Less than a week after President Obama signed the JOBS Act (Jumpstart Our Business Startups Act), the Securities and Exchange Commission has published Frequently Asked Questions to provide initial guidance on the implementation and application of the law.

The JOBS Act was designed to help companies go public, raise capital privately, and remain private longer. Among other things, it amends Section 6 of the Securities Act of 1933 by permitting an emerging growth company, or EGC, prior to its initial public offering to confidentially submit to the SEC a draft registration statement for review, provided that the initial confidential registration statement and all amendments thereto are publicly filed with the SEC not later than 21 days before the date on which the issuer conducts a road show.

Ballard Spahr’s Securities Group issued an alert summarizing the JOBS Act. It provides a quick overview of the law’s key provisions in bullet-point format, followed by a more in-depth discussion of the specific ways in which the JOBS Act amends the Securities Act of 1933 and the Securities Exchange Act of 1934, and the exceptions it carves out for certain companies from the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act.

In this alert, we focus on the SEC’s recently published Frequently Asked Questions, or FAQs, providing guidance on implementation of the JOBS Act.

Date of First Sale

In the FAQs, the SEC’s Division of Corporation Finance provides that an EGC may confidentially submit a draft registration statement for confidential, non-public review prior to its initial public offering date, which is the “date of the first sale of common equity securities of an issuer pursuant to an effective registration statement under the Securities Act of 1933.”

The FAQs explain that the “date of the first sale” includes the date of a company’s initial public offering of common equity securities for cash, the date of an offering of common stock pursuant to an employee benefit plan registered on a Form S-8 or the date of a selling shareholder’s secondary offering registered on a resale registration statement. Additionally, an EGC that has had Securities Act registered sales of securities other than common equity securities can make a confidential submission.

Applicability of Confidential Submissions
The FAQs provide that this confidential submission:

  • Does not apply to registration under the Securities Exchange Act of 1934, as amended, only to registrations under the Securities Act
  • Applies to a foreign private issuer that is an EGC
  • Applies to future amendments to a registration statement where an EGC was in registration at the time of enactment of the JOBS Act

Submitting the Draft Registration Statement
When submitting the confidential draft registration statement, the EGC need not:

  •  Submit its draft registration statement under cover of Rule 83 request to preserve confidentiality
  • Pay a filing fee (the filing fee is due when the registration statement is first publicly filed on EDGAR)
  • Sign the submission or include the consent of auditors or other experts as it is not a filing

When submitting a draft registration statement, an EGC:

  • May omit certain limited information from its initial submission in reliance on the existing rules and regulations relating to the content of filed registration statements; and
  • Should submit a “substantially complete” draft registration statement including a signed audit report of the registered public account firm covering the fiscal years presented in the registration statement and exhibits.

Until a system is implemented to provide for the electronic transmission of confidential submissions, EGCs may either submit the draft registration statement via a text searchable PDF file on CD/DVD or  in paper. One copy of the confidential submission should be delivered to: Draft Registration Statement, U.S. Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C., 20549.

Public Filing Requirements and Interaction with Other Rules
Confidential submissions must be publicly filed at least 21 days before the issuer conducts a “road show,” or engages in activities or communications that would be characterized as a road show under Rule 433(h)(4). If an EGC does not conduct a road show or engage in similar marketing activities, then the registration statement and confidential submissions should be filed publicly on EDGAR no later than 21 days before the anticipated effective date of the registration statement.

Of interest, is that an EGC does not need to treat test-the-waters communications conducted in reliance on new Section 5(d) of the Securities Act as a road show for purposes of Section 6(e) of the Securities Act. Prudence in this area is required, in that these test-the-waters communications may only be with institutional accredited investors and qualified institutional buyers and the line between test-the-waters communications and a road show may not always be bright.

The EDGAR filing of the registration statement must include the initial confidential submission and all amendments thereto as exhibits to the registration statement, with each confidential submission filed as a separate Exhibit 99. In the event an EGC filed an IPO registration statement on EDGAR, which precedes the confidential submission process for subsequent amendments, that EGC must still file the confidential submissions on EDGAR at least 21 days before the road show.

EGCs should also keep in mind that:

  • the confidential submission of the draft registration statement does not count as the filing of a registration statement for purposes of Section 5(c) of the Securities Act, which would prohibit making offers of a security in advance of filing a registration statement; and
  • Rule 134 of the Securities Act, which provides a safe harbor for certain public communications by issuers, is not available to an EGC submitting a draft registration statement on a confidential basis until that EGC files a registration statement that satisfies the requirements of the rule.

SEC Seeks Public Comment Prior to JOBS Act Rule Making

On April 11, 2012, the SEC announced that it will begin accepting comments from the pubic as the agency sets out to promulgate rules required under the JOBS Act.  To facilitate public comment, the SEC is providing a series of links on its website organized by sections of the JOBS Act.

Members of Ballard Spahr’s Securities Group are available to assist clients as they prepare to address these new requirements. Please contact Justin P. Klein, 215.864.8606 or kleinj@ballardspahr.com; Gerald J. Guarcini, 215-864-8625 or guarcini@ballardspahr.com; Mary J. Mullany, 215-864-8631 or mullany@ballardspahr.com; Katayun I. Jaffari, 215-864-8475 or jaffarik@ballardspahr.com; Amit Kakkar, 215-864-8265 or kakkara@ballardspahr.com; or any member of the Securities Group with any questions.


Copyright © 2012 by Ballard Spahr LLP.
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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.