[Federal Register Volume 62, Number 40 (Friday, February 28, 1997)]
[Proposed Rules]
[Pages 9276-9287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4669]



[[Page 9276]]

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SECURITIES AND EXCHANGE COMMISSION
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.

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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: [email protected]. 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-
B 6 and S-K.7
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    \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Commission rescinded the special filing rules for competitive 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).
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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.
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    \8\ The 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.
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    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
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    \9\ Rule 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.
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    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
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    \10\ Exchange Act Rule 15c2-8 [17 CFR 240.15c2-8].
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    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

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to Regulation S, 14 the Securities Act safe harbor for offshore 
offerings or resales, in order to curtail Regulation S abuses.15
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    \11\ 17 CFR 230.144.
    \12\ Release 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.
    \13\ Release No. 33-7391 (February 20, 1997).
    \14\ 17 CFR 230.901-904.
    \15\ Release No. 33-7392 (February 20, 1997).
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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
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    \16\ Current Rule 430A eliminates the need for pre-effective 
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)].
    \17\ Rule 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.
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    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
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    \18\ Proposed 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.
    \19\ For example, current Rule 430A is limited to offerings of 
securities for cash and to registration statements that are declared 
effective.
    \20\ As 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.)
    \21\ Current 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].
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    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
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    \23\ 15 U.S.C. 80a-1 et seq.
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     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
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    \24\ These rules are generally found in Regulation S-T [17 CFR 
Part 232].
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     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
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    \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.].
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     Each time a prospectus was delivered, it would be 
accompanied by the most recent Form 10-Q 26 or 10-QSB 27 
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.
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    \26\ 17 CFR 249.308a.
    \27\ 17 CFR 249.308b.
    \28\ 17 CFR 249.308.
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     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

[[Page 9278]]

proposal is not intended to permit ``generic'' registration statements 
that contain only minimum information about a proposed offering.
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    \29\ 15 U.S.C. 77j(a).
    \30\ The 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 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.
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    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.
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    \31\ The 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.
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    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?
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    \32\ Under 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.
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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?
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    \33\ Proposed 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].
    \34\ Proposed 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.
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    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?
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    \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.
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    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.
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    \37\ 15 U.S.C. 77h.
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    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

[[Page 9279]]

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.
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    \38\ Proposed Rule 430A(e)(1)(ii).
    \39\ Under 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].
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    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.
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    \40\ Proposed Rule 430A(e)(1)(iii).
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    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?
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    \41\ Proposed 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].
    \42\ Pub. 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.
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    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 time-sensitive 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
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    \43\ Forms 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].
    \44\ The Commission's Internet Web site address is http://
www.sec.gov.
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    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 EDGAR-related 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 company-related 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.
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    \45\ General Instructions I.H to Form S-2 and I.A.8 to Form S-3.
    \46\ Proposed Rule 430A(e)(1)(v).
    \47\ Proposed 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)].
    \48\ Proposed Rule 430A(e)(1)(v).
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    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.
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    \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 post-
effective amendments in the same set of circumstances.
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    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 post-effective amendment to its 
registration statement to update the document \50\ and provide annual 
audited financial statements.\51\ This requirement would

[[Page 9280]]

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.
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    \50\ Each post-effective amendment would contain a completely 
updated prospectus, which would supersede all prior prospectuses. 
Proposed Rule 430A(e)(2)(i).
    \51\ Proposed 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, 
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.
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    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-B \53\ and pro 
forma financial information.\54\ Under recent amendments, this would 
occur where the pending acquisition exceeds the 50% significance 
level.\55\ The post-effective 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.
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    \52\ 17 CFR 210.3-05.
    \53\ 17 CFR 228.310(c). Proposed Rule 430A(e)(2)(i).
    \54\ Article 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)].
    \55\ Rule 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].
    \56\ Within 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)].
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    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?
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    \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.
---------------------------------------------------------------------------

    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 post-effective 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\
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    \58\ Under 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)].
---------------------------------------------------------------------------

     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\
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    \60\ Item 512(a)(2) of Regulation S-K [17 CFR 229.512(a)(2)].
---------------------------------------------------------------------------

     Finally, the company must deregister by means of a post-
effective amendment any securities that remain unsold at the 
termination of the offering.\61\
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    \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.
---------------------------------------------------------------------------

    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 
post-effective 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?
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    \62\ Rule 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.
    \63\ As 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).
---------------------------------------------------------------------------

    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 post-
effective 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 co-manager necessitate a 
post-effective

[[Page 9281]]

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\
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    \64\ Rule 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).
    \65\ The complete package would have to be delivered any time 
the prospectus was delivered.
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    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\
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    \66\ Form 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.
    \67\ Electronic 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.
    \68\ Proposed 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 anti-fraud 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.
---------------------------------------------------------------------------

    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?
---------------------------------------------------------------------------

    \69\ Proposed 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).
---------------------------------------------------------------------------

    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
---------------------------------------------------------------------------

    \70\ Securities Act Rule 408 and Exchange Act Rule 12b-20.
    \71\ This would be analogous to the Item 11 line item 
requirement in Form S-2, discussed above.
---------------------------------------------------------------------------

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?
---------------------------------------------------------------------------

    \72\ Rule 430A(a)(3).
---------------------------------------------------------------------------

    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.,

[[Page 9282]]

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 Actively-traded 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?
---------------------------------------------------------------------------

    \73\ 17 CFR 242.100 et seq. Release No. 34-38067 (December 20, 
1996) [62 FR 520].
    \74\ See 17 CFR 242.101 and 102.
---------------------------------------------------------------------------

    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 shelf-registered 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 shelf-registered 
distributions, which for primary offerings are now limited to larger 
issuers.76
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    \75\ Release No. 34-38067, 62 FR at 526.
    \76\ Under 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.
---------------------------------------------------------------------------

    The Commission has considered the appropriate application of anti-
manipulation 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 less-seasoned 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).
---------------------------------------------------------------------------

    \77\ 17 CFR 242.105.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \78\ Items 512(a) and 512(i) of Regulation S-K, respectively.
---------------------------------------------------------------------------

    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-B 80 also are 
being proposed. Securities Act Rule 415 would be amended to add a new 
paragraph permitting delayed pricing under Rule 430A(e).81
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    \79\ One 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.
    \81\ Proposed 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.
---------------------------------------------------------------------------

    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

[[Page 9283]]

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
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    \82\ Proposed 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.
    \83\ Release No. 33-6714 (May 27, 1987) [52 FR 21252] at Section 
II.B.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

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

    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).
---------------------------------------------------------------------------

    \85\ Proposed paragraph (b)(9) to Rule 424. This time frame 
would mirror that of current Rule 430A offerings. Rule 424(b)(1).
---------------------------------------------------------------------------

    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: [email protected]. 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

[[Page 9284]]

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

[[Page 9285]]

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.
---------------------------------------------------------------------------

    \86\ These 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.
---------------------------------------------------------------------------

    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 Sec. 228.512 (Item 512 of Regulation S-B), remove paragraph 
(c) and redesignate paragraphs (d) through (f) as paragraphs (c) 
through (e).
    3. In Sec. 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:


Sec. 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.
* * * * *


Sec. 229.512  [Amended]

    5. In Sec. 229.512 (Item 512 of Regulation S-K), remove paragraph 
(d) and redesignate paragraphs (e) through (j) as paragraphs (d) 
through (i).
    6. In Sec. 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:


Sec. 229.601  (Item 601) Exhibits.

* * * * *
    Exhibit Table
* * * * *

[[Page 9286]]

    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 Sec. 230.415 by adding paragraph (a)(1)(xii) and 
revising (a)(2) and (a)(3) to read as follows:


Sec. 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 
Sec. 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 (Sec. 229.512 of this chapter) or Regulation 
S-B (Sec. 228.512 of this chapter) as applicable.
* * * * *
    9. By amending Sec. 230.424 by adding paragraphs (b)(8) and (b)(9) 
before Instructions 1 and 2 to read as follows:


Sec. 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 Sec. 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 Sec. 230.415(a)(1)(xii) 
that discloses information previously omitted from the prospectus filed 
as part of an effective registration statement in reliance upon 
Sec. 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 Sec. 230.430A by removing paragraph (d) and 
redesignating paragraph (e) as paragraph (d) and adding paragraph (e) 
before the Note to read as follows:


Sec. 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 
Sec. 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 
Sec. 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 
Sec. 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 (Sec. 229.601(c) or Sec. 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 
Secs. 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 Sec. 210.3-05 of this chapter and 
Sec. 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 (Sec. 229.512(a) or Sec. 228.512(a) of this chapter). Each post-
effective amendment shall be deemed to be a new registration statement 
relating to the

[[Page 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 post-effective 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 
(Sec. 249.308a of this chapter) or Form 10-QSB (Sec. 249.308b of this 
chapter) for the end of the most recent fiscal quarter not reflected in 
the registration statement; and Forms 8-K (Sec. 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 (Sec. 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 
(Sec. 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 
Sec. 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 
(Secs. 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 (Sec. 229.512(i) 
or Sec. 228.512(i) of this chapter).

    11. By amending Sec. 230.434 by revising paragraph (b)(2) to read 
as follows:


Sec. 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 Sec. 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