerings should be replaced with a company registration system. The
recommendations of the Advisory Committee may result in rule
proposals or legislative recommendations that, if endorsed by the
Commission, ultimately may address the matters discussed in this
release. Because most financing transactions that would be
undertaken within the framework of several of the company
registration models now being considered by the Advisory Committee
could be conducted primarily on the basis of disclosure provided in
a registered company's filed periodic and current reports, business
acquisition reporting generally would be rendered consistent in both
the public offering and periodic reporting contexts.
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A. Elimination of Required Financial Statements for Pending
Acquisitions and Waiver of Financial Statements for Recently Completed
Acquisitions
The Commission proposes to eliminate the requirement to provide
audited financial statements for pending business acquisitions in
Securities Act registration statements, other than registrations by
``blank check companies.'' 20 In addition, the proposed rules
would automatically waive the required financial statements for
significant acquisitions completed within 75 days of a registered
offering, if such audited financial statements are not readily
available at the time the offer commences.21 However, other than
financial statements and pro forma information presented pursuant to
Rules 3-05 and Article 11 of Regulation S-X and Item 310 of Regulation
S-B, the proposed rule changes do not change information required with
respect to significant acquisitions.
\20\ A ``blank check company'' is defined in Sec. 230.419 of
Regulation C [17 CFR 230.419(a)].
\21\ The date of an offering will be deemed to be the date of a
final prospectus or prospectus supplement relating to the offering
as filed with the Commission pursuant to Rule 424(b) [17 CFR
230.424(b)] under the Securities Act.
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Although financial statements of acquirees may be omitted under the
proposed amendments, pro forma financial information required by
Article 11 of Regulation S-X and Item 310 of Regulation S-B would
continue to be required when financial statements of the acquiree are
furnished.22 In any case, likely effects of a probable or recently
consummated business combination are required to be discussed in
Management's Discussion and Analysis, to the extent material.23
\22\ 17 CFR 210.11-01 to 11-03.
\23\ See Item 303 of Regulation S-K and S-B [17 CFR 229.303 and
228.303].
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Comments are requested concerning whether the accommodations
proposed today should only be available with respect to acquisitions
below a particular level of significance compared to the assets and
pre-tax income of the registrant. If a significance test is
appropriate, should it be, for example, 75%, 60%, 50%, 40%, 30% or 20%?
Comment is requested whether other classes of issuers, in addition to
``blank check companies,'' should be excluded from the provisions of
the proposed amendments. Is it appropriate to provide the same grace
period for offering documents as for Form 8-K reports? Should the grace
period be shorter, e.g. 15 days? Further, comment is requested
regarding whether such relief should be available to all registrants
(including new registrants) or whether minimum reporting history or
public float requirements should be established. Comment is requested
as to whether audited financial statements with respect to significant
business combinations that have not been consummated but are probable
should be required to be furnished in the prospectus if the financial
statements are readily available. Comment is requested as to whether
unaudited financial statements with respect to probable or recently
consummated business combinations should be required if they are
readily available.
Although a domestic company may proceed with a registered offering
of securities without financial statements of a recent or probable
acquiree in the circumstances described above, it will be required to
file financial statements of each significant acquired business on Form
8-K within 75 days of consummation of the acquisition. The proposed
revisions would apply to offerings of domestic and foreign issuers
alike. However, foreign private issuers are not subject to quarterly or
Form 8-K reporting rules, and are not required currently to furnish
financial statements of acquired businesses in the absence of a
registered offering of securities. Comment is requested as to whether
the rule should therefore include, as a condition for omission of the
financial statements in a registration statement, that the foreign
private issuer undertake in the registration statement to provide on
Form 6-K the audited financial statements of the acquired business
within 75 days of consummation of the business combination.
The amendments proposed today would also eliminate the significance
threshold that triggers the requirement to provide in registration
statements audited financial statements of acquired businesses that, in
the aggregate, but not individually, are significant.24 Comment
[[Page 35658]]
is requested as to whether elimination of the requirement is
appropriate or whether a significance level applicable to aggregations
of individually insignificant businesses should be maintained at the
current threshold of 20%, or increased to 40%, 50%, 60% or 75%.
\24\ In such case, the issuer must furnish audited financial
statements of the most recent fiscal year for a majority of the
individually insignificant businesses. See Rule 3-05(b)(i) of
Regulation S-X.
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No change is proposed with respect to current rules governing
financial statements required for acquired operating real estate
properties. The Commission has previously addressed the issue of
financial statements for operating real estate properties. Rule 3-14 of
Regulation S-X reflects conclusions reached regarding the appropriate
form of financial information and the number of periods for which the
financial information should be furnished.25 Comment is requested
on whether relief proposed under the proposed amendments should also be
available for operating real estate properties acquired or to be
acquired by the registrant.
\25\ Audited income statements of significant acquired or to be
acquired operating real estate properties are required to be
furnished pursuant to Rule 3-14 of Regulation S-X and Item 310(e) of
Regulation S-B [17 CFR 210.3-14 and 228.310(e)]. The income
statements are required to be presented only for the most recent
fiscal year, regardless of significance, if the property is not
acquired from a related party and the registrant is not aware of any
material factors relating to the specific property that would cause
the reported financial information not to be necessarily indicative
of future operating results. The income statements may exclude items
not comparable to the proposed future operation of the property,
such as mortgage interest, leasehold rental, depreciation, corporate
expenses and federal and state income taxes.
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Where securities are being registered in an offering to acquire a
business, audited financial statements of the business to be acquired
will still be required as provided under the current rules.26 The
proposed amendments do not cover these situations. The registrant may
rely on the proposed rules with respect to other pending or recently
completed acquisitions.
\26\ Forms S-4 and F-4 do provide certain accommodations with
respect to acquirees that are not reporting companies under the
Exchange Act. See Item 17 in each Form [17 CFR 239.25 and 33].
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Likewise, the proposed new rules would not change the financial
statement requirements of the business to be acquired for proxy
statements in which financial statements of such business are required
to be provided pursuant to Item 14 of Schedule 14A.27 Comment is
requested as to whether the relief afforded under the proposed
amendments should be available for a company being acquired if that
acquisition transaction is the subject of the registration statement or
proxy statement.
\27\ Financial statements of an acquired business are required
pursuant to Item 14 if action is to be taken with respect to
mergers, consolidations, acquisitions and similar matters [17 CFR
240.14a-101.14].
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B. Automatic Waiver of Certain Unavailable Acquiree Financial
Statements
When audited financial statements of an acquired business are
required in filings made under the Exchange Act or the Securities Act,
the number of years for which statements are mandated varies depending
on the level of significance of the acquisition relative to the assets
and income of the registrant.28 In 1992, as part of its Small
Business Initiatives,29 the Commission provided certain relief in
cases where the acquiree's audited financial statements are not readily
available. This automatic waiver is proposed to be extended to all
issuers. As proposed to be amended, Rule 3-05 would provide that, where
an acquiree's audited financial statements are not readily available,
the requirement for furnishing them would be automatically waived if
the significance of the acquired business does not exceed 20%, and the
earlier of the two years of the required financial statements would be
automatically waived where significance does not exceed 40%.30
\28\ The number of years for which audited financial statements
are required depends on the level of significance: one year at 10%,
two years at 20%, and three years at 40%. See Rule 3-05(b)(1) of
Regulation S-X.
\29\ Release No. 33-6949 (July 30, 1992) [57 FR 36442]; Release
No. 33-6996 (April 28, 1993) [58 FR 26509].
\30\ If a registrant omits financial statements in reliance on
the proposed amendments, the pro forma financial information
included in a Form 8-K relating to the acquisition could not be used
as the basis for measuring the significance of subsequent
acquisitions as otherwise permitted by Rule 3-05(b)(1) of Regulation
S-X. See proposed amendments to Rule 3-05(b)(1) of Regulation S-X.
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Comment is requested as to the appropriateness of this automatic
waiver provision. Should the Commission eliminate altogether the
requirement for financial statements of any acquisition below the 20%
significance level? Should financial statements that are not readily
available be waived automatically unless the acquisition exceeds the
50% level of significance? Comment is requested also as to whether
unaudited financial statements should be required to be filed if
audited financial statements are omitted pursuant to the automatic
waiver granted under the proposed rule.
III. Quarterly Reporting of Unregistered Equity Sales
Concerns have been raised by some commenters that while
unregistered offshore or private placements of common stock may have a
material effect on the issuer and may result in significant dilution of
existing shareholders, they frequently are not publicly disclosed.
Recognizing the market need for such information, the Commission
last year adopted Rule 135c 31 to remove any regulatory impediment
to such disclosure. The rule provides a safe harbor under Section 5 for
public announcement of unregistered offerings. Some have suggested that
mandated reporting of unregistered equity placements would assure
investors are provided with material information about such
transactions and have the additional benefit of spotlighting abuses of
Regulation S. The SEC Government-Business Forum on Small Business
Capital Formation included a recommendation that reporting of
Regulation S offerings on Form 8-K be required.32
\31\ 17 CFR 230.135c, adopted in Release No. 33-7053 (Apr. 26,
1994) [59 FR 21644].
\32\ Final Report of the SEC Government-Small Business Capital
Formation (February 1995).
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In response to these concerns and suggestions, the Commission is
proposing amendments to its annual and quarterly report forms for
domestic issuers that would require the disclosure of unregistered
sales of equity securities 33 during the previous fiscal quarter,
whether pursuant to a private placement, a Regulation S offering or
otherwise. This information would be provided in an issuer's Quarterly
Report on Form 10-Q or 10-QSB for sales during the issuer's first three
fiscal quarters and in the Annual Report on Form 10-K or 10-KSB for
offerings during the final fiscal quarter.
\33\ The term ``equity security'' would include convertible and
exchangeable securities, warrants, options and other types of
equity-related securities, as provided under Rule 3a11-1 [17 CFR
240.3a-11-1] under the Exchange Act.
The disclosure proposed 34 is that currently set forth in
Items 701 of Regulation S-K 35 and Regulation S-B,36 and
includes:
\34\ This information is currently required in registration
statements on Forms S-1, S-11 and F-1.
\35\ 17 CFR 229.701.
\36\ 17 CFR 228.701.
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The title and amount of securities sold, and the date of
the transaction.
Underwriter or placement agent.
The consideration received.37
\37\ As to consideration, Item 701 requires: ``As to securities
sold for cash, state the aggregate offering price and the aggregate
underwriting discounts or commissions. As to any securities sold
otherwise than for cash, state the nature of the transactions and
the nature and aggregate amount of consideration received by the
registrant.''
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Persons or classes of persons to whom the securities were
sold.
The exemption from registration claimed.
Comment is requested on investors' need for such information.
Comment is also requested as to whether the information will be
sufficiently timely, or instead, should be provided in a filing at an
earlier date, such as a mandatory Current Report on Form 8-K, or a
notice of sale similar to that used for Regulation D. Should notice be
required prior to or at the time of the sale? Some have suggested that
earlier reporting should be required unless the Regulation S restricted
period is lengthened so that a report must be filed before the end of
the restricted period. Comment also is requested as to the adequacy of
the information required; is there additional information that would be
helpful to investors; are there items that are not necessary?
The proposed requirement is limited to unregistered sales of common
equity securities (and common equity equivalents) because of the
significant market impact the issuance of such securities often has and
the current lack of public information about such sales. Comment is
requested as to whether a reporting requirement should be extended to
other types of securities or registered offerings, e.g., takedowns off
a shelf registration statement, and if so why?
IV. Cost-Benefit Analysis
To assist the Commission in its evaluation of the costs and
benefits that may result from the proposed changes to disclosure
requirements contained in this release, commenters are requested to
provide views and data relating to any costs and benefits associated
with the proposals. It is expected that the proposals relating to
financial statements of acquired businesses will decrease registrants'
costs and compliance burdens. It is expected that the proposals to
disclose sales of unregistered equity securities on a quarterly basis
will modestly increase registrants' costs and compliance burdens. This
requirement should not significantly increase the burden on company
resources, since most registrants are required to gather such
information in connection with the preparation of audited and unaudited
financial statements. To the extent this requirement results in any
additional expense, it may be justified in view of the material
information that would be available to investors.
V. Request for Comments
Any interested person wishing to submit written comments on any
aspect of the amendments to forms and rules that are subject to this
release are requested to do so. Comments should be submitted in
triplicate to Jonathan G. Katz, secretary, U.S. Securities and Exchange
Commission, 450 5th Street, N.W., Washington, D.C. 20549 and should
refer to file number S7-19-95.
VI. Summary of Initial Regulatory Flexibility Analysis
The Commission has prepared an Initial Regulatory Flexibility
Analysis pursuant to the requirements of the Regulatory Flexibility
Act,38 regarding the proposed amendments to Rule 3-05 of
Regulation S-X, Item 310 of Regulation S-B, Form S-4 and Form F-4 and
Forms 10-Q, 10-QSB, 10-K and 10-KSB. The analysis notes that these
proposed amendments relating to financial statement requirements for
acquired businesses would provide issuers greater flexibility and
efficiency in accessing the public securities markets. The proposed
amendments with respect to disclosure of recent sales of unregistered
securities are intended to provide investors with more information
regarding changes in outstanding securities of public companies.
\38\ 5 U.S.C. 603 (1988).
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As discussed more fully in the analysis, the proposed changes would
affect persons that are small entities, as defined by the Commission's
rules. It is expected that the changes primarily would decrease
reporting, recordkeeping and compliance burdens, although the
requirement to report unregistered sales would modestly increase such
burdens. The analysis also indicates that there are no current federal
rules that duplicate, overlap or conflict with the revised disclosure
provisions.
As stated in the analysis, several possible significant
alternatives to the disclosure proposals were considered, including,
among others, establishing different compliance or reporting
requirements for small entities or exempting them from all or part of
the proposed requirements. As more fully discussed in the analysis, the
alternatives were either addressed in the proposals, inconsistent with
the purposes of the federal securities laws, or otherwise without
justification.
Written comments are encouraged with respect to any aspect of the
analysis. Such comments will be considered in the preparation of the
Final Regulatory Flexibility Analysis if the proposed revisions are
adopted. A copy of the analysis may be obtained by contacting Annemarie
Tierney, Office of International Corporate Finance, Division of
Corporation Finance at (202) 942-2990, U.S. Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
VII. Statutory Bases
The amendments to the Commission's rules and forms are being
proposed pursuant to sections 2, 3, 4 and 19 of the Securities Act of
1933 and 3(b), 4A, 12, 13, 14, 15, 16 and 23 of the Securities Exchange
Act of 1934.
Text of Proposals
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is proposed to be amended as follows:
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT
COMPANY ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF
1975--REGULATION S-X
1. The authority citation for Part 210 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77aa(25),
77aa(26), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79e(b), 79j(a),
79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-37a, unless
otherwise noted.
2. Section 210.3-05 is amending by revising paragraph (b) to read
as follows:
Sec. 210.3-05 Financial statements of businesses acquired or to be
acquired.
(a) ***
(b) Periods to be presented. (1)(i) If securities are being
registered to be offered to the security holders of the business to be
acquired, the financial statements specified in Secs. 210.3-01 and
210.3-02 shall be furnished for the business to be acquired, except as
provided otherwise for filings on Form N-14, S-4 or F-4. In all other
cases, financial statements of the business acquired or to be acquired
shall be filed for the periods specified in this paragraph or such
shorter period as the business has been in existence. The financial
statements covering fiscal years shall be audited except as provided in
Item 14 of Schedule 14A, (Sec. 240.14a-101 of this chapter) with
respect to certain proxy statements or in
[[Page 35660]]
registration statements filed on Forms N-14, S-4 or F-4 (Sec. 239.23,
25 or 34 of this chapter). The periods for which such financial
statements are to be filed shall be determined using the conditions
specified in the definition of significant subsidiary in Sec. 210.1-
02(w) as follows:
(A) If none of the conditions exceeds 10 percent, financial
statements are not required.
(B) If any of the conditions exceeds 10 percent, but none exceed 20
percent, financial statements shall be furnished for at least the most
recent fiscal year and any interim periods specified in Secs. 210.3-01
and 210.3-02.
(C) If any of the conditions exceeds 20 percent, but none exceed 40
percent, financial statements shall be furnished for at least the two
most recent fiscal years and any interim periods specified in
Secs. 210.3-01 and 210.3-02.
(D) If any of the conditions exceeds 40 percent, the full financial
statements specified in Secs. 210.3-01 and 210.3-02 shall be furnished.
(ii) The determination shall be made by comparing the most recent
annual financial statements of each such business to the registrant's
most recent annual consolidated financial statements filed at or prior
to the date of the acquisition. However, if the registrant made a
significant acquisition subsequent to the latest fiscal year-end and
filed a report on Form 8-K which included audited financial statements
of such acquired business for the periods required by this section and
the pro forma financial information required by Sec. 210.11, such
determination may be made by using the pro forma amounts for the latest
fiscal year in the report on Form 8-K rather than by using the
historical amounts for the latest fiscal year of the registrant. The
tests may not be made by ``annualizing'' data. However, if a Form 8-K
was filed to report a significant acquisition but audited financial
statements were not furnished pursuant to the provisions of paragraph
(b)(2)(i) of this section, the determination of significance may not be
made using the pro forma amounts for the latest fiscal year.
(2) Notwithstanding the requirements in paragraph (b)(1) of this
section:
(i) If none of the conditions specified in the definition of
significant subsidiary in paragraph (b)(1) of this section exceeds 20
percent and the required audited financial statements of the acquired
business are not readily available, an automatic waiver of the required
audited financial statements is granted. If none of the conditions
specified in the definition of significant subsidiary in paragraph
(b)(1) of this section exceeds 40 percent and the required audited
financial statements are not readily available, an automatic waiver is
granted with respect to the required audited financial statements for
the fiscal year preceding the latest fiscal year.
(ii)(A) Separate financial statements of the acquired or to be
acquired business need not be presented in a proxy statement or
registration statement pursuant to this rule, if either:
(1) The consummation of the acquisition has not yet occurred; or
(2) The acquisition was consummated within 75 days of the date of
the offering under the Securities Act of 1933 [15 U.S.C. Secs. 77a et
seq.], or mailing date in the case of a proxy statement, and the
required audited financial statements of the acquired business are not
readily available at the date of the final prospectus or mailing of the
proxy.
(B) Except that the provisions of this paragraph are not applicable
to registration statements for securities issued to acquire the
business or registrations statements subject to the provisions of
Sec. 419 of Regulation C [17 CFR 230.419].
(iii) Separate financial statements of the acquired business need
not be presented once the operating results of the acquired business
have been reflected in the audited consolidated financial statements of
the registrant for a complete fiscal year unless such financial
statements have not been previously filed or unless the acquired
business is of such significance to the registrant that omission of
such financial statements would materially impair an investor's ability
to understand the historical financial results of the registrant. For
example, if, at the date of acquisition, the acquired business met at
least one of the conditions in the definition of significant subsidiary
in Sec. 210.1-02 at the 80 percent level the income statements of the
acquired business should normally continue to be furnished for such
periods prior to the purchase as may be necessary when added to the
time for which audited income statements after the purchase are filed
to cover the equivalent of the period specified in Sec. 210.3-02.
(iv) A separate audited balance sheet of the acquired business is
not required when the registrant's most recent audited balance sheet
required by Sec. 210.3-01 is for a date after the date the acquisition
was consummated.
* * * * *
3. Section 210.11-01 is amended by revising paragraph (e) to read
as follows:
Sec. 210.11-01 Pro forma financial information.
* * * * *
(e) This rule does not apply to transactions between a parent
company and its totally held subsidiary or to a transaction for which
financial statements of an acquired or to be acquired business are not
presented pursuant to Sec. 210.3-05(b)(i) and Sec. 210.3-05(b)(ii).
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
4. 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.
5. By amending Sec. 228.310 by adding paragraph (c)(3)(iv),
removing paragraph (c)(4), redesignating paragraph (c)(5) as paragraph
(c)(4), and revising paragraph (d)(2) to read as follows:
Sec. 228.310 (Item 310) financial statements.
* * * * *
(c) * * *
(3) * * *
(iv) Notwithstanding the requirements in paragraphs (c)(3)(i) and
(c)(3)(ii) of this Item, separate financial statements of the acquired
or to be acquired business need not be presented in a proxy statement
or registration statement pursuant to this rule, if either:
(A) The consummation of the acquisition has not yet occurred; or
(B) The acquisition was consummated within 75 days of the date of
the offering under the Securities Act of 1933 [15 U.S.C. Secs. 77a et
seq.], or mailing date in the case of a proxy statement, and the
required audited financial statements of the acquired business are not
readily available at the date of the final prospectus or mailing of the
proxy.
Except that the provisions of this paragraph are not applicable to
registration statements for securities issued to acquire the business
or registrations statements subject to the provisions of Sec. 419 of
Regulation C [17 CFR 230.419].
(4) * * *
(d) * * *
(2) The provisions of paragraph (c)(2) of this Item apply to
paragraph (d) of this Item. However, paragraph (d) of this Item does
not apply to a transaction for which financial statements of an
acquired or to be acquired business are not presented pursuant to
paragraph (c)(3)(iv) of this Item.
* * * * *
[[Page 35661]]
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1993
6. The authority citation for Part 239 continues to read in part as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77sss, 78c, 78l, 78m,
78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l ,79m, 79n,
79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise noted.
* * * * *
7. By revising paragraph (b)(7) of Item 17 of Form S-4 (referenced
in Sec. 239.25) to read as follows:
Note: Form S-4 does not and these amendments will not appear in
the Code of Federal Regulations.
Form S-4
* * * * *
Item 17. Information with Respect to Companies Other Than S-3 or S-
2 Companies.
* * * * *
(b) * * *
(7) Financial statements as would have been required to be
included in an annual report furnished to security holders pursuant
to Rules 14a-3(b)(1) and (b)(2) (Sec. 240.14a-3 of this chapter) or
Rules 14c-3(a)(1) and (a)(2) (Sec. 240.14c-3 of this chapter), had
the company being acquired been required to prepare such a report;
Provided, however, that the balance sheet for the year preceding the
latest full fiscal year and the income statements for the two years
preceding the latest full fiscal year need not be audited if they
have not previously been audited. In any case, such financial
statements need only be audited to the extent practicable. If this
Form is used for resales to the public by any person who with regard
to the securities being reoffered is deemed to be an underwriter
within the meaning of Rule 145(c) (Sec. 230.145(c) of this chapter),
the financial statements of such companies must be audited for the
periods required to be presented pursuant to paragraphs (b)(1) and
(b)(2)(i) of Rule 3-05 of Regulation S-X (17 CFR 210.3-05).
* * * * *
8. By revising paragraph (b)(5) of Item 17 of Form F-4 to read as
follows:
Note: Form F-4 does not and these amendments will not appear in
the Code of Federal Regulations.
Form F-4
* * * * *
Item 17. Information with Respect to Foreign Companies Other
Than F-3 or F-2 Companies.
* * * * *
(b) * * *
(5) Financial statements as would have been required to be
included in an annual report on Form 20-F (17 CFR 249.220f) had the
company being acquired been required to prepare such a report;
Provided, however, that the balance sheet for the year preceding the
latest full fiscal year and the income statements for the two years
preceding the latest full fiscal year need not be audited if they
have not previously been audited. In any case, such financial
statements need only be audited to the extent practicable. If this
Form is used for resales to the public by any person who with regard
to the securities being reoffered is deemed to be an underwriter
within the meaning of Rule 145(c) (Sec. 230.145(c) of this chapter),
the financial statements of such companies must be audited for the
periods required to be presented pursuant to paragraphs (b)(1) and
(b)(2)(i) of Rule 3-05 of Regulation S-X (17 CFR 210.3-05).
* * * * *
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
9. The authority citation for Part 249 continues to read in part as
follows:
Authority: 15 U.S.C. 78a et seq., unless otherwise noted;
* * * * *
10. By amending Form 8-K (referenced in Sec. 249.308) by revising
Instruction 2 of Item 7 to read as follows:
Note: Form 8-K does not and these amendments will not appear in
the Code of Federal Regulations
Form 8-K
* * * * *
Item 7. Financial Statements and Exhibits.
* * * * *
Instructions. * * *
2. During the pendency of an extension pursuant to this
paragraph, registrants will be deemed current for purposes of their
reporting obligations under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934. With respect to filings under the Securities
Act of 1933, however, registration statements will not be declared
effective and post-effective amendments to registration statements
will not be declared effective. In addition, offerings should not be
made pursuant to effective registration statements, or pursuant to
Rules 505 and 506 of Regulation D (Secs. 230.501 through 506 of this
chapter), where any purchasers are not accredited investors under
Rule 501(a) of that Regulation, until the required audited financial
statements are filed; Provided, however, that the above restriction
shall not apply during the pendency period of an extension pursuant
to this Item if the required audited financial statements of the
acquired business are not readily available. Further, the following
offerings or sales of securities shall not be affected by this
restriction:
(a) Offerings or sales of securities upon the conversion of
outstanding convertible securities or upon the exercise of
outstanding warrants or rights;
(b) Dividend or interest reinvestment plans;
(c) Employee benefit plans;
(d) Transactions involving secondary offerings; or
(e) Sales of securities pursuant to Rule 144 (Sec. 230.144 of
this chapter).
* * * * *
11. By amending Form 10-Q (referenced in Sec. 249.308a) by adding
paragraph (c) to Item 2 of Part II prior to the Instruction to read as
follows:
Note: Form 10-Q does not and these amendments will not appear in
the Code of Federal Regulations
Form 10-Q
* * * * *
Part II
Item 2. Changes in Securities.
* * * * *
(c) Furnish the information required by Item 701 of Regulation
S-K (Sec. 229.701 of this chapter) as to all equity securities of
the registrant sold by the registrant during the period covered by
the report that were not registered under the Securities Act.
* * * * *
12. By amending Form 10-QSB (referenced in Sec. 249.308b) by adding
paragraph (c) to Item 2 of Part II prior to the Instruction to read as
follows:
Note: Form 10-QSB does not and these amendments will not appear
in the Code of Federal Regulations
Form 10-QSB
* * * * *
Part II
* * * * *
Item 2. Changes in Securities.
* * * * *
(c) Furnish the information required by Item 701 of Regulation
S-B (Sec. 228.701 of this chapter) as to all equity securities of
the registrant sold by the registrant during the period covered by
the report that were not registered under the Securities Act.
* * * * *
13. By amending Form 10-K (referenced in Sec. 249.310) by revising
Item 5 of Part II as follows:
Note: Form 10-K does not and these amendments will not appear in
the Code of Federal Regulations
Form 10-K
* * * * *
Part II
* * * * *
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Furnish the information required by Item 201 of Regulation S-K
(Sec. 229.201 of this chapter) and Item 701 of Regulation S-K
(Sec. 229.701 of this chapter) as to all equity securities of the
registrant sold by the registrant during the period covered by the
report that were not registered under the Securities Act; provided
that information that has previously been included in a Quarterly
Report on Form 10-Q or 10-QSB (Sec. 249.308a or 249.308b of this
chapter) need not be provided.
* * * * *
[[Page 35662]]
14. By amending Form 10-KSB (referenced in Sec. 249.310b) by
revising Item 5 of Part II to read as follows:
Note: Form 10-K does not and these amendments will not appear in
the Code of Federal Regulations
Form 10-KSB
* * * * *
Part II
* * * * *
Item 5. Market for Common Equity and Related Stockholder
Matters.
Furnish the information required by Item 201 of Regulation S-B
and Item 701 of Regulation S-B as to all equity securities of the
registrant sold by the registrant during the period covered by the
report that were not registered under the Securities Act; provided
that information that has previously been included in a Quarterly
Report on Form 10-Q or 10-QSB need not be provided.
* * * * *
By the Commission.
Dated: June 27, 1995.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-16392 Filed 7-7-95; 8:45 am]
BILLING CODE 8010-01-P