[Federal Register Volume 61, Number 176 (Tuesday, September 10, 1996)]
[Proposed Rules]
[Pages 47706-47712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22726]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 228, 230, 239, 240 and 249

[Release Nos. 33-7326 and 34-37624; File No. S7-23-96]
RIN 3235-AG82


Expansion of Short-Form Registration To Include Companies With 
Non-voting Common Equity

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rules.

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SUMMARY: The Securities and Exchange Commission (``Commission'') today 
proposes amendments to rules and Forms S-3 and F-3 under the Securities 
Act of 1933 (``Securities Act'') to include non-voting as well as 
voting common equity in the computation of the required $75 million 
aggregate market value of common equity held by non-affiliates of the 
registrant.
    In addition, the Commission is proposing conforming amendments to 
Form F-2 under the Securities Act, Forms 10-K and 10-KSB under the 
Securities Exchange Act of 1934 (``Exchange Act'') and the definition 
of ``Small Business Issuer'' in Rule 405 and in Item 10 of Regulation 
S-B under the Securities Act and in Rule 12b-2 under the Exchange Act. 
Under the proposed revisions, the aggregate market value of voting and 
non-voting common equity would be included in the calculation of the 
amount of the required public float for issuers to qualify to use Form 
F-2 and to be small business issuers and in stating the amount of the 
public float on Forms 10-K and 10-KSB.

DATES: Comments should be received on or before October 10, 1996.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, U.S. Securities and Exchange Commission, Mail Stop 6-
9, 450 Fifth Street, NW., Washington, DC 20549. Comments also may be 
submitted electronically at the following E-mail address: rule-
[email protected]. All comment letters should refer to File Number S7-
23-96. Include this file number 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 on the Commission's Internet web site (http://
www.sec.gov).

FOR FURTHER INFORMATION CONTACT: Mary J. Kosterlitz, Special Counsel, 
(202) 942-2900, Office of Chief Counsel, Division of Corporation 
Finance, Securities and Exchange Commission, 450 Fifth Street, NW., 
Mail Stop 3-3, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to 
Forms S-3 1 and F-3 2 under the Securities Act 3 to 
include non-voting common equity in the computation of the required 
public float. Conforming changes are also proposed to be made to Forms, 
F-2, 4 10-K,5 and 10-KSB 6 and to the definition of 
``small business issuer'' in Rule 405 7 and in Item 10 of 
Regulation S-B 8 under the Securities Act and in Rule 12b-2 9 
under the Exchange Act.10
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    \1\ 17 CFR 239.13.
    \2\ 17 CFR 239.33.
    \3\ 15 USC 77a et seq.
    \4\ 17 CFR 239.32.
    \5\ 17 CFR 249.310.
    \6\ 17 CFR 249.310b.
    \7\ 17 CFR 230.405.
    \8\ 17 CFR 228.10.
    \9\ 17 CFR 240.12b-2.
    \10\ 15 U.S.C. 78a et seq.
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I. Introduction and Background

    The Commission's short-form registration statements, Forms S-3 and 
F-3, require as one condition to eligibility for registration of a 
primary offering of non-investment grade securities (such as common 
stock) that the company have at least $75 million of voting stock held 
by non-affiliates (referred to as the ``public float'').11 Some 
companies, both domestic and foreign, that have significant amounts of 
non-voting common stock held by non-affiliates (but not significant 
amounts of voting stock) are not eligible to use these forms for such 
an offering because non-voting stock is not included in the calculation 
of the required public float. The revisions proposed today would make 
Forms S-3 and F-3 available to these issuers provided they otherwise 
qualify for these forms. These changes are proposed to provide 
additional flexibility for registered capital raising transactions by 
extending the availability of the short form registration statements. 
The proposed revisions are

[[Page 47707]]

consistent with the spirit of the recommendations of the Commission's 
Task Force on Disclosure Simplification (``Task Force Report'') 12 
and with requirements included in S. 1815, the Securities Investment 
Promotion Act of 1996.13
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    \11\ See General Instruction I.B.1 of Forms S-3 and F-3. General 
registrant requirements for Forms S-3 and F-3 eligibility are 
outlined in General Instruction I.A to these forms.
    \12\ The Task Force Report in part seeks to eliminate rules that 
no longer may be necessary or appropriate for investor protection 
and to streamline, simplify, and modernize the overall regulatory 
scheme without compromising or diminishing important investor 
protections. See March 5, 1996, Letter from Arthur Levitt printed in 
Report on Task Force Simplification, March 1996. See Release No. 33-
7271 (March 5, 1996) [61 FR 9848]. The report is available for 
inspection and copying in the Commission's Public Reference Room and 
is posted on the Commission's Internet Web Site (http://
www.sec.gov).
    \13\ See S. 1815, 2d Sess. Sec. 314 (1996).
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    Under the integrated disclosure system, there are three basic 
Securities Act registration forms: Forms S-1, S-2 and S-3.14 These 
forms establish three categories of registrants. Although the 
information required for each of these forms is the same, the method of 
delivering the information varies depending on the category of 
registrant. These methods of delivering information are: (1) Provision 
of information physically in the prospectus; (2) delivery with the 
prospectus; or (3) incorporation by reference into the prospectus from 
Exchange Act reports. Form S-3 permits maximum reliance on Exchange Act 
reports, allowing eligible issuers to use this form to incorporate 
information into the prospectus by reference from Exchange Act 
filings.15 Form F-3, the corollary to Form S-3 for foreign private 
issuers,16 also allows eligible registrants to incorporate 
information by reference from Exchange Act reports.
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    \14\ These three classes of forms apply to domestic issuers. 
Foreign private issuers have three parallel Securities Act 
registration forms: Forms F-1, F-2 and F-3. 17 CFR 239.0-1.
    \15\ See Release No. 33-6383 (March 3, 1982) [47 FR 11380]. Form 
S-3 also allows issuers to update the issuer prospectus information 
through incorporation by reference of future Exchange Act filings, 
instead of filing post-effective amendments to the registration 
statement. Id.
    \16\ The term ``foreign private issuer'' is defined in Rule 405.
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    The Commission's rules have always conditioned the availability of 
short form registration for primary offerings of non-investment grade 
securities (such as common stock) on the issuer's having a minimum 
amount of voting stock held by non-affiliates. The rationale for the 
float condition has been to assure that physical delivery of the 
detailed information required by longer registration forms would not be 
necessary because complete and current information about the issuer was 
already ``disseminated and accounted for by the market place.'' 17 
Float consistently has been viewed as an indicator of analyst or market 
following (which in turn assures a sufficient dissemination of 
information to allow use of short form registration).18
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    \17\ See Release No. 33-6331 (August 6, 1981) [47 FR 41902, 
41904].
    \18\ Release No. 33-6943 (July 22, 1992)[57 FR 32461]; Release 
No. 33-6331 (August 6, 1981)[46 FR 41902]; Release No. 33-5923 
(April 11, 1978)[43 FR 16677].
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    Throughout the development of short form registration, the 
Commission has not fully articulated a reason for excluding non-voting 
common stock from the calculation of public float.19 Because it is 
not clear that analyst or market following would be affected by whether 
or not a company's securities carry voting rights as long as the 
securities are common equity securities, and in light of questions 
raised by issuers and others that believe non-voting common stock 
should be included, the Commission has decided to reexamine the basis 
for excluding non-voting stock in calculating public float. 
Consequently, the Commission is proposing today to eliminate the 
distinction, thus making short form registration available to a broader 
class of issuers.
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    \19\ In connection with expansion of a predecessor short form, 
Form S-16, the Commission analyzed the distinction between voting 
equity securities and non-voting debt securities. In that context, 
the Commission agreed that information about companies with publicly 
held non-voting securities may be widely available but noted that 
while a $50 million float requirement (which was the amount being 
adopted at the time) is appropriate for voting securities, it is not 
necessarily indicative of general market interest in debt 
securities. See Release No 5923 (April 11, 1978)[43 FR 16677].
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II. Discussion of Proposals

A. Changes to Forms S-3 and F-3

    The proposed amendments relating to the use of Forms S-3 and F-3 
for primary offerings of non-investment grade securities would change 
the transaction requirements outlined in the General Instructions to 
the Forms to provide that non-voting common equity would be included in 
the calculation of the $75 million float requirement.20 These 
changes would be accomplished by removing the term ``voting stock'' as 
it appears in these sections and substituting the phrase ``shares of 
voting and non-voting common equity.'' The meaning of the term ``common 
equity'' would be as defined in Rule 405 under the Securities 
Act.21
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    \20\ The amendments proposed would not alter any other 
requirements of Forms S-3 or F-3, including the amount of the public 
float.
    \21\ Rule 405 defines ``common equity'' as ``any class of common 
stock, or an equivalent interest, including but not limited to a 
unit of beneficial interest in a trust or a limited partnership 
interest.''
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    Comment is requested concerning whether the proposed change to 
include non-voting shares of common equity in calculating public float 
is appropriate. Specifically, the Commission solicits comment as to 
whether the distinction between voting and non-voting common equity 
affects market following of companies. Does it matter if a significant 
amount of the securities necessary to qualify are not voting equity 
securities? In addition, the Commission seeks comment as to whether it 
is appropriate to provide short form eligibility if the only publicly 
held equity securities are non-voting.
    The term ``common equity'' as used in the proposed changes to Forms 
S-3 and F-3 would not include either convertible securities or 
preferred shares, because it is not clear that such securities, 
standing alone, would give rise to a market following. Comment is 
requested, however, as to whether there are types of preferred or 
convertible securities that have sufficient market following that would 
justify their inclusion in the calculation of public float for purposes 
of Forms S-3 and F-3 eligibility. Commenters urging inclusion of other 
securities are requested to identify the characteristics of the 
securities and provide information about market following of issuers 
with such securities.

B. Conforming Changes to Other Commission Rules and Forms Referencing 
Public Float

    The Commission also is proposing conforming changes to Forms F-2, 
10-K and 10-KSB, as well as to the definition of ``small business 
issuer'' in Rule 405 and in Item 10 of Regulation S-B under the 
Securities Act and to Rule 12b-2 under the Exchange Act, to provide 
that the public float requirement is to be computed by including the 
aggregate market value of both voting and non-voting common equity.
    Form F-2 is used by certain foreign private issuers to register 
securities offerings under the Securities Act.22 One Form F-2 
eligibility requirement is that, in certain cases, the foreign private 
issuer must have an aggregate worldwide market value of voting stock 
held by non-affiliates of the equivalent

[[Page 47708]]

of $75 million.23 The proposed amendments would change the 
eligibility requirement outlined in the General Instruction to Form F-2 
to indicate that non-voting common equity as well as voting common 
equity would be included in the calculation of the $75 million float 
requirement.
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    \22\ See General Instruction I.A and I.B of Form F-2 for the 
eligibility requirements of Form F-2. This form allows certain 
foreign private issuers to provide some of the required prospectus 
information by supplying a copy of the issuer's most recent annual 
report on Form 20-F. Form F-2 is generally available for foreign 
private issuers with a 36 month reporting history; for issuers with 
less than 36 months of reporting, a $75 million float requirement 
applies.
    \23\ See General Instruction I.B.2 of Form F-2.
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    Forms 10-K and 10-KSB each require registrants to state on the 
cover page the aggregate market value of voting stock held by non-
affiliates. The information serves a number of purposes, including use 
by the Commission staff in considering form eligibility. As proposed to 
be amended, the forms would instead require a statement of the 
aggregate market value of voting and non-voting common equity held by 
non-affiliates.
    The proposed amendments also would change the definition of ``small 
business issuer'' in Rule 405 and in Item 10 to Regulation S-B under 
the Securities Act and Rule 12b-2 under the Exchange Act. The current 
definition of ``small business issuer'' states that ``an entity is not 
a small business issuer if it has a public float (the aggregate market 
value of the outstanding securities held by non-affiliates) of 
$25,000,000 or more.'' 24 This definition does not specify what is 
meant by the term ``outstanding securities.'' However, in the adopting 
release for the Small Business Initiatives, the Commission described 
public float as ``the aggregate market value of the issuer's voting 
stock held by non-affiliates,'' 25 and the staff of the Division 
of Corporation Finance has interpreted the float test for small 
business issuers in that manner. Consistent with the proposed changes 
to Forms S-3 and F-3, the proposed amendments to the small business 
issuer eligibility criteria would replace ``securities'' with ``shares 
of voting and non-voting common equity.''
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    \24\ See Rule 405 and Item 10(a)(1) of Regulation S-B.
    \25\ See Release No. 33-6949 (July 30, 1992) [57 FR 36442].
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    Comment is requested as to whether these conforming changes to 
Forms F-2, 10-K and 10-KSB, Rule 405, Item 10 of Regulation S-B, and 
Rule 12b-2 are necessary or appropriate. Specifically, the Commission 
solicits comment as to whether the proposed changes regarding the use 
of non-voting as well as voting shares of common equity to calculate 
the public float for Forms F-2, 10-K, 10-KSB and for small business 
issuers are appropriate, and whether there is a basis for excluding 
non-voting common equity from the definition of public float in these 
contexts. The proposed changes to the definition of small business 
issuer could cause some issuers that have non-voting common equity to 
become ineligible for the small business issuer disclosure system. 
26 Notwithstanding this potential impact, the Commission believes 
that public float should be measured consistently for both larger and 
smaller issuers. Comment is requested, however, as to whether these 
proposed amendments would result in significant new burdens for small 
business issuers and, if so, whether the burden justifies a different 
public float test for small business issuer eligibility.
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    \26\ Under the small business issuer disclosure system, eligible 
companies may use Forms SB-1 and SB-2 for registration under the 
Securities Act, Form 10-SB for registration under the Exchange Act, 
and Forms 10-KSB and 10-QSB for periodic reporting under the 
Exchange Act. These forms generally allow more streamlined 
disclosure than the Securities Act and Exchange Act forms for 
issuers that are not small business issuers. In addition, some 
Commission forms that are not limited to small business issuers 
permit specified streamlined disclosures. See, e.g. General 
Instruction D.3. to From S-4, General Instruction C.3. to Form 8-K 
and Note G to Schedule 14A.
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III. Request for Comment

    Any interested person wishing to submit comment on the proposed 
amendments, as well as other matters that might have an impact on the 
proposed changes to rules and forms, is requested to do so. Comment is 
requested on the impact of the proposals from the point of view of the 
investing public, as well as the entities or persons making filings 
with the Commission. The Commission also requests comment on whether 
the proposed amendments, if adopted, would have an adverse impact on 
competition that is neither necessary nor appropriate in furthering the 
purposes of the Exchange Act. Comments responsive to this inquiry will 
be considered by the Commission in complying with its responsibility 
under Section 23(a) of the Exchange Act.27
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    \27\ 15 U.S.C. 78w(a).
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IV. Cost-Benefit Analysis

    Commenters are requested to provide their views and data relating 
to any costs and benefits associated with these proposals to aid the 
Commission in its evaluation of the costs and benefits that may result 
from the changes proposed in this release. It is anticipated that these 
proposals will have a benefit to issuers with filing obligations that 
would become eligible to use short form registration, by decreasing 
their costs. It is also possible that a small number of issuers 
currently able to use the small business issuer disclosure system may 
have increased costs due to their inability to use this system. No 
detrimental effects to investors are expected.

V. Summary of Initial Regulatory Flexibility Analysis

    An initial regulatory flexibility analysis has been prepared in 
accordance with 5 U.S.C. 603 concerning the proposed amendments. The 
analysis notes that the amendments would revise forms and rules, which 
may increase the availability of Forms S-3, F-2 and F-3 and possibly 
decrease the availability of the small business disclosure system 
(Forms SB-1, SB-2, 10-SB, 10-KSB and 10-QSB) for some issuers.
    As discussed more fully in the analysis, the proposals would affect 
persons that are small entities, as defined in the Commission's rules, 
because the proposed changes to the definition of small business issuer 
could cause some issuers that have non-voting common equity held by 
non-affiliates to become ineligible to use the small business 
disclosure system. The Commission estimates that approximately three 
percent of the small business issuers may become subject to more 
detailed reporting obligations in the future, or may otherwise be 
impacted by the rule proposals. 28 These estimates were not the 
product of a formal study, but were solely the result of estimates 
provided by the staff of the Division of Corporation Finance based on 
its expertise from the review of corporate filings. These estimates 
were thought by the Corporation Finance Division staff to reflect the 
maximum percent of companies that would no longer be eligible to use 
the small business issuer disclosure system. Instead, they would be 
required to file Forms S-1 or S-2 for registered securities offerings, 
Form 10 to register a class of securities under the Exchange Act, and 
Forms 10-Q and 10-K for periodic reporting under the Exchange Act. The 
Commission's Office of Economic Analysis is currently conducting a 
study to estimate the number of companies that would lose their small 
business status. The result of this study will be incorporated into the 
final Regulatory Flexibility Analysis. The Commission does not expect 
that the number of companies that would become ineligible to meet the 
definition of small business issuer would be significant. The 
Commission solicits comment on its preliminary estimates of the number 
of small entities that would be impacted by the proposed rules. The 
Commission also does not expect that

[[Page 47709]]

materially increased reporting, recordkeeping and compliance burdens 
would result from the changes. The Commission, however, also seeks 
comment as to whether these proposed amendments would result in 
significant new burdens for small entities, and, if so, whether the 
burden justifies a different public float test for small business 
eligibility. The analysis also indicates that there are no current 
federal rules that duplicate, overlap or conflict with the rules and 
forms to be amended.
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    \28\ See estimates in Section VI, ``Paperwork Reduction Act,'' 
infra.
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    As stated in the analysis, several possible significant 
alternatives to the 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 discussed more fully in the analysis, the nature of 
these amendments do not lend themselves to separate treatment, nor 
would they impose significant additional burdens on small entities.
    Written comments are encouraged on any aspect of the analysis. Such 
comments will be considered in the preparation of the Final Regulatory 
Flexibility Analysis if the proposed amendments are adopted. A copy of 
the analysis may be obtained by contacting Mary J. Kosterlitz, Office 
of Chief Counsel, Division of Corporation Finance, Mail Stop 3-2, 450 
Fifth Street, N.W., Washington, D.C. 20549.

VI. Paperwork Reduction Act

    Certain provisions of the proposed amendments to Forms S-3, F-2 and 
F-3, Rule 405 and Item 10 of Regulation S-B under the Securities Act 
and Rule 12b-2 under the Exchange Act contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (the ``Act'') (44 U.S.C. 3501 et seq.). The 
Commission has submitted its proposed revisions to the information 
collections required by these provisions to the Office of Management of 
Budget (``OMB'') for review in accordance with 44 U.S.C. Sec. 3507(d) 
and 5 CFR 1320.11. The titles of the affected information collections 
are ``Form S-1,'' ``Form S-2,'' ``Form S-3,'' ``Form F-1,'' ``Form F-
2,'' ``Form F-3,'' ``Form SB-1,'' ``Form SB-2,'' ``Form 10-K,'' ``Form 
10-Q,'' ``Form 10-KSB,'' ``Form 10-QSB,'' ``Form 10,'' and ``Form 10-
SB.''
    The collections of information contained in the fourteen forms at 
issue are required for the registration of various securities for sale 
to the public under the Securities Act and periodic reporting 
obligations under the Exchange Act. The likely respondents to each form 
are, respectively: (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 S-2, generally issuers that have been 
reporting companies for three years and that have filed Exchange Act 
reports timely for the past 12 calendar months; (iii) for Form S-3, 
issuers that have been Exchange Act reporting companies for 12 months, 
have timely filed Exchange Act reports for 12 months, and if making 
primary offerings of non-investment grade securities, generally have a 
public float of at least $75 million; (iv) for Form F-1, generally all 
foreign private issuers (as defined in Rule 405 under the Securities 
Act) registering securities under the Securities Act that are not 
eligible to use other forms; (v) for Form F-2, generally foreign 
private issuers that have filed Exchange Act reports for 36 months or, 
in some instances, that have a public float of at least $75 million; 
(vi) for Form F-3, generally foreign private issuers that have been 
Exchange Act reporting companies for 12 months (and have filed at least 
one annual report on the appropriate form), have timely filed Exchange 
Act reports for 12 months, and if making primary offerings of non-
investment grade securities, have a public float of at least $75 
million; (vii) for Form SB-1, generally small business issuers (as 
defined in Rule 405 under the Securities Act) registering up to $10 
million of securities under the Securities Act in a continuous 12 month 
period to be sold for cash; (viii) for Form SB-2, generally small 
business issuers registering securities offerings under the Securities 
Act; (ix) for Form 10-K, generally all issuers reporting under the 
Exchange Act filing annual reports that are not foreign private issuers 
or small business issuers; (x) for Form 10-Q, generally all issuers 
reporting under the Exchange Act filing quarterly reports that are not 
foreign private issuers or small business issuers; (xi) Form 10, 
generally all issuers registering under the Exchange Act that are not 
foreign private issuers or small business issuers; (xii) for Form 10-
KSB, generally small business issuers reporting under the Exchange Act 
filing annual reports; (xiii) for Form 10-QSBs, generally small 
business issuers reporting under the Exchange Act filing quarterly 
reports; and (xiv) Form 10-SB, generally small business issuers 
registering under the Exchange Act. The estimated burden for responding 
to the collections of information in each form is not expected to 
change. Those estimates per respondent are as follows: (i) For Form S-
1: 1,267 burden hours; (ii) for Form S-2: 470 burden hours; (3) for 
Form S-3: 398 burden hours; (iv) for Form F-1: 1,868 burden hours; (v) 
for Form F-2: 559 burden hours; (vi) for Form F-3: 166 burden hours; 
(vii) for Form SB-1: 710 burden hours; (viii) for Form SB-2: 876 burden 
hours; (ix) for Form 10-K: 1,723 burden hours; (x) for Form 10-Q: 144 
burden hours; (xi) for Form 10-KSB: 1,216 burden hours; (xii) for Form 
10-QSB: 131 burden hours; (xiii) for Form 10: 95 burden hours; and 
(xiv) for Form 10 SB: 90 burden hours.
    It is expected that the Commission's proposal to include non-voting 
as well as voting common equity in computing the required public float 
for use of Forms S-3, F-2, and F-3 would increase the number of issuers 
able to use these forms, and proportionately decrease the number of 
issuers that use Forms S-1, S-2 and F-1. The result would be a net 
overall reduction in reporting or recordkeeping burden, since Forms S-3 
and F-3 provide for short form registration. The Commission's proposal 
to amend the definition of ``small business issuer'' in Rule 405 and in 
Item 10 of Regulation S-B under the Securities Act and in Rule 12b-2 
under the Exchange Act so that the $25 million public float maximum 
includes the aggregate market value of non-voting as well as voting 
common equity could reduce the number of issuers that would qualify as 
small business issuers. The result would be a commensurate decrease in 
the number of issuers filing Form SB-1 and SB-2. Such issuers instead 
would use Form S-1 or S-2. The proposal to change the definition of 
small business issuer in Rule 12b-2 under the Exchange Act would also 
result in a decrease in the number of issuers filing Forms 10-KSB, 10-
QSB, and 10-SB. Such issuers would instead use Forms 10-K, 10-Q and 10, 
respectively.
    It is estimated for the purposes of the Act that approximately 
1,164 Form S-1s, 111 Form S-2s, 2,059 Form S-3s, 178 Form F-1s, 4 Form 
F-2s, 143 Form F-3s, 17 Form SB-1s, and 393 Form SB-2s, 6,019 Form 10-
Ks, 28,934 Form 10-Qs, 887 Form 10-KSBs, 5,443 Form 10-QSBs, 82 Form 
10s, and 88 Form 10-SBs are filed each year.29 If the proposed 
amendments to Forms S-3, F-2 and F-3 were adopted it is estimated that: 
(1) The number of Form S-3s filed per year will increase by 
approximately 103 with an estimated per year increase burden of 40,994 
hours in the aggregate; (2) the number of F-2s filed per year

[[Page 47710]]

will increase by 1 with an estimated increase burden of 559 hours; (3) 
the number of F-3s filed per year will increase by 7 with an estimated 
increase burden of 1,162 hours in the aggregate; (4) the number of S-1s 
filed per year will decrease by 92 with an estimated decrease burden of 
116,564 hours in the aggregate; (5) the number of S-2s filed per year 
will decrease by 11 with an estimated decrease burden of 7,370 hours in 
the aggregate; and (6) the number of F-1s filed per year will decrease 
by 8 with an estimated decrease burden of 14,944 hours in the 
aggregate.30 The total net decrease in burden is estimated at 
96,162 hours.
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    \29\ These estimates are based on the number of such filings 
made in fiscal year 1995 and assume that there are no increases or 
decreases each year.
    \30\ The Commission estimates that approximately three percent 
of the small business issuers may become subject to more detailed 
reporting obligations in the future, or may otherwise be impacted by 
the rule proposals. See Section V, ``Summary of Initial Regulatory 
Flexibility Analysis,'' supra. 
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    If the proposed amendments to Rule 405 and Item 10 of Regulation S-
B were adopted it is estimated that: (1) The number of Form SB-1s filed 
per year would decrease by approximately 1 with an estimated decrease 
in burden of 710 hours; (2) the number of Form SB-2s filed per year 
would decrease by approximately 12 with an estimated decrease in burden 
of 10,512 hours in the aggregate; the number of Form S-1s filed per 
year would increase by 12 with an estimated increase in burden of 
15,204 hours in the aggregate; and the number of Form S-2s filed per 
year would increase by 1 with an estimated increase in burden of 470 
hours. The total net increase in burden would be 4,452 hours.
    If the proposed amendment to Rule 12b-2 under the Exchange Act is 
adopted it is estimated that: (1) The number of Form 10-KSBs filed per 
year would decrease by approximately 27 with an estimated per year 
decrease burden of 32,832 hours in the aggregate; (2) the number of 
Form 10-QSBs filed per year would decrease by approximately 163 with an 
estimated per year decrease burden of 21,353 hours in the aggregate; 
(3) the number of Form 10-SBs filed per year would decrease by 
approximately 3 with an estimated per year decrease burden of 270 hours 
in the aggregate; (4) the number of Form 10-Ks filed per year would 
increase by approximately 27 with an estimated per year increase burden 
of 46,521 hours in the aggregate; (5) the number of Form 10-Qs would 
increase by approximately 163 with an estimated per year increase 
burden of 23,472 hours in the aggregate; and (6) the number of Form 10s 
filed per year would increase by approximately 3 with an estimated per 
year increase burden of 285 hours in the aggregate. The total net 
increase in burden is estimated at 15,823 hours.
    Thus, it is anticipated that the adoption of the proposed 
amendments to Form S-3, F-2 and F-3 will decrease burden by an 
estimated 96,162 hours and the adoption of the proposed amendments to 
Rule 405 and Item 10 of Regulation S-B will increase burden by an 
estimated 4,552 hours. It is anticipated that the adoption of the 
proposed amendments to Rule 12b-2 under the Exchange Act will increase 
burden by an estimated 15,823 burden hours. Consequently, it is 
estimated that the adoption of all of the proposed amendments will 
result in a total decrease in burden of 75,787 hours.
    In accordance with 44 U.S.C. 3506(c)(2)(B), the Commission solicits 
comments on the following: whether the proposed changes in the 
collections of information are necessary for the proper performance of 
the functions of the agency, including whether the information would 
have practical utility; on the accuracy of the Commission's estimate of 
the burden of each collection of information as well as the proposed 
changes to the collections of information; on the quality, utility and 
clarity of the information to be collected; and whether the burden of 
the collections 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 the Information and Regulatory Affairs, 
Washington, D.C. 20503, with reference to File No. S7-23-96. 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 amendments to the Commission's rules and forms are proposed 
pursuant to Sections 6, 7, 8, 10, 19(a), and 27A of the Securities Act 
and Sections 12, 13, 14, 15(d), 21E, 23(a) and 35A of the Exchange Act.

List of Subjects in 17 CFR Parts 228, 230, 239, 240 and 249

    Reporting and recordkeeping requirements, Securities.

Text of the 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.


Sec. 228.10  [Amended]

    2. By amending Sec. 228.10(a)(1) by removing the word 
``securities'' in the Provided however sentence immediately following 
Sec. 228.10(a)(1)(iv) and adding the words ``shares of voting and non-
voting common equity'' in its place.

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    3. The authority citation for part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, 
and 80a-37, unless otherwise noted.


Sec. 230.405  [Amended]

* * * * *
    4. By amending Sec. 230.405 the definition of ``Small Business 
Issuer'' by removing the words ``outstanding securities'' in the 
Provided however clause and adding the words ``outstanding voting and 
non-voting common equity'' in their place.

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    5. The authority citation for part 239 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l, 
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m, 
79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise 
noted.


Secs. 239.13, 239.32, 239.33  [Amended]

* * * * *
    6. 17 CFR part 239 is amended by removing the words ``voting 
stock'' and adding, in their place, the words ``shares of voting and 
non-voting common equity'' in the following sections:
    (a) 17 CFR 239.13(b)(1)
    (b) 17 CFR 239.32(b)(2)(i)
    (c) 17 CFR 239.33(b)(1)
    7. By revising the Instruction to Sec. 239.13(b)(1) to read as 
follows:

[[Page 47711]]

Sec. 239.13  Form S-3, for registration under the Securities Act of 
1933 of securities of certain issuers offered pursuant to certain types 
of transactions.

* * * * *
    (b) Transaction requirements. * * *
    (1) Primary and secondary offerings by certain registrants. * * *

Instruction to Paragraph (b)(1)

    For the purposes of this Form, ``common equity'' is as defined 
in Securities Act Rule 405 (Sec. 230.405 of this chapter). The 
aggregate market value of the registrant's outstanding voting and 
non-voting common equity shall be computed by use of the price at 
which the common equity was last sold, or the average of the bid and 
asked prices of such common equity, in the principal market for such 
common equity as of a date within 60 days prior to the date of 
filing. See the definition of ``affiliate'' in Securities Act Rule 
405.
* * * * *
    8. By amending Form S-3 (referenced in Sec. 239.13) by revising the 
Instruction to General Instruction I.B.1 to read as follows:

(Note: The text of Form S-3 does not and the amendments will not 
appear in the Code of Federal Regulations.)

Form S-3

* * * * *

General Instructions

I. Eligibility Requirements for Use of Form S-3
* * * * *
B. Transaction Requirements * * *
    1. Primary Offerings by Certain Registrants. * * *
    Instruction. For the purposes of this Form, ``common equity'' is as 
defined in Securities Act Rule 405 (Sec. 230.405 of this chapter). The 
aggregate market value of the registrant's outstanding voting and non-
voting common equity shall be computed by use of the price at which the 
common equity was last sold, or the average of the bid and asked prices 
of such common equity, in the principal market for such common equity 
as of a date within 60 days prior to the date of filing. See the 
definition of ``affiliate'' in Securities Act Rule 405.
* * * * *
    9. By revising Instruction 1 to Sec. 239.32(b)(2) to read as 
follows:


Sec. 239.32  Form F-2, for registration under the Securities Act of 
1933 for securities of certain foreign private issuers.

* * * * *
    (b) * * *
    (2) * * *

Instructions to Paragraph (b)

    1. For the purposes of this Form, ``common equity'' is as 
defined in Securities Act Rule 405 (Sec. 230.405 of this chapter). 
The aggregate market value of the registrant's outstanding voting 
and non-voting common equity shall be computed by use of the price 
at which the common equity was last sold, or the average of the bid 
and asked prices of such common equity, in the principal market for 
such common equity as of a date within 60 days prior to the date of 
filing. See the definition of ``affiliate'' in Securities Act Rule 
405.
* * * * *
    10. By amending Form F-2 (referenced in Sec. 239.32) by revising 
the Instruction to General Instruction I.B.2.1. to read as follows:

(Note: The text of Form F-2 does not and the amendments will not 
appear in the Code of Federal Regulations.)

Form F-2

* * * * *

General Instructions

I. Eligibility Requirements For Use of Form F-2
* * * * *
    B. * * *
    2. * * *
    Instructions. 1. For the purposes of this Form, ``common equity'' 
is as defined in Securities Act Rule 405 (Sec. 230.405 of this 
chapter). The aggregate market value of the registrant's outstanding 
common equity shall be computed by use of the price at which the voting 
and non-voting common equity was last sold, or the average of the bid 
and asked prices of such common equity, in the principal market for 
such common equity as of a date within 60 days prior to the date of 
filing. See the definition of ``affiliate'' in Securities Act Rule 405.
* * * * *
    11. By revising the Instruction to paragraph (b)(1) of Sec. 239.33 
to read as follows:


Sec. 239.33  Form F-3, for registration under the Securities Act of 
1933 of securities of certain foreign private issuers offered pursuant 
to certain types of transactions.

* * * * *
    (b) Transaction requirements. * * *
    (1) Primary offerings by certain registrants. * * *

Instruction to Paragraph (b)(1)

    For the purposes of this Form, ``common equity'' is as defined 
in Securities Act Rule 405 (Sec. 230.405 of this chapter). The 
aggregate market value of the registrant's outstanding voting and 
non-voting common equity shall be computed by use of the price at 
which the common equity was last sold, or the average of the bid and 
asked prices of such common equity, in the principal market for such 
common equity as of a date within 60 days prior to the date of 
filing. See the definition of ``affiliate'' in Securities Act Rule 
405.
* * * * *
    12. By amending Form F-3 (referenced in Sec. 239.13) by revising 
the General Instruction I.B.1 to read as follows:

(Note: The text of Form F-3 does not appear in the Code of Federal 
Regulations.)

Form F-3

* * * * *

General Instructions

I. Eligibility Requirements For Use of Form F-3
* * * * *
B. Transaction Requirements
* * * * *
    1. Primary Offerings by Certain Registrants. * * *
    Instruction. For the purposes of this Form, ``common equity'' is as 
defined in Securities Act Rule 405 (Sec. 230.405 of this chapter). The 
aggregate market value of the registrant's outstanding voting and non-
voting common equity shall be computed by use of the price at which the 
common equity was last sold, or the average of the bid and asked prices 
of such common equity, in the principal market for such common equity 
as of a date within 60 days prior to the date of filing. See the 
definition of ``affiliate'' in Securities Act Rule 405.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    13. The authority citation for part 240 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *


Sec. 240.12b-2  [Amended]

    14. By amending Sec. 240.12b-2 the definition of ``Small Business 
Issuer'' by removing the words ``outstanding securities'' in the 
Provided however clause and adding the words ``outstanding voting and 
non-voting common equity'' in their place.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    15. The authority citation for part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
    16. By amending the front page of Form 10-K (referenced in 
Sec. 249.310) by

[[Page 47712]]

revising the paragraph before the ``Note'' to read as follows:

(Note: The text of Form 10-K does not and the amendments will not 
appear in the Code of Federal Regulations.)

Form 10-K

* * * * *
    State the aggregate market value of the voting and non-voting 
common equity held by non-affiliates of the registrant. The aggregate 
market value shall be computed by reference to the price at which the 
common equity was sold, or the average bid and asked prices of such 
common equity, as of a specified date within 60 days prior to the date 
of filing. (See definition of affiliate in Rule 405, 17 CFR 230.405.)
* * * * *
    17. By amending the front page of Form 10-KSB (referenced in 
Sec. 249.310b) by revising the paragraph before the ``Note'' to read as 
follows:

(Note: The text of Form 10-KSB does not, and the amendments will not 
appear in the Code of Federal Regulations.)

Form 10-KSB

* * * * *
    State the aggregate market value of the voting and non-voting 
common equity held by non-affiliates computed by reference to the price 
at which the common equity was sold, or the average bid and asked price 
of such common equity, as of a specified date within the past 60 days. 
(See definition of affiliate in Rule 12b-2 of the Exchange Act.)
* * * * *
    By the Commission.

    Dated: August 30, 1996.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-22726 Filed 9-9-96; 8:45 am]
BILLING CODE 8010-01-P