Smaller Reporting Company Regulatory Relief and Simplification, 934-983 [E7-24965]
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 210, 228, 229, 230, 239,
240, 249, 260, and 269
[Release Nos. 33–8876; 34–56994; 39–2451;
File No. S7–15–07]
RIN 3235–Aj86
Smaller Reporting Company
Regulatory Relief and Simplification
Securities and Exchange
Commission.
ACTION: Final rule.
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AGENCY:
SUMMARY: The Securities and Exchange
Commission is adopting amendments to
its disclosure and reporting
requirements under the Securities Act of
1933 and the Securities Exchange Act of
1934 to expand the number of
companies that qualify for its scaled
disclosure requirements for smaller
reporting companies. Companies that
have less than $75 million in public
equity float will qualify for the scaled
disclosure requirements under the
amendments. Companies without a
calculable public equity float will
qualify if their revenues were below $50
million in the previous year. To
streamline and simplify regulation, the
amendments move the scaled disclosure
requirements from Regulation S–B into
Regulation S–K.
DATES: Effective Date: February 4, 2008,
except for amendments § 249.308b and
Form 10–QSB, which are effective
October 31, 2008, and amendments Part
228, § 249.310b, and Form 10–KSB,
which are effective March 15, 2009.
Compliance Dates: For information on
compliance, see the SUPPLEMENTARY
INFORMATION section below.
FOR FURTHER INFORMATION CONTACT:
Kevin M. O’Neill, Special Counsel, or
Johanna Vega Losert, Attorney-Advisor,
Office of Small Business Policy,
Division of Corporation Finance,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–3628, (202) 551–3460.
SUPPLEMENTARY INFORMATION: After the
effective date of the rule amendments,
companies currently qualifying as
‘‘small business issuers’’ under
Regulation S–B will have the option to
file their next annual report for a fiscal
year ending on or after December 15,
2007 on either Form 10–KSB, using the
scaled disclosure requirements in
Regulation S–B, or Form 10–K, using
the new scaled disclosure requirements
in Regulation S–K. After a ‘‘small
business issuer’’ files that next annual
report, it will be required to file
quarterly reports on Form 10–Q and
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annual reports on Form 10–K, and may
elect to comply with the new scaled
disclosure requirements of Regulation
S–K. Companies newly qualifying as
‘‘smaller reporting companies’’ will
have the option to use the new scaled
Regulation S–K requirements when
filing their next periodic report due after
the effective date of the amendments.
These companies will determine
eligibility for smaller reporting company
status based on the last business day of
their most recent second fiscal quarter,
or based on the alternative initial
registration statement calculation
discussed in Section IV. If a registration
statement was filed on an ‘‘SB’’ form
before the effective date of the rule
amendments, and the company seeks to
amend it after the effective date of the
rule amendments, the company must
file the amendment on the appropriate
form available to the issuer without an
‘‘SB’’ designation. As discussed in
Section IV, to provide a transition
period, these issuers will be able to
continue using the disclosure format
and content based on the ‘‘SB’’ form
until six months after the effective date.
We are adopting amendments to
Regulation S–K,1 and rules and forms
under the Securities Act of 1933,2
Securities Exchange Act of 1934,3 and
Trust Indenture Act of 1939.4 In
Regulation S–K, we are adopting
amendments to Items 10, 101, 102, 201,
301, 302, 303, 305, 401, 402, 404, 407,
503, 504, 512, 601, 701, and 1118.5 We
are adopting amendments to Securities
Act Rules 110, 138, 139, 158, 175, 405,
415, 428, 430B, 430C, 455, and 502.6
Further, we are rescinding Regulation
S–B 7 and eliminating the forms
associated with it, Forms SB–1, SB–2,
10–SB, 10–QSB, and 10–KSB.8 We are
amending Securities Act Forms 0–1, S–
1, S–3, S–4, S–8, S–11, 1–A, and F–X,9
Exchange Act Rules 0–2, 0–12, 3b–6,
10A–1, 10A–3, 12b–2, 12b–23, 12b–25,
12h–3, 13a–10, 13a–13, 13a–14, 13a–16,
13a–20, 14a–3, 14a–5, 14a–8, 14c–3,
14d–3, 15d–10, 15d–13, 15d–14, 15d–
1 17
CFR 229.10–229.1123.
U.S.C. 77a et seq.
3 15 U.S.C. 78a et seq.
4 15 U.S.C. 77aaa et seq.
5 17 CFR 229.10, 229.101, 229.102, 229.201,
229.301, 229.302, 229.303, 229.305, 229.401,
229.402, 229.404, 229.407, 229.503, 229.504,
229.512, 229.601, 229.701, and 229.1118.
6 17 CFR 230.110, 230.138, 230.139, 230.158,
230.175, 230.405, 230.415, 230.428, 230.430B,
230.430C, 230.455, and 230.502.
7 17 CFR 228.10–228.703.
8 17 CFR 239.9, 239.10, 249.210b, 249.308b, and
249.310b.
9 17 CFR 239.0–1, 239.11, 239.13, 239.25,
239.16b, 239.18, 239.90, and 239.42.
2 15
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20, and 15d–21,10 and Exchange Act
Forms 0–1, 8–A, 8–K, 10, 10–Q, 10–K,
11–K, 20–F, and SE.11 We are amending
Schedules 14A and 14C.12 In Regulation
S–X,13 we are amending Rules 210.3–
01, 210.3–05, 210.3–10, 210.3–12,
210.3–14, 210.4–01, and 210.10–01 and
adding a new Article 8 containing
thefinancial statement requirements
available to smaller reporting
companies.14 Finally, we are amending
Trust Indenture Act Rules 0–11, 4d–9,
and 10a–5 15 and Section 269.0–1 of the
Trust Indenture Act Forms.16
Table of Contents
I. Background and Summary
II. Description of Proposed Amendments
III. Discussion of Amendments We Are
Adopting
A. Moving Scaled Disclosure Item
Requirements From Regulation S–B Into
Regulation S–K
B. Moving Smaller Reporting Company
Financial Statement Requirements From
Item 310 of Regulation S–B Into New
Article 8 of Regulation S–X; Additional
Regulation S–X Changes
C. Adopting Scaled Disclosure Item
Requirements in Regulation S–K
1. Overview
2. Electing Scaled Disclosure Standards on
‘‘A La Carte’’ Basis
D. Eliminating ‘‘SB’’ Forms Associated
with Regulation S–B
E. Qualifying Standards for Treatment as
‘‘Smaller Reporting Company’’
1. Eligibility and Exclusions
2. Determination Dates
a. Reporting Companies
b. Non-Reporting Companies Filing an
Initial Registration Statement
c. Alternative Revenue Test for Reporting
and Non-Reporting Companies
d. Entering and Exiting Smaller Reporting
Company Status
F. Miscellaneous
1. Indexing for Inflation
2. Eliminating Transitional Small Business
Issuer Format
3. Checking the ‘‘Smaller Reporting
Company’’ Box
IV. Compliance Dates
V. Paperwork Reduction Act
A. Background
B. Summary of Comment Letters and
Revisions to the Proposals
VI. Cost-Benefit Analysis
10 17 CFR 240.0–2, 240.0–12, 240.3b–6, 240.10A–
1, 240.10A–3, 240.12b–2, 240.12b–23, 240.12b–25,
240.12h–3, 240.13a–10, 240.13a–13, 240.13a–14,
240.13a–16, 240.13a–20, 240.14a–3, 240.14a–5,
240.14a–8, 240.14c–3, 240.14d–3, 240.15d–10,
240.15d–13, 240.15d–14, 240.15d–20, and 240.15d–
21.
11 17 CFR 249.0–1, 249.208a, 249.210, 249.308,
249.308a, 239.310, 249.311, 249.220f, and 249.444.
12 17 CFR 240.14a–101 and 240.14c–101.
13 17 CFR 210.3–01—210.12–29.
14 17 CFR 210.3–01, 210.3–05, 210.3–10, 210.3–
12, 210.3–14, 210.4–01, 210.10–01, and new Article
8 210.8–01–8–08.
15 17 CFR 260.0–11, 260.4d–9, and 260.10a–5.
16 17 CFR 269.0–1.
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
A. Background
B. Summary of Rules
C. Benefits
D. Costs
VII. Consideration of Impact on the Economy,
Burden on Competition and Promotion
of Efficiency, Competition and Capital
Formation
VIII. Final Regulatory Flexibility Act
Analysis
A. Reasons for and Objectives of
Amendments
1. The Advisory Committee on Smaller
Public Companies Recommended Scaled
Federal Securities Regulation for Smaller
Companies
2. Expanding Eligibility for Smaller
Company Scaled Regulation Under
Amended Regulation S–K
3. Integrating Substantive Requirements of
Regulation S–B Into Regulations S–K and
S–X
B. Significant Issues Raised by Public
Comment
C. Small Entities Subject to the Final
Amendments
D. Reporting, Recordkeeping, and Other
Compliance Requirements
E. Agency Action to Minimize Effect on
Small Entities
IX. Statutory Basis and Text of Amendments
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I. Background and Summary
At an open Commission meeting on
May 23, 2007, we approved publication
of eight releases designed to update and
improve federal securities regulations
that significantly affect smaller
companies and their investors in today’s
capital markets.17 These releases
17 These releases included (1) Release No. 33–
8812 (June 20, 2007) [72 FR 35118] (proposing to
expand eligibility requirements of Forms S–3 and
F–3 to permit registration of annual primary
offerings of up to a specified percentage of public
float by companies with a public float of less than
$75 million). The Commission voted to approve this
proposal at a December 11, 2007 open meeting
(archived webcast available at https://www.sec.gov/
news/openmeetings.shtml); (2) Release No. 33–8813
(June 22, 2007) [72 FR 36822] (proposing
amendments to Rule 144 to revise the holding
period for the resale of restricted securities,
simplify compliance for non-affiliates, revise the
Form 144 filing thresholds, and codify certain staff
interpretations, as well as to amend Rule 145). This
proposal was adopted in Release No. 33–8869 (Dec.
6, 2007) [72 FR 71546]; (3) Release No. 33–8814
(June 29, 2007) [72 FR 37376] (proposing revisions
to Form D and to mandate electronic filing of Form
D). The Commission voted to approve this proposal
at the December 11, 2007 open meeting (archived
webcast available at https://www.sec.gov/news/
openmeetings.shtml); (4) Release No. 33–8819 (July
5, 2007) [72 FR 39670] (proposing to increase the
number of companies eligible for our scaled
disclosure and reporting requirements for smaller
companies); (5) Release No. 33–8828 (Aug. 3, 2007)
[72 FR 45116] (proposing new Regulation D
exemption for offers and sales of securities to a
newly defined category of ‘‘large accredited
investors,’’ as well as proposing revisions to the
Regulation D definition of ‘‘accredited investor,’’
disqualification provisions, and integration safe
harbor); (6) Release No. 34–56010 (July 5, 2007) [72
FR 37608] (proposing exemptions from requirement
to register class of securities for compensatory stock
options granted by reporting and non-reporting
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reflected our efforts during the past few
years to provide responsive solutions
addressing the special characteristics
and needs of smaller companies and
their investors. One of the releases (the
‘‘Proposing Release’’) proposed rule
amendments intended to provide
general regulatory relief and
simplification for smaller companies
reporting under our rules.18 In that
release, we proposed a series of
amendments to our scaled disclosure
and reporting requirements for smaller
reporting companies. The release had
three stated objectives:
• Expanding the number of smaller
companies eligible to use scaled
disclosure requirements;
• Reducing unnecessary complexity
in our regulations by combining the
category of ‘‘small business issuers’’
with the category of ‘‘non-accelerated
filers’’ to the extent feasible; and
• Simplifying disclosure
requirements by moving our scaled
disclosure requirements for smaller
companies from Regulation S–B into
Regulation S–K, the integrated
disclosure system for other companies.
Several of the amendments in the
Proposing Release had their genesis in
the recommendations made by the
Advisory Committee on Smaller Public
Companies in 2006. The Commission
had chartered the Advisory Committee
in March 2005 to assess the current
regulatory system for smaller companies
under the federal securities laws and
make recommendations for changes.19
Among the specific charges of the
Committee was to consider the
corporate disclosure and reporting
requirements for smaller companies,
including differing regulatory
requirements based on market
capitalization, and other measurements
of size or market characteristics.20 In its
Final Report, the Advisory Committee
made several recommendations relating
to scaling securities regulation for
companies). This proposal was adopted in Release
No. 34–56887 (Dec. 3, 2007) [72 FR 69554]; (7)
Release No. 33–8810 (June 20, 2007) [72 FR 35324]
(providing interpretive guidance regarding
management’s report on internal control over
financial reporting under Section 13(a) or 15(d) of
the Securities Exchange Act of 1934); and (8)
Release No. 33–8811 (June 20, 2007) [72 FR 35346]
(requesting additional comment on the definition of
a significant deficiency). The last proposal was
adopted in Release No. 33–8829 (Aug. 3, 2007) [72
FR 44927] (adopting definition of ‘‘significant
deficiency’’).
18 Release No. 33–8819 (July 5, 2007) [72 FR
39670].
19 See SEC Advisory Committee on Smaller
Public Companies, Final Report (2006) (‘‘Advisory
Committee Final Report’’), available at https://
www.sec.gov/info/smallbus/acspc.shtml.
20 Advisory Committee Final Report (p. 1).
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smaller companies and labeled them as
priority items.21
In 2006, 3,395 reporting companies
elected to take advantage of our current
scaled disclosure and reporting
requirements for small business issuers
by filing their annual reports on Form
10–KSB.22 We estimate that a total of
4,976 companies will be eligible to use
our scaled disclosure requirements
under today’s amendments, a difference
of 1,581 additional companies.23 The
1,581 companies would represent about
13% of the total 11,898 reporting
companies that filed annual reports
with us in 2006.
The amendments that we are adopting
address the need to revisit and adjust
the Commission’s small company
policies to reflect changes in our
securities markets as well as changes to
the regulatory landscape since 1992,
when the Commission first adopted an
integrated scaled disclosure system for
small business in Regulation S–B.24 The
Commission adopted Regulation S–B
and its associated Forms SB–1 and SB–
2 based upon the success of Form S–18,
which was a simplified registration form
for smaller companies under the
Securities Act that preceded Forms SB–
1 and SB–2.25 Regulation S–B was
designed to reduce compliance costs
and improve the ability of start-ups and
other small businesses to obtain
financing through the public capital
markets.
The amendments we are adopting will
result in the substantive changes
highlighted below. The new provisions:
• Establish a category of ‘‘smaller
reporting companies’’ eligible to use our
scaled disclosure requirements. The
primary determinant for eligibility will
be that the company have less than $75
million in public float. When a
company is unable to calculate public
float, however, such as if it has no
common equity outstanding or no
21 Advisory Committee Final Report
Recommendations II.P.1 (pp. 14–22), IV.P.1 (pp.
60–64), and IV.P.2 (pp. 65–68).
22 As stated in the Proposing Release, these
statistics are based on 2006 data from the
Commission’s EDGAR (Electronic Data Gathering,
Analysis and Retrieval) filing system.
23 As we noted in the Proposing Release, these
statistics are based on Thomson Financial
(Datastream). The data includes available
information on registered public firms trading on
the New York Stock Exchange, the American Stock
Exchange, the Nasdaq, the Over-the-Counter
Bulletin Board, and the Pink Sheets and excludes
closed end funds, exchange traded funds, American
depositary receipts, and direct foreign listings.
24 See Release No. 33–6949 (July 30, 1992) [57 FR
36442].
25 The Commission adopted Forms SB–1 and SB–
2 after 10 years of issuers using Form S–18, an
experimental form the Commission created to
benefit small issuers in raising capital. Release No.
33–6924, p. 40 (Mar. 20, 1992) [57 FR 9768].
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market price for its outstanding
common equity exists at the time of the
determination, the standard will be less
than $50 million in revenue in the last
fiscal year;
• Move 12 non-financial scaled
disclosure item requirements from
Regulation S–B into Regulation S–K.26
These scaled requirements will be
available only for smaller reporting
companies. The remaining 24 item
requirements of Regulation S–B 27 are
substantially the same as their
corresponding Regulation S–K item
requirements. We therefore are not
amending them except in one minor
instance explained below; 28
• Move the scaled financial statement
requirements in Item 310 of Regulation
26 The 12 scaled item requirements are: (1)
Description of Business (Item 101); (2) Market Price
of and Dividends on Registrant’s Common Equity
and Related Stockholder Matters (Item 201); (3)
Selected Financial Data (Item 301); (4)
Supplementary Financial Information (Item 302);
(5) Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Item
303); (6) Quantitative and Qualitative Disclosures
about Market Risk (Item 305); (7) Executive
Compensation (Item 402); (8) Transactions with
Related Persons, Promoters and Certain Control
Persons (Item 404); (9) Corporate Governance (Item
407); (10) Prospectus Summary, Risk Factors, and
Ratio of Earnings to Fixed Charges (Item 503); (11)
Use of Proceeds (Item 504); and (12) Exhibits (Item
601).
27 We did not propose changes to the following
items of Regulation S–K because we believe our
analysis showed that the disclosure standards in
these items currently are substantially the same as
the Regulation S–B requirements: (1) Description of
Property (Item 102); (2) Legal Proceedings (Item
103); (3) Description of Registrant’s Securities (Item
202); (4) Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure (Item 304); (5) Disclosure Controls and
Procedures (Item 307); (6) Internal Control Over
Financial Reporting (Item 308); (7) Internal Control
Over Financial Reporting (Item 308T); (8) Directors,
Executive Officers, Promoters and Control Persons
(Item 401); (9) Security Ownership of Certain
Beneficial Owners and Management (Item 403); (10)
Compliance with Section 16(a) of the Exchange Act
(Item 405); (11) Code of Ethics (Item 406); (12)
Forepart of Registration Statement and Outside
Front Cover Page of Prospectus (Item 501); (13)
Inside Front and Outside Back Cover Pages of
Prospectus (Item 502); (14) Determination of
Offering Price (Item 505); (15) Dilution (Item 506);
(16) Selling Security Holders (Item 507); (17) Plan
of Distribution (Item 508); (18) Interest of Named
Experts and Counsel (Item 509); (19) Disclosure of
Commission Position on Indemnification for
Securities Act Liabilities (Item 510); (20) Other
Expenses of Issuance and Distribution (Item 511);
(21) Recent Sales of Unregistered Securities; Use of
Proceeds from Registered Securities (Item 701); (22)
Indemnification of Directors and Officers (Item
702); and (23) Purchases of Equity Securities by the
Issuer and Affiliated Purchasers (Item 703). In
addition, although we proposed to amend
Undertakings (Item 512), we are not adopting this
change because we believe it is clear which
undertakings may and may not apply to a smaller
reporting company.
28 See the discussion of Description of Property
(Item 102) below. In addition, we are making
technical changes to numerous item requirements
to remove references to Regulation S–B and its
associated ‘‘SB’’ forms.
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S–B into new Article 8 of Regulation
S–X, and amend these requirements to
provide a scaled disclosure option for
smaller reporting companies, requiring
two years of balance sheet data instead
of one year, and make other minor
adjustments after considering comments
we received; 29
• Permit smaller reporting companies
to elect to comply with scaled financial
and non-financial disclosure on an itemby-item or ‘‘a la carte’’ basis. As
adopted, eligible companies may elect
to follow scaled financial statement
requirements or to provide the larger
company financial statement
presentation on a quarterly basis, rather
than require companies to elect the full
fiscal year’s financial presentation in the
first quarterly report of the fiscal year,
as was proposed;
• Eliminate our current ‘‘SB’’ forms
but allow a phase-out period for small
business issuers transitioning to smaller
reporting company status;
• Combine elements relating to the
accelerated filer definition with
qualifying standards for the smaller
reporting company determination and
transition provisions to promote
uniformity and consistency with current
regulations and, therefore, simplify
regulation;
• Permit all foreign companies to
qualify as ‘‘smaller reporting
companies’’ if they otherwise qualify
and choose to file on domestic company
forms and provide financial statements
prepared in accordance with U.S.
Generally Accepted Accounting
Principles (‘‘U.S. GAAP’’); and
• Eliminate the transitional small
business issuer format.
II. Description of Proposed
Amendments
We proposed an eligibility standard
for our scaled disclosure requirements
for ‘‘smaller reporting companies’’ to
replace the ‘‘small business issuer’’
definition found in Item 10 of
Regulation S–B.30 Under the proposals,
the new definition of ‘‘smaller reporting
company’’ would have established
eligibility for companies with less than
$75 million in public common equity
float. We provided an alternative
revenue test for those companies unable
to calculate public common equity float,
basing eligibility on whether the
company had annual revenues of less
than $50 million in its last fiscal year.
In contrast, our previous eligibility
requirements for ‘‘small business
29 The amendments also rescind Regulation S–B,
since all of its substantive requirements will now
be contained in Regulation S–K or new Article 8 of
Regulation S–X.
30 17 CFR 228.10.
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issuer’’ status required that companies
have both less than $25 million in
public common equity float and less
than $25 million in annual revenues.
Under the proposals, which we are
adopting in modified form, each
company would determine its eligibility
based on whether the company is: (1) A
reporting company already filing
periodic and annual reports; 31 (2) a
non-reporting company filing a
registration statement under either the
Securities Act or Exchange Act; or (3) a
reporting or non-reporting company that
had no public float, such as if it had no
public common equity outstanding or
no market price for its common equity
existed. A reporting company
determining its eligibility as a smaller
reporting company would calculate its
public float as of the last business day
of its most recently completed second
fiscal quarter. Non-reporting companies
filing a registration statement would
calculate their public float as of a date
within 30 days of the date of the filing
of the registration statement.
Under the proposals, investment
companies and asset-backed issuers
would be excluded from eligibility for
smaller reporting company status, as
was the case under the definition of
‘‘small business issuer’’ in Regulation
S–B.32 As proposed, foreign companies
could qualify as smaller reporting
companies and provide scaled
disclosure if they elected to use
domestic company forms and provide
financial statements prepared in
accordance with U.S. GAAP. Removing
the exclusion of foreign companies
would make scaled treatment available
to additional smaller companies.33
We proposed that smaller reporting
companies be required to exit the scaled
disclosure system the fiscal year after
their public float rose above $75 million
as of the last business day of their
second fiscal quarter.34 Smaller
reporting companies attempting to
establish eligibility to enter the scaled
disclosure system again would be
required to determine that their public
float fell below $50 million as of the last
business day of their second fiscal
quarter, and would be able to use scaled
disclosure again in the next fiscal year
following the determination, starting
31 A reporting company is required to file reports
under Section 13(a) and 15(d) of the Exchange Act.
15 U.S.C. 78m and 15 U.S.C. 78o.
32 Item 10(a)(1)(iii) of Regulation S–B, 17 CFR
228.10(a)(1)(iii).
33 Item 10(a)(1)(ii) of Regulation S–B only permits
U.S. or Canadian issuers to qualify as ‘‘small
business issuers.’’
34 The entering and exiting rules in the smaller
reporting company system are modeled after the
method of determining accelerated filer status set
forth in Rule 12b–2. 17 CFR 240.12b–2.
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with the first Form 10–Q of the next
fiscal year.
An objective of our proposals was to
simplify and improve our disclosure
and reporting rules for smaller
companies by moving the Regulation
S–B disclosure requirements for smaller
companies into Regulation S–K, as
recommended by the SEC Advisory
Committee on Smaller Public
Companies. As a result of our
rulemaking, we identified 13 item
requirements in Regulation S–B that
provided scaled disclosure for smaller
companies.35 We reasoned that
consolidation of the Regulation
S–K and S–B disclosure requirements
would provide a more unified set of
rules that would be easier to use. To
accomplish this, we proposed to move
item requirements in Regulation S–B
containing substantive scaled nonfinancial disclosure requirements into
Regulation S–K by adding a new
paragraph to the items of Regulation
S–K that would contain separate
disclosure standards for smaller
reporting companies. We did not
propose any major substantive changes
to the items we were moving from
Regulation S–B into Regulation S–K, but
sought comment from the public on
substantive changes they would
recommend.
One of the item requirements in
Regulation S–B providing scaled
disclosure requirements did not have a
similar disclosure item requirement in
Regulation S–K. Consequently, our
specific proposals included adding a
new Item 310 in Regulation S–K for
financial statements. Item 310 of
Regulation S–K would have set forth the
alternative requirements on form and
content of financial statements for
smaller companies that formerly
appeared in Item 310 of Regulation
S–B.
The proposals also allowed a smaller
reporting company to choose, on an
item-by-item basis or ‘‘a la carte’’ basis,
to comply with either the scaled
disclosure and financial reporting
requirements made available in
Regulation S–K for smaller reporting
companies or the requirements for other
companies in Regulation S–K, when the
requirements for other companies were
more rigorous.
The proposal, like the amendments
we are adopting, would rescind all of
our forms designated with the letters
‘‘SB.’’ Smaller reporting companies
would be eligible to file on Form S–1,
rather than on Form SB–1 or SB–2 as
before, to offer securities to the public.
This would provide a smaller reporting
35 See
note 26 above.
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company the ability to incorporate by
reference its previously filed Exchange
Act reports if the company meets the
requirements set forth under General
Instruction VII of Form S–1.36
Finally, the proposals, like the
amendments we are adopting, would
eliminate the ‘‘transitional small
business issuer format’’ associated with
Form SB–1 and annual reports on Form
10–KSB.37 A small business issuer using
the transitional format followed
disclosure based on Model A or B found
in Regulation A. These two disclosure
models were intended to ease transition
from non-reporting to reporting status
for small business issuers preparing
disclosure on initial registration
statements and annual reports. In our
Proposing Release we noted, however,
that the number of companies
registering on Form SB–1 and following
the disclosure format within Form 10–
KSB had significantly declined over
time.38
We received 21 comment letters on
the proposals,39 including six from
public accounting firms. We also
received comment letters from
professional and trade associations, a
law firm, an associate professor of
finance, two small business owners, and
the Small Business Administration’s
Office of Advocacy. In general, the
comment letters strongly supported our
efforts to simplify our scaled disclosure
requirements for smaller reporting
companies and expand eligibility for
them.
36 General Instruction VII of Form S–1 sets forth
the eligibility criteria to qualify for incorporation by
reference. The registrant must be required to file
reports pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 and must have
filed all reports and materials during the preceding
12 months. The company must have filed an annual
report for its most recently completed fiscal year.
Section D of the instruction disqualifies companies
that, in the past three years, were any of the
following:
(a) A blank check company as defined in Rule
419(a)(2);
(b) A shell company, other than a business
combination related shell company, each as defined
in Rule 405; or
(c) A registrant for any offering of penny stock as
defined in Rule 3a51–1 under the Exchange Act.
37 See Proposing Release Release No. 33–8819,
pp. 40–41 (July 5, 2007) [72 FR 39680].
38 For example, during the past five years, the
Commission has received only 56 Form SB–1
registration statements. For years 2000 through
2005, two small business issuers out of 56 filed a
Form 10–KSB using the transitional disclosure
format.
39 The public comments we received are available
for inspection in our Public Reference Room at 100
F Street, NE, Washington, DC 20549 in File No. S7–
15–07, or may be viewed at https://www.sec.gov/
comments/s7-15-07/s71507.shtml.
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937
III. Discussion of Amendments We Are
Adopting
After considering the public
comments, we are adopting the
amendments substantially as we
proposed them, with the modifications
discussed below.
A. Moving Scaled Disclosure Item
Requirements From Regulation S–B Into
Regulation S–K
Many of the comment letters
supported moving our scaled disclosure
requirements from Regulation S–B into
Regulation S–K.40 In general, the
comments in these letters viewed
moving the requirements as having a
positive impact by reducing complexity
and promoting more streamlined
regulation. One letter noted that
combining the two disclosure systems
would allow smaller reporting
companies to more easily evaluate the
extent of the differences between the
requirements for smaller reporting
companies and larger companies and
consider which requirement better
meets the needs of their investors.41
A few comment letters opposed
moving the scaled disclosure
requirements into Regulation S–K,
indicating that having all of the smaller
company rules in one place was
convenient for smaller companies.42
These comment letters expressed
concern that the migration into
Regulation S–K would increase legal
and accounting costs for smaller
companies and make the rules more
complex for smaller companies to
understand. A few comment letters
suggested providing the scaled smaller
reporting company disclosure
requirements in a separate section of
Regulation S–K.43
We are adopting our proposal to move
our Regulation S–B scaled disclosure
requirements into Regulation S–K. After
considering the comments, we believe
combining the two disclosure systems
and setting out the smaller reporting
company scaled item requirements in
separate paragraphs within Regulation
S–K is appropriate. We believe our
amendments eliminate redundancies
and provide a more streamlined
disclosure system for smaller reporting
companies. In response to the concern
that moving the item requirements will
create complexity for smaller
companies, we are including an index of
40 See, e.g., Letter from the American Bar
Association, Section of Business Law (ABA).
41 See Letter from PricewaterhouseCoopers LLP.
42 See, e.g., Letters from the Chamber of
Commerce and New York State Society of Certified
Public Accountants (NYSSCPA).
43 See, e.g., Letter from KPMG.
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scaled disclosure requirements in the
definition of smaller reporting company
at the beginning of Regulation S–K 44 to
highlight items of the Regulation that
contain the scaled disclosure
requirements specific to smaller
reporting companies.
Regulation S–B has 12 non-financial
item requirements that provide scaled
disclosure options to smaller reporting
companies. Under this rulemaking,
these 12 item requirements are being
moved to separate paragraphs within
Regulation S–K. In some cases, smaller
reporting companies are not required to
provide disclosures required of larger
companies. For example, while larger
companies are required to provide
disclosure under Item 305 on
quantitative and qualitative disclosures
about market risk, smaller companies
are not currently required to do so
under the same item requirement in
Regulation S–B. In cases like this, we
include a paragraph in the relevant item
of Regulation S–K indicating that
smaller reporting companies are not
required to respond to the item.
In addition to the Regulation S–B and
S–K differences, the forms themselves
may contain different disclosure
requirements for smaller reporting
companies. Currently, Forms 10–SB,
10–KSB and 10–QSB do not require risk
factor disclosure from small business
issuers. The amendments carry this
difference in disclosure requirements
over to Forms 10, 10–K and 10–Q by
adding instructions indicating that
smaller reporting companies are not
required to provide risk factor
disclosure in these Exchange Act forms.
B. Moving Smaller Reporting Company
Financial Statement Requirements From
Item 310 of Regulation S–B Into New
Article 8 of Regulation S–X; Additional
Regulation S–X Changes
Several comment letters
recommended moving the rules on form
and content of financial statements for
smaller reporting companies now in
Item 310 of Regulation S–B into
Regulation S–X, rather than into a new
Item 310 of Regulation S–K, as
proposed. Several comment letters also
agreed with the Advisory Committee
recommendation to require smaller
reporting companies to provide two
years of comparative audited balance
sheet data in annual financial
statements under these rules, rather
than one year, as is currently required
under Regulation S–B.45 The comment
44 See
new Item 10(f) of Regulation S–K (Index of
Scaled Disclosure Available to Smaller Reporting
Companies).
45 We had specifically asked for comments on this
recommendation in the Proposing Release. See
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letters are persuasive that we should
adopt these recommendations as part of
our rule amendments. Accordingly, we
are moving the financial statement rules
for smaller reporting companies into a
new Article 8 of Regulation S–X 46 and
will require two years of comparative
audited balance sheet data of smaller
reporting companies. Comparative
balance sheets will provide a much
more meaningful presentation for
investors without a significant
additional burden on smaller reporting
companies, since the earlier year data
should be readily available for the
purposes of preparing the other
financial statements.47 We also are
making technical and language changes
to the rules on form and content of
financial statements for smaller public
companies to facilitate their placement
in Article 8 of Regulation S–X rather
than in Regulation S–B or Regulation
S–K.
We also are adopting technical
amendments to Rule 3–05(b)(2)(iv) of
Regulation S–X that were tied
conceptually to the small business
issuer threshold in Regulation S–B that
we are replacing with the definition of
smaller reporting company in
Regulation S–K. Rule 3–05 of Regulation
S–X requires the inclusion of financial
statements of businesses acquired or to
be acquired, so-called ‘‘target
companies,’’ in registration statements
and Form 8–K reports. The number of
years of audited financial statements to
be included for a target company is
determined using the conditions
specified in the definition of significant
subsidiary in Rule 1–02(w) of
Regulation S–X. If the net revenues
reported by the target company for the
latest fiscal year are less than $25
million and three years of financial
statements would otherwise be required,
the earliest of the three fiscal years may
be omitted pursuant to Rule 3–
05(b)(2)(iv) of Regulation S–X.
Several comment letters noted that in
light of the $50 million in revenues
threshold proposed for determining a
company’s qualification as a smaller
reporting company if a company is
unable to calculate public float, the
Commission should consider revising
this rule to raise to $50 million the $25
million threshold currently used to limit
to two the periods required for audited
financial statements of an acquired
Proposing Release Release No. 33–8819, p. 26 [72
FR 39676].
46 To be codified at 17 CFR 210.8–01—.8–08.
47 Although the earlier year data would be readily
available, auditors must undertake appropriate
audit procedures related to the prior fiscal year.
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business.48 The $25 million threshold
was based on the $25 million in
revenues standard in Regulation S–B
that we are rescinding.49 We are
amending this standard to increase the
threshold to $50 million in revenues, as
suggested by the commenters.
C. Adopting Scaled Disclosure Item
Requirements in Regulation S–K
1. Overview
The following is a list of item
requirements we are amending in
Regulation S–K to include the substance
of the scaled standards for smaller
reporting companies now in the same
item number of Regulation S–B. The
adopted amendments are substantially
as described in the Proposing Release,
but with the changes discussed below:
Item 101 (Description of Business).
We are adding a new paragraph (h) to
this item to set forth the alternative
disclosure standards for smaller
companies that appeared in Item 101 of
Regulation S–B. Generally, the different
requirements for smaller reporting
companies under Item 101 involve
providing a less detailed description of
the company’s business. For example,
the Regulation S–K standard for Item
101 requires financial information about
segments, which the standard for
smaller reporting companies does not
require.50 In addition, smaller reporting
companies will be required to provide
and disclose business development
activities for only three years, instead of
the five-year disclosure required of
larger companies by Item 101 of
Regulation S–K.
We also are implementing additional
minor revisions that replace the
reference to Canadian issuers. Since we
are making the smaller reporting
company standards available to foreign
issuers generally, we are requiring that
these issuers provide disclosure on
enforceability of civil liability against
foreign persons. Previously, Item 101 of
Regulation S–B had required this
disclosure from Canadian issuers only
because those were the only foreign
issuers eligible for Regulation S–B
disclosure standards. The item
requirement applicable to smaller
reporting companies also will no longer
48 See, e.g., Letter from Center for Audit Quality
(CAQ).
49 In 1996, the Commission adopted revisions to
rules that streamlined requirements with respect to
financial statements of significant business
acquisitions in filings made under the Securities
Act and the Exchange Act. The $25 million
threshold limit was intended to be consistent with
criteria for small business issuers. Release No. 33–
7355, p. 36 (Oct. 10, 1996).
50 Application of U.S. GAAP (FAS 131) may,
however, require segment information in the notes
to the financial statements. 17 CFR 229.101(b).
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refer to the foreign private issuer
requirement to disclose whether the
report will include a reconciliation of
financial information with U.S.
generally accepted accounting
principles, because smaller reporting
companies must provide financial
statements prepared in accordance with
U.S. GAAP.
Item 201 (Market Price of and
Dividends on Registrant’s Common
Equity and Related Stockholder
Matters). We are revising Instruction 6
to paragraph (e) of this Regulation S–K
item requirement to reflect that smaller
reporting companies (instead of ‘‘small
business issuers’’) are not required to
provide a performance graph.
Item 301 (Selected Financial Data);
Item 302 (Supplementary Financial
Information). We are adding a new
paragraph (c) to each item requirement,
providing that smaller reporting
companies are not required to present
the information required by these item
requirements.
Item 303 (Management’s Discussion
and Analysis of Financial Condition
and Results of Operations). As provided
in new paragraph (d), this item sets
forth the scaled requirements.51 For
example, under this item requirement,
smaller reporting companies will:
• Provide only two years of analysis
if the company is presenting only two
years of financial statements, instead of
the three years of analysis required of
larger companies that are required to
provide three years of financial
statements; and
• Not be required to provide tabular
disclosure of contractual obligations.
Item 305 (Quantitative and
Qualitative Disclosures about Market
Risk). New paragraph (e) in this item
specifies that smaller reporting
companies are not required to disclose
Item 305 information.
Item 402 (Executive Compensation).
New paragraphs (l) through (r) set forth
the alternative standards for smaller
reporting companies for disclosure of
compensation of executives and
directors that were in Item 402 of
Regulation S–B.52 Smaller reporting
companies will:
• Provide executive compensation
disclosure for only three named
executive officers (specifically including
the principal executive officer but not
the principal financial officer), rather
51 As discussed below, we are also adding
references to two Industry Guides to this item.
52 As proposed, the scaled disclosure for this item
would have been in new paragraph (l), but in order
to clarify the requirements, the adopted Item
restates the requirements for smaller reporting
companies in several paragraphs.
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than the five required of larger
companies;
• Provide the Summary
Compensation Table disclosure for only
two years, rather than the three years
required of larger companies;
• Not be required to provide a
Compensation Discussion and Analysis;
• Provide only three of the seven
tables 53 required of larger companies;
• Provide alternative narrative
disclosures; and
• Not be required to include footnote
disclosure of the grant date fair value of
equity awards in the Director
Compensation Table.
Item 404 (Transactions with Related
Persons, Promoters and Certain Control
Persons). We are making changes to the
introductory text of paragraph (c)(1),
and adding paragraph (d) before the
instructions to this item to change the
calculation of total assets for smaller
reporting companies from 1% of their
total assets based on the average of total
assets at year end for the last three
completed fiscal years to the last two
completed fiscal years. We believe this
standard is more consistent with the
two years of financial statements
required of smaller reporting
companies. Under new Item 404(d) of
Regulation S–K, smaller reporting
companies will: 54
• Not be required to disclose policies
and procedures for reviewing related
person transactions, which is required
of larger companies;
• Be required to provide disclosure
regarding a transaction where the
amount exceeds the lesser of 1% of a
smaller company’s total assets or
$120,000;
• Be required to provide additional
specific information about underwriting
discounts and commissions, and
corporate parents; and
• Be required to provide disclosure
regarding promoters and certain control
persons.
Item 407 (Corporate Governance).
New paragraph (g) to Item 407 of
Regulation S–K specifies that smaller
reporting companies are:
• Not required to provide
Compensation Committee Interlock and
Insider Participation disclosure or a
Compensation Committee Report; and
• Not required to provide an Audit
Committee Report until the first annual
53 These are the Summary Compensation Table,
the Outstanding Equity Awards at Fiscal Year End
Table, and the Director Compensation Table.
54 See Section III.C.2, clarifying that to the extent
the smaller reporting company scaled disclosure
requirement is more rigorous than the same larger
company item requirement, smaller reporting
companies will be required to comply with the
more rigorous smaller reporting company
requirement.
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939
report after their initial registration
statement is filed with the Commission
and becomes effective.
Item 503 (Prospectus Summary, Risk
Factors, and Ratio of Earnings to Fixed
Charges). New paragraph (e) to this item
specifies that smaller reporting
companies need not provide the
information required by paragraph (d) of
Item 503 regarding the ratio of earnings
to fixed charges when a registrant issues
debt, or the ratio of combined fixed
charges and preference dividends to
earnings when a registrant issues
preference equity securities. In addition,
we have added instructions to the risk
factor disclosure requirements set forth
in Exchange Act Forms 10, 10–K and
10–Q to indicate that smaller reporting
companies are not required to provide
Item 503 risk factor disclosure in these
filings.55
Item 504 (Use of Proceeds). We are
revising Instruction 6 to this item to
clarify that new Article 8 of Regulation
S–X, rather than the other articles of
Regulation S–X, will govern whether
financial statements of businesses
proposed to be acquired must be
included in the filings of smaller
reporting companies.
Item 601 (Exhibits). New paragraph (c)
reflects that smaller reporting
companies need not provide Exhibit 12
(Statements re Computation of Ratios).
Other Regulation S–K Items. We
identified 24 item requirements in
Regulation S–B that were substantially
similar or identical to the same
numbered item requirements in
Regulation S–K. In these cases, we
determined it was appropriate to require
that smaller reporting companies follow
the same item requirements as larger
companies. In the Proposing Release, we
identified Item 512 (Undertakings) as a
scaled item requirement for smaller
reporting companies; however, we now
believe no change is needed because it
is clear which undertakings may apply
to a smaller reporting company’s filings.
We are, therefore, not including a new
paragraph (m) in Regulation S–K, as
proposed.
In addition, as described below, we
are amending Item 102 (Description of
Property) of Regulation S–K to include
references to the Industry Guides 56
55 See Section III.A above. The Securities Offering
Reform final rule amendments stated that the risk
factor disclosure requirement did not apply to small
business issuers filing on Form 10–KSB or Form
10–SB. The amendments we are adopting carry this
difference in disclosure requirements over to the
Forms 10, 10–K and 10–Q for smaller reporting
companies. See Securities Offering Reform Release
33–8591 (July 19, 2005) [70 FR 44722, 44786–87].
56 The Industry Guides serve as expressions of the
policies and practices of the Division of Corporation
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noted below and highlighting the
requirements of Item 401 (Directors,
executive officers, promoters and
control persons). To further maintain
consistency with references to other
industry guides in the disclosure item
requirements, we also are adding
instructions to Item 303 directing
companies’ attention to:
• Industry Guide 3—Statistical
disclosure by bank holding companies;
and
• Industry Guide 6—Disclosure
concerning unpaid claims and claim
adjustment expenses of propertycasualty insurance underwriters.
The Regulation S–B item requirement
on the Description of Property in Item
102 included detailed instructions
specific to small business issuers
engaged in: (1) Significant mining
operations; (2) oil and gas producing
activities; and (3) real estate activities.
Under Item 102 of Regulation S–B,
mining companies are directed to the
information called for in Industry Guide
7; oil and gas producing issuers are
directed to the information called for in
Industry Guide 2; and real estate
companies are directed to the
information called for in Industry Guide
5. Regulation S–K, however, does not
include any references to these industry
guides. Several commenters suggested
that we revise Item 102 of Regulation S–
K to include references to industry
guides.57 We agree, and are amending
Item 102 of Regulation S–K to include
references to the following industry
guides:
• Industry Guide 2—Disclosure of oil
and gas operations;
• Industry Guide 4—Prospectus
relating to interests in oil and gas
programs;
• Industry Guide 5—Preparation of
registration statements relating to
interests in real estate limited
partnerships; and
• Industry Guide 7—Description of
property by issuers engaged or to be
engaged in significant mining
operations.
Item 401 of Regulation S–K (Directors,
executive officers, promoters and
control persons), differs from Regulation
S–B in one respect. Under Regulation S–
B, the disclosure pertaining to Federal
bankruptcy laws or state insolvency
Finance. They are of assistance to issuers, their
counsel and others preparing registration
statements and reports, as well as to the
Commission’s staff. The Industry Guides are not
rules, regulations, or statements of the Commission.
The Commission has neither approved nor
disapproved these interpretations. See Release 33–
6384 (Mar. 16, 1982).
57 See, e.g., Letters from KPMG and Grant
Thornton.
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laws related only to ‘‘any bankruptcy
petition filed by or against any business
of which such person was a general
partner or executive officer either at the
time of the bankruptcy or within two
years prior to that time.’’ 58 Under
Regulation S–K, disclosure must be
provided pertaining to any petitions
filed under the Federal bankruptcy laws
or any state insolvency laws filed by or
against a director or officer of the
company.59 We believe it is appropriate
to require disclosure about a personal
bankruptcy petition filed by or against
a director or officer of a smaller
reporting company given that, in light of
the generally smaller level of operations
of smaller reporting companies, it may
be material to an evaluation of the
ability or integrity of any director or
person to be nominated to become a
director or executive officer of the
smaller reporting company.
Accordingly, smaller reporting
companies now will be required to
comply with the slightly different
disclosure requirement of the
Regulation S–K item.
2. Electing Scaled Disclosure Standards
on ‘‘A La Carte’’ Basis
Commenters generally supported the
proposal to allow smaller reporting
companies to choose compliance with
either the smaller reporting company
scaled disclosure requirements or the
larger company disclosure requirements
in Regulation S–K on an item-by-item or
‘‘a la carte’’ basis.60 One comment letter
expressed the view that the smaller
reporting company disclosure
requirements would serve as a baseline
that would allow companies to provide
any additional disclosure they deemed
important to investors.61 Another set of
comments noted that the ‘‘a la carte’’
approach is already sanctioned by
disclosure rules generally.62 This letter
explained that line-item disclosure
requirements generally permit providing
more disclosure than is required by the
line items. Additionally, issuers are
58 See Item 401(d)(1) of Regulation S–B. 17 CFR
228.401(d)(1). Under Regulation S–B, issuers
provide legal proceedings disclosure about
promoters and control persons for the past five
years. Regulation S–K requires disclosure on legal
proceedings for control persons and promoters for
registrants that have not been subject to the
reporting requirements for Section 13(a) or 15(d) of
the Exchange Act for the twelve months
immediately before the filing of the registration
statement, report or statement. 17 CFR 229.401(f)
and (g).
59 See Item 401(f)(1) of Regulation S–K. 17 CFR
229.401(f)(1).
60 See, e.g., Letter from Independent Community
Bankers of America (ICBA).
61 See Letter from Deloitte & Touche LLP
(Deloitte).
62 See Letter from ABA.
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required to disclose all material facts
that are necessary to make the
statements included in the document
not misleading, which may require
disclosures in excess of line item
requirements.63
Some accounting firms commenting
on the a la carte approach requested that
we address what one commenter
referred to as the ‘‘lock-in’’ aspect of the
proposal. In the Proposing Release, we
explained that a smaller reporting
company would have the option to take
advantage of the smaller reporting
company requirements for one, some,
all or none of the item requirements, at
its election, in any one filing. We
proposed to require, however, that a
smaller reporting company provide its
financial statements on the basis of the
scaled financial statement requirements
or the larger company financial
statement requirements for a single
fiscal year, and not be permitted to
switch back and forth from one to
another in different filings within a
single fiscal year.
One accounting firm noted that it was
unclear how the a la carte approach
would work if issuers were required to
elect in the first quarterly report
whether they would follow the scaled
financial statement requirements or the
larger company Regulation S–X
requirements in that same fiscal year’s
annual report on Form 10–K.64
According to this letter, making a
determination in this manner would
require a smaller reporting company
that wants to preserve the option of
following the smaller reporting
company requirements in its annual
report on Form 10–K to adhere to the
smaller reporting company rules and
not provide any additional information
in the first quarterly report on Form 10–
Q. Another accounting firm expressed
the concern that a smaller reporting
company might elect to provide more
than the minimum disclosures only in
periods when the additional disclosures
tended to be favorable.65 These
comment letters agreed that the a la
carte approach would work if the
Commission clarified that although the
smaller reporting company disclosure
and financial statement requirements
would appear to establish the minimum
disclosure requirements, Rule 12b–20
under the Exchange Act 66 would
require that a smaller reporting
company provide any additional
63 The ABA cited the following in support of this
statement: Sections 11 and 12(a)(2) of the Securities
Act and Rule 408 under the Securities Act, and
Rules 10b–5 and 12b–20 under the Exchange Act.
64 See Letter from BDO Seidman, LLP (BDO).
65 See Letter from Ernst & Young LLP (E&Y).
66 17 CFR 240.12b–20.
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information beyond those minimum
disclosure requirements, in order to
avoid a misleading presentation.67 The
accounting firms suggested that we
encourage smaller reporting companies
to provide consistent disclosures in
succeeding periods in order to respond
to investor expectations and allow
period-to-period comparisons.
The proposals would have required
companies to make the determination
whether to report financial statement
disclosure on a scaled basis in the first
quarter due after the fiscal year covering
the determination date. After reviewing
the suggestions in several comment
letters, however, we believe it is
appropriate to permit smaller reporting
companies to choose to comply with
both the non-financial and financial
item requirements on an item-by-item
basis when these disclosures are
provided consistently and when they
are consistent with the legal
requirements under the federal
securities laws, including Securities Act
Rule 408 and Exchange Act Rule 12b–
20. Additionally, we stress the
importance of providing disclosure that
permits investors to make period-toperiod comparisons, whether quarterly
or annually.
We continue to expect that our staff
will evaluate item-by-item compliance
by smaller reporting companies with
only the Regulation S–K requirements
applicable to smaller reporting
companies, and not with the
requirements applicable to larger
companies. This will be the case even
if the company whose filing is being
reviewed chooses to comply with the
larger company requirements. Finally,
as we noted in the Proposing Release,
the a la carte approach will have no
effect on the legal requirements and
liabilities that apply to all disclosures
made by issuers.68
We are further clarifying that to the
extent the smaller reporting company
scaled item requirement is more
rigorous than the same larger company
item requirement, smaller reporting
companies will be required to comply
with the more rigorous, smaller
reporting company item requirement.
Also, we do not believe it is appropriate
for a smaller reporting company to
comply with a larger reporting company
Regulation S–K item requirement if that
requirement sets a higher threshold
obviating the need for the smaller
reporting company to provide
disclosure. For example, unlike the
larger company requirement under Item
404 of Regulation S–K, smaller reporting
67 See
Letters from E&Y and CAQ.
No. 33–8819, n. 76 p. 33 [72 FR 39678].
68 Release
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companies are required to disclose
additional specific information about
underwriting discounts and
commissions and corporate parents.69 In
this case, a smaller reporting company
would be required to provide the
additional Item 404 disclosure.
Currently, the smaller reporting
company requirements under Item 404
of Regulation S–K 70 present the only
instance where the scaled requirements
could be more rigorous than the larger
company standard. This is because a
smaller reporting company is required
to provide disclosure on a related
person transaction since the beginning
of the company’s last fiscal year if the
amount involved in the transaction
exceeds the lesser of $120,000 or 1% of
the average of the company’s total assets
at year end for the last two completed
fiscal years. In contrast, a larger
company reporting under the same Item
404 Regulation S–K requirement is
required to provide disclosure on a
related person transaction since the
beginning of the last fiscal year if the
transaction exceeds $120,000.71 A
smaller reporting company’s related
person transaction may more easily
exceed 1% of the average of the smaller
reporting company’s total assets than
$120,000, as required for larger
companies under the same item
requirement. We believe this may be the
case because 1% of a smaller company’s
total assets might be appreciably lower
than $120,000.
D. Eliminating ‘‘SB’’ Forms Associated
With Regulation S–B
While some comment letters appeared
to support the elimination of the forms
designated with the letters ‘‘SB’’
associated with Regulation S–B,72 along
with moving the smaller reporting
company requirements from Regulation
S–B into Regulation S–K, others
questioned whether this approach
would reduce compliance burdens and
lower costs for smaller companies.73
Some of the letters questioning the
elimination of the SB forms
recommended a two-year phase-in
period to help smaller companies adjust
to the transition. Some letters expressed
a general perception that eliminating the
SB forms would lead to increased costs
for smaller reporting companies because
69 See Instructions to Item 404(d) of Regulation S–
K, 17 CFR 229.404(d).
70 New Regulation S–K Item 404(d)(1) related
person disclosure requirement for smaller reporting
companies.
71 17 CFR 229.404(a).
72 See, e.g., Letter from ABA.
73 See, e.g., Letter from Office of Advocacy of the
U.S. Small Business Administration (SBA
Advocacy Office).
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Forms 10, 10–K, 10–Q and S–1, which
would be used by smaller companies if
the SB forms were eliminated, appeared
to have more item disclosure
requirements.74 One commenter stated,
however, that eliminating the ‘‘SB’’
forms would provide both time and cost
savings to smaller reporting companies
that will be eligible to incorporate
information from their previously filed
Exchange Act periodic reports into a
Form S–1 registration statement.75 None
of the comment letters explained how
using Forms 10, 10–K, 10–Q, and S–1
would increase costs for smaller
reporting companies. One letter noted,
however, that a smaller company
probably would take longer to go
through Form 10–K and Form 10–Q to
figure out exactly what applied to the
company and what did not apply in
terms of required disclosures.76 In
contrast, another comment letter noted
that the elimination of ‘‘SB’’ forms
would allow smaller reporting
companies to incorporate information
from their previously filed Exchange
Act reports into a Form S–1 registration
statement, which would result in time
and cost savings to the smaller reporting
company.77
Some of the comment letters
apparently misperceived that the SB
forms are simpler and shorter than
forms larger companies use. This is not
the case. The SB forms themselves are
not necessarily simpler to use than the
forms that larger companies use. The
scaling and increased simplicity for
smaller companies generally occurs in
the item requirements of Regulation
S–B, rather than the associated SB
forms, and we are moving the item
requirements into Regulation S–K with
very few changes.78
Nevertheless, after considering the
comments, we have decided not to
eliminate the Exchange Act reporting SB
forms immediately, but to phase them
out to ease the transition for smaller
companies. We considered commenters’
concerns regarding current small
business issuers moving to the Forms
10–K and 10–Q, and concluded that our
transition schedule will provide an
74 See, e.g., Letter from the International
Association of Small Business Broker Dealers and
Advisors (‘‘IASBDA’’).
75 See Letter from ABA.
76 See Letter from James J. Angel, Ph.D., CFA
(‘‘Prof. James Angel’’).
77 See Letter from ABA.
78 Moreover, the SB forms are not necessarily
substantially shorter than the comparable forms for
larger companies. Form 10–SB is actually longer, at
41⁄2 pages, than Form 10, which is less than 4 full
pages long; Form 10–KSB is 11 pages long, while
Form 10–K is 12; Form SB–2 is 5 pages long, while
Form S–1 is just over 6 pages, not including
instructions on summary prospectuses.
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adequate period for these companies to
continue to file reports on these forms,
if they so desire.79 Further, to help
current small business issuers make the
transition, the Division of Corporation
Finance’s Office of Small Business
Policy plans to provide an informational
brochure to assist their transition to the
new smaller reporting company form
requirements.
E. Qualifying Standards for Treatment
as ‘‘Smaller Reporting Company’’
Many of the comment letters in favor
of our proposed definition of ‘‘smaller
reporting company’’ agreed that
combining the categories of nonaccelerated filers with small business
issuers for purposes of the definition
provided a convenient and simple
approach because it tracks the
accelerated filer definition and reduces
regulatory complexity.80 In the
Proposing Release, we reasoned that
requiring only a public float test for
most companies to qualify would
provide additional simplicity,
consistency and certainty. Eliminating a
revenue test also would broaden the
category of eligible companies. Our
decision to focus on a company’s nonaffiliate common equity market
capitalization or ‘‘public float’’ was also
consistent with the Commission’s
current regulatory standards for
purposes of Form 10–K, Form S–3, and
the accelerated filer definition. Setting
the public float ceiling at $75 million for
smaller reporting companies further
aligns the smaller reporting company
definition with the non-accelerated filer
definition.
The Advisory Committee
recommended that we require
companies to determine eligibility based
on total equity market capitalization
rather than public float. Although the
Advisory Committee acknowledged that
the Commission has historically and
consistently used public float as a
measurement in analogous regulatory
contexts, it stated that equity market
capitalization would better measure
total financial exposure to investors.81
The Advisory Committee recommended
extending the Commission’s nonfinancial scaled disclosure
requirements, covering disclosure and
reporting, to companies in the lowest
1% of market capitalization. Some of
the comment letters we received on the
Proposing Release agreed with the
Advisory Committee equity market
capitalization preference, stating that it
79 See
Section IV below on compliance dates.
e.g., Letters from PricewaterhouseCoopers
and E&Y.
81 Advisory Committee Final Report 19.
80 See,
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was simpler and more widely
understood than the calculation of
public float. The majority of comment
letters supported our proposals to
require a public float standard only,
agreeing we should require a revenue
test only if a company is unable to
calculate public float.
Several comment letters opposed
increasing the public float ceiling to a
level higher than $75 million.82 One
comment letter explained that because
smaller companies typically do not have
a large analyst following, financial
information provided by the company
takes on greater importance in
communicating results to investors.83
Another letter noted that to balance
protecting investors and promoting
capital formation by small businesses,
‘‘reduced’’ disclosures should be limited
to those public companies with
relatively limited and less complex
operations.84 Most comment letters,
however, supported a higher public
float ceiling than $75 million.85 Some of
these comment letters argued that many
companies with a public float greater
than $75 million are still quite small.
Several commenters suggested that the
Commission provide scaled regulation
to companies with up to $787 million in
equity market capitalization, as they
seemed to believe the Advisory
Committee had recommended.86
We are adopting, as proposed, a
definition for ‘‘smaller reporting
companies’’ that requires companies to
have a public float of less than $75
million. We believe this standard is
appropriately scaled in that it reduces
costs to smaller companies caused by
82 See
Letters from PricewaterhouseCoopers and E
& Y.
83 See
Letter from PricewaterhouseCoopers.
Letter from E&Y.
85 See, e.g., Letters from SBA Advocacy Office
and ABA.
86 The Advisory Committee recommended
extending the Commission’s scaled disclosure
regime to the lowest 6% of total U.S. equity market
capitalization, which would have included
companies with less than $787 million in market
capitalization as of March 31 and June 10, 2005. But
the Advisory Committee only identified the rules
on form and content of financial statements in Item
310 of Regulation S–B as appropriate for
application to that category of companies. The
Advisory Committee recommended extending the
Commission’s other scaled disclosure rules,
covering disclosure and reporting, to companies in
the lowest 1% of market capitalization, which, as
explained in the Proposing Release at page 16 [72
FR 39673], is essentially the same group and
proposal contained in the Proposing Release—
reporting companies with less than $75 million in
public equity float—which we are adopting with
few changes today. As calculated from data
obtained from Thomson Financial (Datastream), the
overlap between reporting companies with $128
million in market capitalization and reporting
companies with $75 million in public float is
approximately 98%.
84 See
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unnecessary information requirements,
consistent with investor protection.
As adopted, the definition will make
eligibility for smaller reporting company
status contingent solely on public float
for most companies. Alternatively, for
companies that are unable to calculate
public float, we are, as proposed,
providing a revenue test. If a company
has no common equity outstanding or
no market price for its outstanding
common equity exists at the time of its
eligibility determination, the company
would qualify as a smaller reporting
company if it had less than $50 million
in revenues in the last fiscal year. This
is a departure from the dual eligibility
test under the Regulation S–B system,
which required separate calculations
under public float and annual revenues.
By eliminating the revenue test for most
companies, the new definition of
smaller reporting company simplifies
and streamlines the definition while
expanding the number of companies
eligible to qualify.
As adopted, Item 10(f) of Regulation
S–K will set forth the definition for
‘‘smaller reporting company.’’ We are
further streamlining the definition and
clarifying technical inconsistencies in
the Proposing Release. We are also
modifying the proposed introduction of
Item 10, which indicated that smaller
reporting companies would be
permitted to choose to comply with
either the requirements applicable to
smaller reporting companies or the
requirements applicable to other
companies. Companies may make a
choice on most of the scaled disclosure
item requirements, unless the
requirements for smaller reporting
companies specify that smaller
reporting companies must comply with
the smaller reporting company
requirements.87 If the item requirement
does not require specific compliance,
then the smaller reporting company will
be permitted to choose scaled or
standard disclosure requirements.
1. Eligibility and Exclusions
Currently, under Item 10 of
Regulation S–B, small business issuer
eligibility is limited to U.S. and
Canadian issuers. This has been the case
since 1992, when we adopted
Regulation S–B and its associated forms
and maintained eligibility for small
business issuer status for Canadian
companies because these companies
had been able to use the Form SB–2
precursor, Form S–18. As adopted, we
are expanding eligibility for smaller
reporting company status to non-U.S.
87 See the discussion of Item 404 at the end of
Part III.C.2.
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companies using domestic company
forms. Foreign companies will qualify
as smaller reporting companies if they
are eligible to file on a form that permits
disclosure based on the standards for
smaller reporting companies, such as
Forms S–1, S–3, S–4, 10–Q, and 10–K.
Companies filing on forms available
only to ‘‘foreign private issuers,’’ such
as Forms F–1, F–3, F–4, and 20-F, will
be ineligible for the smaller reporting
company scaled disclosure
requirements.
Several commenters objected to the
proposal requiring that Canadian and
other foreign private issuers provide
financial statements prepared according
to U.S. GAAP if they want to use the
scaled rules available to smaller
reporting companies, which they may
use only if they file on a form available
to U.S. domestic companies. Generally,
these comment letters stated that the
proposals would eliminate an
accommodation already enjoyed by
Canadian companies filing on Form SB–
2. Currently, Canadian companies are
permitted to provide Canadian GAAP
financial statements that are reconciled
to U.S. GAAP on domestic forms. Some
of the comment letters urged that we
consider allowing all foreign private
issuers to provide their own country’s
GAAP with U.S. GAAP reconciliation.
To the extent that a foreign company
qualifies as a smaller reporting
company, it may make filings with us
on forms available to domestic U.S.
companies if it presents financial
statements pursuant to U.S. GAAP. We
continue to believe that because we are
extending eligibility for scaled
disclosure on domestic forms to all
foreign issuers, it is important to require
that this significantly larger group of
foreign filers provide financial data in
accordance with U.S. GAAP on
domestic forms at this time. Other than
in limited situations, foreign filers using
domestic forms are required to prepare
their financial statements in accordance
with U.S. GAAP. Unlike our filing forms
that are specifically designed for foreign
private issuers that permit the use of
financial statements prepared in
accordance with bases of accounting
other than U.S. GAAP so long as U.S.
GAAP reconciling information is
presented, the disclosure and other
requirements under our domestic filing
forms do not contemplate the use of
accounting principles other than U.S.
GAAP. We believe eligible foreign
registrants that choose to avail
themselves of the option to provide
scaled disclosure should comply fully
with the scaled disclosure and financial
statement presentation requirements
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applicable to domestic issuers.88
Finally, the regulatory scheme for
foreign private issuers on the ‘‘F’’ forms
is specifically tailored to address their
special circumstances, and we believe
the scheme provides the
accommodations most useful to these
companies.
We will continue to exclude
investment companies, including
business development companies, and
asset-backed issuers from eligibility for
scaled treatment under our rules for
smaller reporting companies. We
requested comment on these exclusions
and received none.
2. Determination Dates
The smaller reporting company
determination dates we are adopting
today are based on three categories of
companies: reporting companies with a
public float, non-reporting companies
filing a registration statement, probably
an initial registration statement, under
either the Securities Act or the
Exchange Act, and reporting or nonreporting companies without a public
float.89 We are amending the definition
of smaller reporting company to remove
the reference to an issuer having ‘‘no
significant public common equity
outstanding,’’ based on a commenter’s
belief that it was confusing. Instead, the
definition will indicate that in the case
of an issuer whose public float as
calculated under the definition was
zero, most likely because the issuer had
no public common equity outstanding
or no market price for its common
equity existed, the issuer must have had
annual revenues of less than $50 million
in its last fiscal year.
In the case of a reporting company,
we are requiring the same public float
calculation currently used to determine
accelerated filer status, $75 million in
public float computed by multiplying
the aggregate worldwide number of
shares of its voting and non-voting
common equity held by non-affiliates by
the price at which the common equity
was last sold, or the average of the bid
and asked prices of common equity in
the principal market for the common
equity.
a. Reporting Companies
To determine smaller reporting
company eligibility, reporting
88 We have published a concept release on
whether U.S. companies should be permitted to use
International Financial Reporting Standards as
published by the International Accounting
Standards Board in their filings with the
Commission. If we proceed with proposed rules in
this area, we may consider the impact of any
proposal on filers that use scaled disclosure. See
Release No. 33–8831 (Aug. 7, 2007) [72 FR 45600].
89 See new Item 10(f) of Regulation S–K.
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943
companies will follow the accelerated
filer determination date in Rule 12b-2
under the Exchange Act—the last
business day of a company’s second
fiscal quarter.90 We believe this
approach simplifies regulation and
promotes consistency and uniformity
with current Commission rules. The
public float of a reporting company will
be calculated by using the price at
which the shares of its common equity
were last sold or the average of the bid
and asked prices of such shares in the
principal market for the shares as of the
last business day of the company’s
second fiscal quarter, multiplied by the
number of outstanding shares held by
non-affiliates. We are adopting, as
proposed, a rule providing that if a
reporting company determines it
qualifies as a larger reporting company
rather than a smaller reporting company
on the last day of its second fiscal
quarter, it will be required to comply
with the larger company disclosure
standards when it files its first quarterly
report in the fiscal year following the
fiscal year of the determination date. We
are permitting larger reporting
companies, however, to opt for the
scaled disclosure requirements
beginning with the Form 10–Q covering
the second fiscal quarter corresponding
to the measurement date establishing
eligibility as a smaller reporting
company.91
b. Non-Reporting Companies Filing an
Initial Registration Statement
Companies determining eligibility in
connection with the filing of their initial
registration statement with the
Commission will have to choose a date
within 30 days of filing to determine
eligibility.92 Under Regulation S–B, we
had required companies to choose a
public float calculation during a 60-day
window before the filing. We believe
requiring a 30-day window will lead to
more accuracy and less uncertainty for
filers, Commission staff, and investors.
The calculation methodology we are
adopting for non-reporting companies
varies slightly from the Regulation S–B
standard we are rescinding. The
Regulation S–K standards will require
computing public float based on three
components:
• Estimated offering price per share at
the time of filing the registration
statement;
90 New Item 10(f)(2)(i) of Regulation S–K explains
how the determination dates work for companies
already filing reports under the Exchange Act.
91 See Section III.E.2.d below, explaining how a
company enters and exits the smaller reporting
company disclosure status.
92 See new Item 10(f)(1)(ii) of Regulation S–K.
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• Number of shares of common stock
outstanding that are held by nonaffiliates before the offering; and
• Number of shares of common stock
to be sold at the estimated offering
price.
As adopted, the rule will require that
non-reporting companies base the
calculation on the estimated number of
registered shares for offering to the
public. For example, as we illustrated in
the Proposing Release, a company that
registers 7,000,000 shares in its initial
public offering will be required to add
that number to the total number of
shares held by non-affiliates before the
offering. If a company has 25,000,000
shares of common stock outstanding
held by non-affiliates before the
offering, it would add the 7,000,000 and
25,000,000 shares of common stock. The
result would mean that the 32,000,000
shares of common stock outstanding
would be multiplied by the estimated
offering price per share in the initial
public offering.
One commenter raised questions
regarding the proposed method of
calculation.93 This commenter noted
that the estimated public offering price
and the number of shares being offered
tends to change during the time between
the initial filing of the registration
statement and the final prospectus. The
uncertainty raised by the final estimated
public offering price and number of
shares being offered caused the
commenter to question whether an
issuer would be required to switch
midway through the process from using
smaller reporting company disclosure
standards to using more extensive
regular disclosure standards.
Conversely, this commenter noted that
if the price range and/or the number of
shares being offered decreased, the
issuer will have satisfied a more
extensive disclosure standard than it
turns out it was required to satisfy.
We considered these comments, and
believe it is appropriate to provide
initial public offering registrants the
option to recalculate their public float at
the time the company completes the
initial public offering. Our intention in
providing this flexibility is to permit
(but not require) these issuers to
recalculate their eligibility based on the
results of the initial public offering for
purposes of filing the next periodic
report. For example, if an issuer files an
initial public offering registration
statement under the Securities Act
based on the larger company Regulation
S–K item requirements but then
determines after the close of the initial
public offering that its public float is
below $75 million, then this issuer
would be a smaller reporting company
and would be eligible to provide scaled
disclosure in the first periodic report
due after the initial public offering
registration statement was declared
effective.94
To address the commenter’s concern
that a smaller reporting company would
be required to transition its disclosure to
the larger company requirements if its
public float rose above $75 million
during the pre-effective stage of the
filing, we are clarifying that this would
not be the case if the issuer made a bona
fide eligibility determination at the time
it filed the initial public offering
registration statement. The issuer will
continue to be a smaller reporting
company until its next annual
determination date—the end of its
second fiscal quarter.
With regard to a company’s initial
registration statement under the
Exchange Act covering a class of
securities, the company would calculate
its public float as of a date within a 30day window of the registration
statement being filed. Because such an
Exchange Act registration statement
would not directly affect the issuer’s
public float, if an issuer that files such
an Exchange Act registration statement
does not have a public float or its public
float cannot be calculated because there
is no market price for the issuer’s equity
securities, the issuer’s eligibility for the
scaled disclosure would be based on its
revenue, as proposed.95
c. Alternative Revenue Test for
Reporting and Non-Reporting
Companies
As we stated in the Proposing Release,
situations may arise in which a
reporting company would be unable to
calculate public float because it has no
public common equity outstanding or
no market price for its common equity
exists. As adopted, the definition
provides a third eligibility category to
qualify for smaller reporting company
status—companies unable to calculate a
public float. To qualify as smaller
reporting companies, this group of
companies will be required to have
annual revenues of less than $50 million
during the last fiscal year before filing
the registration statement.96
d. Entering and Exiting Smaller
Reporting Company Status
The rules we are adopting on entering
and exiting smaller reporting company
status in Item 10 of Regulation S–K are
94 See
95 See
93 See
Letter from ABA.
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new Item 10(f)(2)(ii) of Regulation S–K.
new Item 10(f)(1)(iii) of Regulation S–K.
96 Id.
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less restrictive than the Regulation S–B
requirements of Item 10. Item 10 of
Regulation S–B currently requires
issuers to calculate eligibility based on
public float and revenue levels for two
consecutive fiscal years. The Regulation
S–B system had a significantly longer
transition period to enter or exit the
smaller company disclosure system.
We are adopting transition rules for
entering and exiting smaller reporting
company status that track the
accelerated filer definition. The
Proposing Release suggested that the
accelerated filer transition rules were
the same as the smaller reporting
company transition requirements to
move back and forth from larger
company disclosure standards to
smaller reporting company standards.
One comment letter requested
clarification, pointing out that
accelerated filers are required to change
to their new status when determining
the due date of the annual report
covering the year of the status change,
but, as proposed, the smaller reporting
company determination would not take
effect until the first fiscal quarter of the
next fiscal year.
As adopted, the rules provide that a
larger reporting company that
determines it is a smaller reporting
company as of the last business day of
its most recently completed second
fiscal quarter is permitted to transition
to the scaled disclosure requirements in
the Form 10–Q quarterly report
corresponding to the determination
date’s second fiscal quarter rather than,
as proposed, the following fiscal year’s
first quarterly report. A smaller
reporting company required to
transition to the larger reporting system
after its determination date calculation
will not be required to satisfy the larger
reporting company disclosure
requirements until the first quarter after
the determination date fiscal year.97
To illustrate, a larger reporting
company with a fiscal year end of
December 31, 2008 that qualified as a
smaller reporting company on the last
business day of its most recently
completed second fiscal quarter in 2008
would be able to provide scaled
disclosure beginning with the Form 10–
Q for the same second fiscal quarter in
which the company determined its
eligibility, which would be due in
August 2008. Conversely, a smaller
reporting company with a fiscal year
end of December 31, 2008 that is
required to transition out of the scaled
disclosure system into the larger
company disclosure system will be
required to do so beginning with the
97 See
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Form 10–Q for the first fiscal quarter of
2009, which would be due in May 2009.
As adopted, once an issuer fails to
qualify for smaller company status, it
will remain unqualified unless it
determines that its public float, as
calculated in accordance with the
definition, was less than $50 million as
of the last business day of its second
fiscal quarter. Where an issuer does not
have a public float or no public market
for its common equity securities exists
and it has less than $50 million in
revenue, it will qualify to use the scaled
disclosure item requirements until it
exceeds $50 million in annual revenue.
Once such an issuer fails to qualify as
a smaller reporting company because its
revenues exceed $50 million, that issuer
will not become eligible for smaller
reporting company status until it has
annual revenues of less than $40 million
in its last fiscal year.98
F. Miscellaneous 99
1. Indexing for Inflation
Many comment letters favored the
inflation adjustments to the public float
levels and revenue ceilings in the
definition of smaller reporting company,
but noted that the accelerated filer
definition also should be indexed in
order to keep these two categories
aligned. We are not adopting the
indexing proposal, but will consider
whether these suggestions should be the
subject of a future rulemaking project to
collectively index several thresholds in
current Commission rules.
2. Eliminating Transitional Small
Business Issuer Format
We are eliminating the transitional
small business issuer format, as
proposed. No commenters objected to
this proposal.
3. Checking the ‘‘Smaller Reporting
Company’’ Box
A company that qualifies as a smaller
reporting company based on the
appropriate eligibility test under the
definition will be required to check the
‘‘smaller reporting company’’ box on the
registration statement or periodic report
filed, whether or not it chooses to rely
on the scaled disclosure standards of the
amended Regulation S–K requirements.
Several comment letters supported this
proposal.100
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98 See
new Item 10(f)(2)(iii) of Regulation S–K. 17
CFR 229.10(f)(2).
99 In addition to the matters discussed in this
release, we are amending a number of rules to
eliminate references to Regulation S–B and the SB
forms and to make other technical changes, such as
providing the Commission’s current mailing
address.
100 See, e.g., Letters from CAQ and ABA.
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IV. Compliance Dates
Transition for Current Small Business
Issuers. We are providing current small
business issuers the option to file their
next annual report for a fiscal year
ending on or after December 15, 2007 on
either Form 10–KSB or Form 10–K. A
small business issuer may continue to
file its periodic reports using Regulation
S–B and the ‘‘SB’’ forms until its next
annual report is filed. After a small
business issuer files that next annual
report, subsequent periodic reports must
be filed on a form that does not have the
‘‘SB’’ designation. This will provide an
optional transition period for companies
that were small business issuers as of
the effective date.
As a result of this transition period,
Regulation S–B, Form 10–QSB, and
Form 10–KSB need to be maintained
while eligible small business issuers
may continue to use them. Accordingly,
while most of the amendments are
effective on February 4, 2008. Form
10–QSB will not be removed until
October 31, 2008 and Regulation S–B
and Form 10–KSB will not be removed
until March 15, 2009.
We are making numerous changes to
rules and forms to implement these rule
amendments, including replacing
references to small business issuers with
references to smaller reporting
companies. During the optional
transition period, small business issuers
have the same reporting obligations as
they had before these rule amendments,
except to the extent that they
voluntarily move to the new smaller
reporting company system before being
required to do so.
The ‘‘SB’’ Securities Act and
Exchange Act registration statement
forms, SB–1, SB–2, and 10–SB, will be
rescinded on the effective date.
Companies filing a registration
statement after this date will be required
to file on the appropriate form without
an ‘‘SB’’ designation. If a registration
statement was filed on an ‘‘SB’’ form
before the effective date, and the
company seeks to amend it after the
effective date, the company must file the
amendment on a correct form without
an ‘‘SB’’ designation, but may continue
to use the disclosure format and content
based on the ‘‘SB’’ form until six
months after the effective date.101
General Transition Provisions.
Companies that qualify as smaller
reporting companies after the effective
101 For example, a company that filed on Form
SB–2 before the effective date would be required to
file any pre-or post-effective amendments on Form
S–1, but would be able to maintain the item
requirement format of its Form SB–2 for up to six
months after the effective date.
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date, whether or not they currently are
small business issuers, will have the
option to comply with the scaled
disclosure item requirements for smaller
reporting companies in their registration
statements and periodic reports filed
after the effective date. To determine
their status after the effective date,
reporting companies will refer to their
most recent second fiscal quarter to
calculate public float. In these cases,
reporting companies have already
calculated public float for purposes of
determining accelerated filer status and,
therefore, no additional computation is
necessary. Current small business
issuers will be deemed to qualify as
smaller reporting companies and need
not make this calculation. Companies
that recently became reporting
companies before the effective date, but
have not yet had a completed second
fiscal quarter, will base eligibility on the
public float calculated after the initial
public offering. In all cases, companies
that qualify for smaller reporting
company status will continue to have
this status until they make their annual
determination at the end of the second
fiscal quarter.
V. Paperwork Reduction Act
A. Background
The amendments contain ‘‘collection
of information’’ requirements within the
meaning of the Paperwork Reduction
Act of 1995 (‘‘PRA’’).102 As discussed in
the Proposing Release, we submitted a
request for approval of the ‘‘collection of
information’’ requirements contained in
the proposed amendments to the Office
of Management and Budget in
accordance with the PRA.103 Some of
the revisions that we are making to the
original proposal affect these collections
of information, but the revisions do not
affect the burden estimates that we
submitted to the OMB in connection
with the Proposing Release. The titles of
the collections of information are:104
(1) ‘‘Regulation S–B’’ (OMB Control
No. 3235–0417);
(2) ‘‘Regulation S–K’’ (OMB Control
No. 3235–0071);
(3) ‘‘Regulation C’’ (OMB Control No.
3235–0074);
(4) ‘‘Form SB–1’’ (OMB Control No.
3235–0423);
102 44
U.S.C. 3501 et seq.
U.S.C. 3507(d); 5 CFR 1320.11.
104 The paperwork burden from Regulation S–K
and S–B is imposed through the forms that are
subject to the requirements in those regulations and
is reflected in the analysis of those forms. To avoid
a Paperwork Reduction Act inventory reflecting
duplicative burdens and for administrative
convenience, we assign a one-hour burden to
Regulations S–K and S–B.
103 44
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(5) ‘‘Form SB–2’’ (OMB Control No.
3235–0418);
(6) ‘‘Form S–1’’ (OMB Control No.
3235–0065);
(7) ‘‘Form S–3’’ (OMB Control No.
3235–0073);
(8) ‘‘Form S–4’’ (OMB Control No.
3235–0324);
(9) ‘‘Form S–8’’ (OMB Control No.
3235–0066);
(10) ‘‘Form S–11’’ (OMB Control No.
3235–0067);
(11) ‘‘Form 1–A’’ (OMB Control No.
3235–0286);
(12) ‘‘Form 10’’ (OMB Control No.
3235–0064);
(13) ‘‘Form 10–SB’’ (OMB Control No.
3235–0419);
(14) ‘‘Form 10–K’’ (OMB Control No.
3235–0063);
(15) ‘‘Form 10–KSB’’ (OMB Control
No. 3235–0420);
(16) ‘‘Form 8–K’’ (OMB Control No.
3235–0060);
(17) ‘‘Form 8–A’’ (OMB Control No.
3235–0056);
(18) ‘‘Form 10–Q’’ (OMB Control No.
3235–0070);
(19) ‘‘Form 10–QSB’’ (OMB Control
No. 3235–0416);
(20) ‘‘Form 11–K’’ (OMB Control No.
3235–0082); and
(21) ‘‘Form SE’’ (OMB Control No.
3235–0327).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
The hours and costs associated with
preparing disclosure, filing information
required by forms, and retaining records
constitute reporting and cost burdens
imposed by collection of information
requirements. The information
collections related to annual, periodic,
and current reports and registration
statements will be mandatory for larger
reporting companies; some of the
requirements, however, will be
voluntary for smaller reporting
companies. There is no mandatory
retention period for the information
disclosed, and the information disclosed
will be made publicly available on the
Commission’s EDGAR filing system or
in the Commission’s public reference
room in the case of a Form 1–A or Form
SE filing.
For purposes of the Paperwork
Reduction Act, as adopted, the burden
changes are insignificant for companies
that currently meet the small business
issuer definition. We did not receive
any comment letters providing data or
other information concerning legal or
accounting costs that would cause us to
change our view.
We adopted existing Regulation S–B
to provide an integrated disclosure
system for small business issuers and
Regulation S–K to provide an integrated
disclosure system for larger reporting
companies. Forms SB–1, SB–2, S–1, S–
3, S–4, S–8, and S–11 are registration
statements that are prepared by eligible
issuers to provide investors with the
information they need to make informed
investment decisions in registered
offerings. Form 1–A is the form required
when a non-reporting company seeks to
use the Regulation A exemption from
the Securities Act. Regulation A is a
conditional small issues exemption
available to eligible issuers. Forms 10,
10–SB, 10–K, 10–KSB, 8–K, 8–A, 10–Q,
10–QSB, and 11–K are forms that set
forth disclosure requirements for
companies filing reports with the
Commission pursuant to the Exchange
Act. Finally, Form SE is a notice to the
Commission by an EDGAR electronic
filer that it is filing paper format
exhibits.
Consistent with the information that
we previously submitted to the OMB we
estimate that the total increase in
burden hours for Form 10–K, Form 10–
Q, Form 10, Form S–1, and Form S–11
will be 7,857,948 and that the total
increase in cost will be $1,114,044,563.
These increases are offset by the total
decrease in burden hours for Form 10–
KSB, Form 10–QSB, Form 10–SB, Form
SB–1, and Form SB–2 of 7,853,542.5
burden hours and a total decrease in
cost of $1,108,787,363. The net
difference between the increase and
decrease is an increase of 4,405.5
burden hours and a cost of
$5,257,200.105 The net increase of
4,405.5 burden hours and costs of
$5,257,200 is outweighed by the
possible decrease of 356,290 burden
hours and costs of $47,479,000 for the
1,581 newly eligible smaller reporting
companies.
The table below sets forth our current
hourly and cost burden estimates for
Forms 10–K, 10–Q, 10, S–1, and S–11
after these amendments.106
Form
Burden hours
10–K .................................................................................................................................................................
10–Q ................................................................................................................................................................
10 .....................................................................................................................................................................
S–1 ...................................................................................................................................................................
S–11 .................................................................................................................................................................
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B. Summary of Comment Letters and
Revisions to the Proposals
We requested comment on the
Paperwork Reduction Act analysis
contained in the Proposing Release. One
commenter 107 stated that the
substitution of the Regulation S–K
disclosure framework would only be
beneficial to small issuers if there were
no increase in legal and accounting
costs. The commenter noted that the
Commission does not guarantee that
105 As explained in the Proposing Release, the net
difference arises primarily from the increased
burden on real estate companies that previously
could use Form SB–2, but under these amendments
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moving the current Regulation S–B
disclosure requirements into Regulation
S–K will be more cost effective. The
commenter also disagreed with the
Commission’s average costs estimates,
stating that costs vary between New
York City and smaller communities
throughout the country. Several other
commenters 108 raised similar concerns
that costs may increase as a result of
these proposals. None of these
commenters, however, provided any
would now be required to use Form S–11, the form
tailored to issuers in the real estate industry.
106 Collection affected by the rulemaking, but not
included in the table, were either rescinded or their
estimated burden was not changed.
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23,430,170
4,583,290
11,725
167,912
37,069
Annual costs
$3,124,022,763
513,829,600
14,070,000
201,493,800
44,484,000
data or other information to show that
legal and accounting costs will increase.
Our estimates of the average number
of hours each entity spends completing
the affected forms, allocation of burden
between outside counsel and internal
personnel, and the average hourly rate
for outside securities counsel were
obtained by contacting a number of law
firms and other persons regularly
involved in completing the forms and
reflect regional variances.
107 See
Letter from the IASBDA.
Letters from SBA Office of Advocacy,
Center for Capital Markets (U.S. Chamber of
Commerce), and Prof. James Angel.
108 See
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Commenters who raise a concern
about the transition from Regulation
S–B and the ‘‘SB’’ forms to Regulation
S–K and the ‘‘SK’’ forms wanted us to
consider a phase-in period. The
amendments, as adopted, will allow a
former ‘‘SB’’ filer a choice to file its first
annual report on Form 10–K or Form
10–KSB during the transition period,
but thereafter it will no longer be able
to use the ‘‘SB’’ forms. For example,
after the effective date of these
amendments, an eligible calendar year
company will be able to choose to file
its first annual report on Form 10–K or
Form 10–KSB. An eligible non-calendar
company may file its quarterly reports
on Form 10–Q or Form 10–QSB until its
next annual report due after the
effective date of the amendments. That
next annual report may be filed on Form
10–K or Form 10–KSB, but thereafter
the company may no longer use the
‘‘SB’’ forms.
We also received comment letters 109
expressing concern that legal and
accounting costs will increase as a result
of the proposals. We do not believe that
legal or accounting costs should
increase since, small business issuers
generally will be providing the same
disclosure as currently filed. In the case
of a newly eligible smaller reporting
company that previously filed under
Regulation S–K using ‘‘SK’’ forms, the
disclosure burden will decrease if the
company elects to use the scaled
disclosure available to smaller reporting
companies. Otherwise the issuer may
also file roughly the same information
as it does currently. The Commission is
providing an index to the scaled
disclosure requirements in new Item
10(f) of Regulation S–K and plans to
publish a brochure to assist smaller
reporting companies in transitioning to
the new scaled disclosure requirements.
In response to these comments, we
decided to revise four items that were
part of the original proposal.
First, we are persuaded by the letters
of the public accounting firms 110 that
Item 310 should be placed in a separate
section within Regulation S–X, instead
of creating a new Item 310 within
Regulation S–K. We agree that having
all financial information requirements
within one Regulation seems logical and
appropriate.
Second, several commenters 111 cite
the Advisory Committee’s
recommendation to require two years of
109 See Letters from IASBDA, SBA Office of
Advocacy, Center for Capital Markets (U.S.
Chamber of Commerce), and Prof. James Angel.
110 See Letters from Grant Thornton, BDO, KPMG,
PricewaterhouseCoopers LLP, and CAQ.
111 See Letters from Grant Thornton, BDO,
PricewaterhouseCoopers, and CAQ.
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balance sheets to go along with audited
statements of income, cash flows, and
changes in stockholders’ equity for each
of the latest two fiscal years, as required
by Regulation S–X. We have been
convinced by the comment letters and
the Advisory Committee’s report that
two years of balance sheets will provide
investors with valuable comparative
information with minimal additional
costs.
A third revision will allow a smaller
reporting company to provide its
financial statements on an ‘‘a la carte’’
basis like the other non-financial
statement disclosure items. This
revision differs from the Proposing
Release, where the Commission
proposed to require a smaller reporting
company to provide its financial
statements on the basis of Item 310 of
Regulation S–K or Regulation S–X for an
entire fiscal year, and not be permitted
to switch back and forth from one to the
other in different filings within a single
fiscal year. A commenter 112 pointed out
that this inflexibility within the ‘‘a la
carte’’ system and requiring a smaller
reporting company to ‘‘lock in’’ to one
approach or the other when it files its
first Form 10–Q for a year seems
contrary to the proposed ‘‘a la carte’’
approach. As we proposed, if a smaller
reporting company wanted to preserve
the option of following the smaller
reporting company rules in its filings, it
perhaps could not provide the
additional information required of larger
companies in its first quarterly report or
risk losing the ability to use the scaled
disclosure requirements for the year. As
adopted, we will allow ‘‘a la carte’’
disclosure for financial statements so
that smaller reporting companies can
provide additional information over and
above the financial disclosure required
by Article 8 of Regulation S–X.
The fourth revision requested by
commenters 113 is to amend Rule 3–05
of Regulation S–X. Rule 3–05 provides
the requirements for Financial
Statements of Businesses Acquired or to
be Acquired, and paragraph (b)(2)(iv)
allows issuers to omit the financial
statements for the earliest of three fiscal
years required if the net revenues of the
business to be acquired are less than $25
million. We agree with the commenters
that the $25 million ceiling was related
to the small business issuer definition,
and since we are creating a new
definition of smaller reporting company
to replace the small business issuer
definition that contains a $50 million
112 See
113 See
Letter from BDO.
Letters from Grant Thornton, KPMG, and
CAQ.
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947
revenue ceiling, it is appropriate to raise
the Rule 3–05 ceiling to $50 million.
For purposes of the Paperwork
Reduction Act, as adopted, the burden
changes are insignificant for companies
that currently meet the small business
issuer definition. We did not receive
any comment letters providing data or
other information concerning legal or
accounting costs that would cause us to
change our view.
VI. Cost-Benefit Analysis
A. Background
We have adopted amendments to
eliminate our ‘‘SB’’ forms and move the
Regulation S–B item requirements into
amended Regulations S–K and S–X. The
amendments will amend all relevant
rules and forms under the Securities
Act, the Exchange Act, and the Trust
Indenture Act to replace the existing
references to ‘‘small business issuer’’ to
reference to ‘‘smaller reporting
company.’’ The new ‘‘smaller reporting
company’’ definition will replace the
current ‘‘small business issuer’’
eligibility standards to allow a greater
number of public companies to provide
disclosure based on the scaled
disclosure requirements. The new
definition for smaller reporting
company will include companies with a
public float of less than $75 million and
will therefore be a significant increase
from the $25 million levels for public
float and revenue under the current
‘‘small business issuer’’ definition. For
companies without a public float, we
are requiring an alternative ceiling of
below $50 million in revenue in the
previous year.
B. Summary of Rules
As noted above, the amendments will
eliminate the separate disclosure
framework of Regulation S–B by moving
those requirements into Regulation S–K
and the financial disclosure into
Regulation S–X. The new definition for
‘‘smaller reporting company’’ will
expand the number of filers that will
qualify to provide disclosure under the
scaled item requirements of the current
Regulation S–B framework. Smaller
reporting companies and nonaccelerated filers will both be subject to
Regulation S–K, but smaller reporting
companies will have the option to
provide disclosure on an item-by-item
basis according to the scaled item
requirements of amended Regulation
S–K. The newly adopted amendments
will allow eligible smaller reporting
companies to do the following:
• Provide three years rather than five
years of business development
activities, and not be required to
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provide segment disclosure under
amended Item 101 of Regulation S–K;
• Not provide disclosure required by
Items 301 and 302 relating to selected
financial data and supplementary
financial information;
• Provide more streamlined
disclosure for management’s discussion
and analysis of financial condition and
results of operations found in Item 303
by requiring only two years of analysis
if the company is presenting only two
years of financial statements, instead of
three years currently required of larger
companies;
• Provide audited balance sheets,
audited statements of income, cash
flows and changes in stockholders’
equity for each of the last two fiscal
years in new Article 8 of Regulation S–
X instead of an audited balance sheet as
of the end of the last two fiscal years
and audited statement of income, cash
flows and changes in stockholders’
equity for each of the last three fiscal
years as required by other parts of
Regulation S–X;
• Provide disclosure about the chief
executive officer and two other highly
compensated executive officers only,
rather than the information for the Chief
Executive Officer, Chief Financial
Officer and three other executive
officers required of larger registrants;
• Not provide a Compensation
Discussion and Analysis required of
larger reporting companies;
• Provide only three of the seven
tables (Summary Compensation,
Outstanding Equity Awards, and
Director Compensation) required of
larger reporting companies; and
• Not provide disclosure regarding
the company’s policies and procedures
for approving related person
transactions. Smaller reporting
companies will be required, however, to
provide disclosure regarding a
transaction where the amount exceeds
the lesser of 1% of a smaller company’s
total assets or $120,000. They also will
be required to provide additional
specific information about underwriting
discounts and commissions and
corporate parents. Additionally, smaller
reporting companies will be required to
provide disclosure regarding promoters
and certain control persons.
C. Benefits
As discussed above, the amendments
adopted today will promote regulatory
simplification by eliminating all ‘‘SB’’
forms and consolidating the Regulation
S–B disclosure item requirements into
Regulation S–K. The integrated
Regulation S–K regime will enable a
larger category of public companies to
have more flexibility in tailoring
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disclosure standards to fit the need of
investors and the realities of their
company. We believe investors will
benefit from the scaled disclosure
amendments to Regulation S–K because
the amendments allow issuers to make
disclosure based on the size, business
operations, and financial condition of
the smaller reporting company.
Allowing smaller reporting companies
to choose scaled disclosure on an itemby-item basis allows companies to tailor
their disclosure to reduce costs and
thereby benefit shareholders. The
increased public float standards in the
definition of smaller reporting company
will allow more companies the
flexibility to choose between scaled
item requirements such as financial
statement information and executive
compensation disclosure. By doing so,
these newly eligible companies can
appropriately determine the information
needs of their investors in light of the
costs of providing that information.
Thus, moving the scaled disclosure
requirements of Regulation S–B into
Regulations S–K and S–X will provide
regulatory flexibility that gives
companies the ability to allocate
resources to increased disclosure only
in instances where they believe doing so
would provide a benefit to shareholders.
Eliminating the ‘‘SB’’ forms will
mitigate any perceived notion that
smaller companies are currently
reporting under a completely different
and inferior disclosure framework. If
current Regulation S–B filers are
inappropriately penalized by the market
for this perceived notion, as some
commenters have suggested, then
integrating Regulation S–B and
Regulation S–K should benefit
shareholders by decreasing the
company’s cost of capital. To the extent
that these amendments eliminate the
perceived notion of an inferior
disclosure framework, we believe that
these amendments will increase the
benefits and in some instances, reduce
the costs of being a public company and
will benefit the capital markets by
encouraging private companies to
consider offerings that are registered
under the Securities Act or to enter the
Exchange Act reporting system.
As amended, an integrated disclosure
system for all companies filing forms
using Regulation S–K will promote
efficiency because practitioners and
investors will refer to one disclosure
framework. Filers and their practitioners
will have one consolidated regulation to
find all relevant disclosure item
requirements, which will reduce
complexity and improve regulatory
efficiencies. Although some
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commenters 114 were concerned that
finding the scaled disclosure provisions
in Regulation S–K would be inefficient,
the index of scaled disclosure in new
Item 10(f) should mitigate this concern.
For some smaller reporting companies,
legal and accounting costs may
decrease.
As discussed earlier in this release,
we estimate that approximately 1,581
new companies will have an
opportunity to use the restructured
scaled disclosure requirements for
smaller reporting companies and may
experience significant burden and cost
savings if they use them.115 We assume
that approximately 50% of the 1,581
companies (or 790 companies) will use
the scaled disclosure requirements. For
purposes of the Paperwork Reduction
Act, we estimate that these 790 smaller
reporting companies may save 356,290
internal burden hours and costs in the
amount of $47,479,000 by using the
scaled disclosure requirements. 116
Finally, another benefit to smaller
reporting companies is that by using
Registration Statement Form S–1, a
company may be permitted to
incorporate by reference its previously
filed periodic reports. We believe that
this will result in some cost savings and
efficiencies in preparing registration
statements for smaller reporting
companies.
D. Costs
In our view, the elimination of the
‘‘SB’’ forms and moving the Regulation
S–B disclosure standards into
Regulation S–K and financial disclosure
into Regulation S–X will not
significantly increase the costs of
complying with the Commission’s rules.
The disclosure requirements will not
change except in minor ways for current
small business issuers that previously
114 See
e.g. Letters from Grant Thornton and BDO.
estimate that 1,227 companies would be
newly eligible to use the scaled disclosure available
to smaller reporting companies in addition to
another 354 companies that currently are eligible
for scaled disclosure but do not use it, resulting in
a total of 1,581 companies. Approximately 1,227
companies have a public float between $25 and $75
million, in addition to approximately 354
companies with a public float below $25 million
that currently use the ‘‘SK’’ forms rather than the
‘‘SB’’ forms.
116 This estimate of a decrease in the compliance
burden by 356,290 hours is based upon 790
responses by companies using regular Regulation
S–K disclosure × 1,723 internal hours per company
= 1,361,170 hours minus 790 responses by
companies × 1,272 internal hours per company =
1,004,880 hours for smaller reporting companies
and a decrease in the annual cost by $47,479,000
(574.25 professional hours × $400 per hour =
$229,700 cost per response using regular Regulation
S–K disclosure × 790 responses minus 424
professional hours × $400 per hour = $169,600 cost
per response using the scaled disclosure × 790
annual responses).
115 We
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filed under Regulation S–B, so we do
not anticipate any increase in costs due
to the change in disclosure
requirements.117
Four commenters 118 stated that these
proposals may have unintended
consequences, such as extra legal and
accounting costs. One of these
commenters 119 expressed concern that
moving the disclosure requirements of
Regulation S–B into Regulation S–K
would only benefit small issuers if the
legal and accounting costs do not
increase. The commenter did not
provide any data or information to
support its position that costs could
increase. The amount of disclosure a
former small business issuer will
provide on the ‘‘SK’’ forms should not
increase unless the issuer chooses to
provide additional disclosure above the
required disclosure. We have added a
heading entitled ‘‘Smaller Reporting
Companies’’ to Items where scaled
disclosure is available for smaller
reporting companies. This will alleviate
the concern that small issuers need
guidance in determining what
disclosure requirements apply to
them.120 Thus, we do not believe that
there should be any significant
additional out-of-pocket costs associated
with compliance.
We recognize that some of the 1,581
companies may choose to avail
themselves of the scaled disclosure
requirements when they have complied
with standard Regulation S–K
previously. In addition, the amount of
disclosure reviewed by the
Commission’s staff may change for these
companies. The staff will now evaluate
compliance with Regulation S–K on the
scaled disclosure requirements available
to smaller reporting companies even if
the company previously chose to
comply with the larger company
Regulation S–K disclosure
requirements. If the amount of
disclosure and corresponding SEC
review under the prior reporting
standard was valued by investors, using
scaled disclosure may increase a
company’s cost of capital. Because the
differences in smaller and larger
company disclosure standards are small,
however, we believe that any such costs
will be minimal.
117 For current ‘‘SB’’ filers, we estimate the net
difference of reporting under Regulation S–K will
be an increase of 4,405.5 burden hours and a cost
of $5,257,200 for purposes of the Paperwork
Reduction Act.
118 See Letters from IASBDA, SBA Office of
Advocacy, Center for Capital Markets (U.S.
Chamber of Commerce), and Prof. James Angel.
119 See Letter from IASBDA.
120 See Letter from Prof. James Angel.
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Investors may face additional costs in
determining whether a newly eligible
smaller reporting company has changed
the amount of disclosure it provides to
investors or whether the company
continues to provide the maximum
required disclosure. Allowing smaller
reporting companies to choose financial
statement items on an ‘‘a la carte’’ basis
in a quarterly report may create
additional costs for investors to
determine whether the company has
changed the type of disclosure from
quarter to quarter. Since smaller
reporting companies will be required to
check a box indicating they qualify as
such, however, investors will be alerted
that these issuers are eligible to use the
scaled disclosure requirements.
Another possible cost is requiring
Canadian issuers, who seek to use the
new scaled disclosure requirements, to
provide their financial statements using
U.S. GAAP rather than home country
GAAP reconciled to U.S. GAAP. Based
upon the Form 10–KSB filings received
from Canadian issuers on the
Commission’s EDGAR filing system we
estimate that under 50 Canadian issuers
will be affected by this change. This
change could increase audit costs for
these companies if they chose to
continue to file on the domestic forms
which will now require financial
statements in accordance with U.S.
GAAP. Other cost increases could
include staff training, administrative
costs, and minor transition costs.
VII. Consideration of Impact on the
Economy, Burden on Competition and
Promotion of Efficiency, Competition
and Capital Formation
Section 23(a)(2) of the Exchange Act
requires us to consider the impact that
any new rule will have on
competition.121 Section 23(a)(2) also
prohibits us from adopting any rule that
will impose a burden on competition
not necessary or appropriate to carry out
the purposes of the Exchange Act.
Furthermore, when engaging in
rulemaking that requires us to consider
or determine whether an action is
necessary or appropriate in the public
interest, Section 2(b) of the Securities
Act and Section 3(f) of the Exchange Act
require the Commission to consider
whether the action will promote
efficiency, competition and capital
formation.
We expect that the amendments
adopted today will result in regulatory
simplification and efficiency by
removing the duplicative sections of
Regulation S–B and consolidating the
scaled item requirements of Regulation
121 15
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S–B, such as executive compensation,
into amended Regulation S–K. As
adopted, the financial statement
requirements for small business issuers
previously found in Item 310 will be in
a separate section of Regulation S–X. As
amended, Regulations S–K and S–X will
consolidate these requirements into a
simplified framework applicable to all
filers that are subject to the reporting
requirements of Sections 13 and 15 of
the Exchange Act and companies filing
registration statements under the
Securities Act. To comply with
disclosure item requirements,
practitioners and companies will no
longer need to refer to two disclosure
frameworks. Practitioners and
companies will benefit from the ease of
reference that a single disclosure
framework will provide.
It is expected that the amendments
will promote capital formation for
smaller reporting companies and
improve their ability to compete with
larger companies for capital. For
example, we believe capital formation
will be improved by providing
flexibility to more smaller reporting
companies to tailor their disclosure to
their investors’ needs. In addition, the
costs to raise capital may be reduced to
the extent compliance costs, but not
benefits, are reduced as a result of the
scaled disclosure requirements. If
smaller reporting companies allocate the
capital they raise and save as a result of
our scaled disclosure requirements to
business development in an effective
manner, these companies will be more
competitive. More companies will be
able to take advantage of more scaled
disclosure item requirements, such as
those contained currently in Item 310
and Item 402 of Regulation S–B. Smaller
reporting companies that avail
themselves of the scaled disclosure
requirements will provide tailored
disclosure that may better meet the
needs of their investors.
VIII. Final Regulatory Flexibility Act
Analysis
This Final Regulatory Flexibility
Analysis has been prepared in
accordance with the Regulatory
Flexibility Act.122 It relates to
amendments to the rules and forms
under the Securities Act and Exchange
Act, which include a new definition of
‘‘smaller reporting company’’ under
Regulation S–K. The new definition will
expand the group of smaller companies
that qualify to provide disclosure in
accordance with the scaled
122 5
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requirements of the current Regulation
S–B disclosure framework.
As adopted, a smaller reporting
company is defined as a company that
meets all of the following criteria: Is not
an investment company, an assetbacked issuer, or the majority-owned
subsidiary of a parent that was not a
smaller reporting company; had a public
float of less than $75 million as of the
last business day of its most recently
completed second fiscal quarter; and in
the case of an issuer whose public float
was zero, had annual revenues of less
than $50 million during its most
recently completed fiscal year for which
audited financial statements are
available on the date of the filing.
The amendments also will eliminate
the separate disclosure regime of
Regulation S–B by removing all related
‘‘SB’’ forms and merging the Regulation
S–B item requirements into Regulation
S–K, except for Item 310 (Financial
statements) which move into Regulation
S–X. The revisions to Regulations S–K
and S–X include revising item
requirements to offer smaller reporting
companies optional disclosure
alternatives that are designed to provide
flexibility, cost efficiencies and
regulatory simplification.
A. Reasons for and Objectives of
Amendments
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1. The Advisory Committee on Smaller
Public Companies Recommended
Scaled Federal Securities Regulation for
Smaller Companies
In March 2005, the Commission
chartered the Advisory Committee on
Smaller Public Companies to assess the
current regulatory system for smaller
companies under the federal securities
laws, including the disclosure and
reporting requirements applicable to
smaller companies, and to make
recommendations for changes to
improve regulatory conditions for
smaller companies.
After receiving public input, the
Advisory Committee made three
recommendations in the disclosure area,
which included making the scaled
disclosure accommodations available to
small business issuers available to all
microcap companies, incorporating
Regulation S–B into Regulation S–K,
and incorporating Item 310 of
Regulation S–B into Regulation S–K or
Regulation S–X to make the scaled
financial statement accommodations
available to a much larger group of
smaller companies.
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2. Expanding Eligibility for Smaller
Company Scaled Regulation Under
Amended Regulation S–K
To make the scaled requirements of
the Regulation S–B disclosure
framework applicable to many more
companies, the Advisory Committee
recommended revising the definition of
‘‘small business issuer’’ to include a
company with a higher public float
threshold than the $25 million ceiling
currently required in the small business
issuer definition found in Item 10 of
Regulation S–B.
Although the Advisory Committee did
not recommend that we use a public
float threshold, the $75 million public
float threshold adopted is based on the
reference to that number in the
accelerated filer definition set forth in
Rule 12b–2 of the Exchange Act. To
maintain consistency with current
regulation, we believe setting a public
float threshold based on the current
levels established for non-accelerated
filers is practical and avoids regulatory
complexity.
3. Integrating Substantive Requirements
of Regulation S–B Into Regulations S–K
and S–X
The overall goal of the rule
amendments is to integrate the scaled
disclosure requirements of Regulation
S–B into Regulation S–K and make
these scaled disclosure requirements
available to more companies as smaller
reporting companies. We believe the
amendments will:
• Further the goals of regulatory
simplification by eliminating the
current Regulation S–B framework as a
separate stand-alone disclosure standard
for the smallest reporting companies;
• Update the public float threshold
and eliminate the revenue threshold
restriction in the current ‘‘small
business issuer’’ definition to
accommodate many more companies
that are contemplating an offering
registered under the Securities Act or
entry into the Exchange Act reporting
system;
• Streamline and modernize forms
under the Securities Act and the
Exchange Act by eliminating all of the
‘‘SB’’ forms; and
• Provide regulatory flexibility by
permitting smaller reporting companies
to provide the same financial statement
information previously found in Item
310 of Regulation S–B into Regulation
S–X.
B. Significant Issues Raised by Public
Comment
The initial Regulatory Flexibility Act
analysis appeared in the Proposing
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Release. We requested comment on any
aspect of the Initial Regulatory
Flexibility Act analysis, especially
empirical data on the impact on small
businesses.
In the Proposing Release we stated
that the proposed elimination of
Regulation S–B and the ‘‘SB’’ forms will
not increase significantly the costs of
complying with the Commission’s rules.
While we still believe this is the case,
we received four comment letters 123
expressing concern that the proposals
could increase legal and accounting
costs. One of these commenters 124
stated that ‘‘this type of one-size-fits-all
regulation may have unintended
consequences such as extra legal and
accounting costs.’’ Another
commenter 125 stated that the proposals
would not increase costs and that the
backwards incorporation by reference
on Form S–1 would save burden hours
and costs.
As stated above, in response to the
commenters’ concerns about the
transition from Regulation S–B and the
‘‘SB’’ forms to Regulation S–K and the
‘‘SK’’ forms, we have added a transition
provision for companies that are current
‘‘SB’’ filers. These companies will have
the choice of filing their next annual
report due after the effective date on
either a Form 10–KSB or a Form 10–K.
Similarly, they may file any quarterly
reports for periods before the next
annual report due on either Form 10–
QSB or Form 10–Q. Reports filed after
the next annual report due may no
longer be on the ‘‘SB’’ forms.
C. Small Entities Subject to the
Amendments
The amendments will affect small
entities, the securities of which are
registered under Section 12 of the
Exchange Act or that are required to file
reports under Section 15(d) of the
Exchange Act. The amendments also
will affect small entities that file, or
have filed, a registration statement that
has not yet become effective under the
Securities Act and that has not been
withdrawn. Securities Act Rule 157 126
and Exchange Act Rule 0–10(a) 127
define an issuer to be a ‘‘small entity’’
for purposes of the Regulatory
Flexibility Act if it had total assets of $5
million or less on the last day of its most
recent fiscal year. We believe the
amendments will affect some small
entities. We estimate that there are
123 See Letters from IASBDA, SBA Office of
Advocacy, Center for Capital Markets (U.S.
Chamber of Commerce), and Prof. James Angel.
124 See Letter from the SBA Office of Advocacy.
125 See Letter from ABA.
126 17 CFR 230.157.
127 17 CFR 240.0–10(a).
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approximately 1,100 issuers that may be
considered small entities.128 Further, we
estimate that virtually all of the 1,100
small entities would be below $75
million in public equity float and will
qualify for the scaled disclosure
requirements.
D. Reporting, Recordkeeping, and Other
Compliance Requirements
As adopted, moving Regulation S–B
requirements into Regulations S–K and
S–X and rescinding all of the ‘‘SB’’
forms will shift the location of
disclosure requirements and will
require smaller reporting companies to
adapt to new formats in preparing their
disclosure for Form S–1. The
amendments to Regulation S–K include
a new definition for smaller reporting
company, which broadens the category
of filers preparing disclosure to comply
with the scaled item requirements of
amended Regulation S–K. Companies
with public floats between $25 and $75
million will be included in the class of
filers that is eligible to provide
disclosure based on the scaled
requirements of proposed revisions to
amended Regulation S–K. As adopted
today, the scope and presentation of
information disclosed based on the item
requirements of amended Regulations
S–K and S–X will differ in a number of
significant ways from the current
Regulation S–K disclosure framework.
Amended Regulation S–K will allow
smaller reporting companies to:
• Provide three years rather than five
years of business development
activities, and not be required to
provide segment disclosure under
amended Item 101 of Regulation S–K;
• Not provide disclosure required by
Items 301 and 302 relating to selected
financial data and supplementary
financial information;
• Provide more streamlined
disclosure for management’s discussion
and analysis of financial condition and
results of operations found in Item 303
by requiring only two years of analysis
if the company is presenting only two
years of financial statements, instead of
the three years currently required of
larger companies;
• Provide audited balance sheets,
audited statements of income, cash
flows and changes in stockholders’
equity for each of the last two fiscal
years in new Article 8 of Regulation S–
X instead of an audited balance sheet as
of the end of the last two fiscal years
128 The estimated number of reporting small
entities is based on 2007 data including the
Commission’s internal computerized filing system
and Thomson Financials Worldscope database. This
represents an update from the number of reporting
small entities estimated in prior rulemakings.
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and audited statement of income, cash
flows and changes in stockholders’
equity for each of the last three fiscal
years as required by other parts of
Regulation S–X;
• Provide disclosure about the chief
executive officer and two other highly
compensated executive officers only,
rather than the information for the Chief
Executive Officer, Chief Financial
Officer and three other executive
officers required of larger registrants;
• Not provide a Compensation
Discussion and Analysis required of
larger reporting companies;
• Provide only three of the seven
tables (Summary Compensation,
Outstanding Equity Awards, and
Director Compensation) required of
larger reporting companies; and
Not provide disclosure regarding the
company’s policies and procedures for
approving related person transactions.
Smaller reporting companies will be
required, however, to provide disclosure
regarding a transaction where the
amount exceeds the lesser of 1% of a
smaller company’s total assets or
$120,000. They also will be required to
provide additional specific information
about underwriting discounts and
commissions and corporate parents.
Additionally, smaller reporting
companies will be required to provide
disclosure regarding promoters and
certain control persons. The
amendments to Regulation S–K will not
generally increase the disclosure
requirements for former small business
issuers, and could decrease the
disclosure required for issuers with
public float levels between $25 million
and $75 million.
Amended Item 404 of Regulation S–
K is the only example where it is
possible that the disclosure required for
smaller reporting companies will be
more extensive than for standard
Regulation S–K filers. In addition to a
longer time period for required
disclosure, as discussed above, Item 404
contains a provision that requires
disclosure of transactions with related
persons that exceed the lesser of
$120,000 or 1% of the average of the
smaller reporting company’s total assets
at the fiscal year end for the last two
completed fiscal years. This
requirement may be more burdensome
to a smaller reporting company if 1% of
total assets are less than $120,000. We
believe transactions involving related
persons are important to disclose,
especially for smaller reporting
companies, which generally have lower
materiality thresholds. We believe these
differences are important for the
protection of investors. This disclosure
issue will only affect smaller reporting
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951
companies that have related person
transactions.
E. Agency Action To Minimize Effect on
Small Entities
The Regulatory Flexibility Act directs
us to consider significant alternatives
that will accomplish the stated
objectives, while minimizing any
significant adverse impact on small
entities. In connection with the
proposals, we considered the following
alternatives:
(a) Establishing different compliance
or reporting requirements which take
into account the resources available to
smaller entities;
(b) The clarification, consolidation or
simplification of disclosure for small
entities;
(c) Use of performance standards
rather than design standards; and
(d) Exempting smaller entities from
coverage of the disclosure requirements
or any part thereof.
As adopted, our amendments are
intended to maintain current disclosure
standards for small entities while
further expanding the scope of
eligibility for companies that elect to
comply with the scaled disclosure item
requirements currently set forth in
Regulation S–B. These changes do not
exempt smaller entities from coverage of
the disclosure requirements; rather, they
provide a greater number of smaller
reporting companies the choice to
provide scaled disclosure within
Regulations S–K and S–X.
As adopted, the new definition for
smaller reporting company will
eliminate the current $25 million
revenue threshold and increase the
public float threshold requirement up to
$75 million from the $25 million level
currently set forth in the small business
issuer definition of Regulation S–B. We
believe that the $75 million threshold
will appropriately result in reduced
costs to smaller companies caused by
unnecessary information requirements,
consistent with investor protection. This
is also consistent with our current
regulatory system.
We considered alternatives such as
including a revenue cap in the new
definition of smaller reporting company,
but currently believe that only requiring
less than $75 million in public float is
preferable, given its ease of reference
and consistency with current rules
under the Securities Act and the
Exchange Act. We also seriously
considered the comment letters
submitted by the public. Some of the
letters urged the Commission to use
market capitalization instead of public
float as a metric to determine eligibility
as a smaller reporting company, but
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again, use of a float test provides more
regulatory consistency.
As adopted, we will consolidate,
clarify, and simplify our disclosure
requirements by moving Regulation S–
B into Regulations S–K and S–X. These
amendments include a new definition of
smaller reporting company, which
greatly expands the number of small
entities that will qualify to provide
disclosure based on the scaled
disclosure item requirements of the
current Regulation S–B framework. We
considered maintaining the Regulation
S–B framework and making it available
to many more companies, but we were
not convinced by commenters that the
Commission should not eliminate
Regulation S–B and the ‘‘SB’’ forms. We
still believe a single disclosure
framework will be more cost effective
and more efficient. The elimination of
the ‘‘SB’’ forms will result in regulatory
simplification for smaller entities by
requiring all registrants to rely on one
set of forms, such as Forms S–1, S–3,
10–K and 10–Q. These forms will
include scaled item requirements for
smaller reporting companies under the
amendments adopted today for
Regulations S–K and S–X.
Finally, we considered the use of
performance rather than design
standards but concluded that, although
we allow some tailoring, investors need
a basic level of consistency, uniformity
and comparability among issuers in
order to make appropriate investment
decisions.
IX. Statutory Basis and Text of
Amendments
The rule amendments described in
this release are being adopted pursuant
to Sections 6, 7, 10, and 19(a) of the
Securities Act, as amended, Sections 12,
13, 14(a), 15(d), and 23(a) of the
Exchange Act, as amended, and Section
319(a) of the Trust Indenture Act, as
amended.
List of Subjects
17 CFR Part 228
Reporting and recordkeeping
requirements, Securities, Small
businesses.
mstockstill on PROD1PC66 with RULES2
17 CFR Parts 210, 229, 230, 239, 240,
249, 260, and 269
Reporting and recordkeeping
requirements, Securities.
For the reasons set out in the
preamble, Title 17, Chapter II of the
Code of Federal Regulations is amended
as follows:
I
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PART 210—FORM AND CONTENT OF
AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF
1933, SECURITIES EXCHANGE ACT
OF 1934, PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935, INVESTMENT
COMPANY ACT OF 1940, INVESTMENT
ADVISERS ACT OF 1940, AND
ENERGY POLICY AND
CONSERVATION ACT OF 1975
1. The authority citation for part 210
continues to read as follows:
I
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
77z–2, 77z–3, 77aa(25), 77aa(26), 78c, 78j–1,
78l, 78m, 78n, 78o(d), 78q, 78u–5, 78w(a),
78ll, 78mm, 80a–8, 80a–20, 80a–29, 80a–30,
80a–31, 80a–37(a), 80b–3, 80b–11, 7202 and
7262, unless otherwise noted.
2. Amend § 210.3–01 by revising
paragraphs (b), paragraph (c)
introductory text and (f) to read as
follows:
I
§ 210.3–01
Consolidated balance sheets.
*
*
*
*
*
(b) If the filing, other than a filing on
Form 10–K or Form 10, is made within
45 days after the end of the registrant’s
fiscal year and audited financial
statements for the most recent fiscal
year are not available, the balance sheets
may be as of the end of the two
preceding fiscal years and the filing
shall include an additional balance
sheet as of an interim date at least as
current as the end of the registrant’s
third fiscal quarter of the most recently
completed fiscal year.
(c) The instruction in paragraph (b) of
this section is also applicable to filings,
other than on Form 10–K or Form 10,
made after 45 days but within the
number of days of the end of the
registrant’s fiscal year specified in
paragraph (i) of this section: Provided,
that the following conditions are met:
*
*
*
*
*
(f) Any interim balance sheet
provided in accordance with the
requirements of this section may be
unaudited and need not be presented in
greater detail than is required by
§ 210.10–01. Notwithstanding the
requirements of this section, the most
recent interim balance sheet included in
a filing shall be at least as current as the
most recent balance sheet filed with the
Commission on Form 10–Q.
*
*
*
*
*
I 3. Amend § 210.3–05 by revising
paragraph (b)(2)(iv) to read as follows:
§ 210.3–05 Financial statements of
businesses acquired or to be acquired.
*
*
*
(b) * * *
(2) * * *
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*
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(iv) If any of the conditions exceed 50
percent, the full financial statements
specified in §§ 210.3–01 and 210.3–02
shall be furnished. However, financial
statements for the earliest of the three
fiscal years required may be omitted if
net revenues reported by the acquired
business in its most recent fiscal year
are less than $50 million.
*
*
*
*
*
I 4. Amend § 210.3–10 by revising
paragraphs (h)(3) and (h)(4) to read as
follows:
§ 210.3–10 Financial statements of
guarantors and issuers of guaranteed
securities registered or being registered.
*
*
*
*
*
(h) * * *
(3) Annual report refers to an annual
report on Form 10–K or Form 20–F
(§ 249.310 or 249.220f of this chapter).
(4) Quarterly report refers to a
quarterly report on Form 10–Q
(§ 249.308a of this chapter).
*
*
*
*
*
I 5. Amend § 210.3–12 by revising
paragraphs (a) and (d) to read as follows:
§ 210.3–12 Age of financial statements at
effective date of registration statement or at
mailing date of proxy statement.
(a) If the financial statements in a
filing are as of a date the number of days
specified in paragraph (g) of this section
or more before the date the filing is
expected to become effective, or
proposed mailing date in the case of a
proxy statement, the financial
statements shall be updated, except as
specified in the following paragraphs,
with a balance sheet as of an interim
date within the number of days
specified in paragraph (g) of this section
and with statements of income and cash
flows for the interim period between the
end of the most recent fiscal year and
the date of the interim balance sheet
provided and for the corresponding
period of the preceding fiscal year. Such
interim financial statements may be
unaudited and need not be presented in
greater detail than is required by
§ 210.10–01. Notwithstanding the above
requirements, the most recent interim
financial statements shall be at least as
current as the most recent financial
statements filed with the Commission
on Form 10–Q.
*
*
*
*
*
(d) The age of the registrant’s most
recent audited financial statements
included in a registration statement
filed under the Securities Act of 1933 or
filed on Form 10 (17 CFR 249.210)
under the Securities Exchange Act of
1934 shall not be more than one year
and 45 days old at the date the
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registration statement becomes effective
if the registration statement relates to
the security of an issuer that was not
subject, immediately before the time of
filing the registration statement, to the
reporting requirements of section 13 or
15(d) of the Securities Exchange Act of
1934.
*
*
*
*
*
I 6. Amend § 210.3–14 by removing the
authority citations following the section
and revising paragraph (b) to read as
follows:
§ 210.3–14 Special instructions for real
estate operations to be acquired.
*
*
*
*
*
(b) Information required by this
section is not required to be included in
a filing on Form 10–K.
I 7. Amend § 210.4–01 by revising
paragraphs (a)(3)(i)(A) and (a)(3)(i)(B) to
read as follows:
§ 210.4–01
Form, order, and terminology.
(a) * * *
(3)(i) * * *
(A) The first interim or annual
reporting period of the registrant’s first
fiscal year beginning on or after June 15,
2005, provided the registrant does not
file as a smaller reporting company; and
(B) The first interim or annual
reporting period of the registrant’s first
fiscal year beginning on or after
December 15, 2005, provided the
registrant files as a smaller reporting
company.
*
*
*
*
*
I 8. An undesignated center heading
and §§ 210.8–01 through 210.8–08 are
added before the undesignated heading
‘‘Bank Holding Companies’’ to read as
follows:
Article 8 Financial Statements of
Smaller Reporting Companies
Sec.
210.8–01 Preliminary Notes to Article 8.
210.8–02 Annual financial statements.
210.8–03 Interim financial statements.
210.8–04 Financial statements of businesses
acquired or to be acquired.
210.8–05 Pro forma financial information.
210.8–06 Real estate operations acquired or
to be acquired.
210.8–07 Limited partnerships.
210.8–08 Age of financial statements.
*
*
*
mstockstill on PROD1PC66 with RULES2
§ 210.8–01
*
*
Note 1 to § 210.8: Financial statements of
a smaller reporting company, as defined by
17:05 Jan 03, 2008
Note 2 to § 210.8: Smaller reporting
companies electing to prepare their financial
statements with the form and content
required in this article need not apply the
other form and content requirements in
Regulation S–X with the exception of the
following:
a. The report and qualifications of the
independent accountant shall comply with
the requirements of Article 2 of this part;
b. The description of accounting policies
shall comply with Article 4–08(n) of this
part; and
c. Smaller reporting companies engaged in
oil and gas producing activities shall follow
the financial accounting and reporting
standards specified in Article 4–10 of this
part with respect to such activities.
To the extent that Article 11–01 of this part
(Pro Forma Presentation Requirements) offers
enhanced guidelines for the preparation,
presentation and disclosure of pro forma
financial information, smaller reporting
companies may wish to consider these items.
Note 3 to § 210.8: Financial statements for
a subsidiary of a smaller reporting company
that issues securities guaranteed by the
smaller reporting company or guarantees
securities issued by the smaller reporting
company must be presented as required by
§ 210.3–10, except that the periods presented
are those required by § 210.8–02.
Note 4 to § 210.8: Financial statements for
a smaller reporting company’s affiliates
whose securities constitute a substantial
portion of the collateral for any class of
securities registered or being registered must
be presented as required by § 210.3–16,
except that the periods presented are those
required by § 210.8–02.
Note 5 to § 210.8: The Commission, where
consistent with the protection of investors,
may permit the omission of one or more of
the financial statements or the substitution of
appropriate statements of comparable
character. The Commission by informal
written notice may require the filing of other
financial statements where necessary or
appropriate.
Note 6 to § 210.8: Section 210.4–01(a)(3)
shall apply to the preparation of financial
statements of smaller reporting companies.
§ 210.8–02
Preliminary Notes to Article 8.
Sections 210.8–01 to 210.8–08 shall
be applicable to financial statements
filed for smaller reporting companies.
These sections are not applicable to
financial statements prepared for the
purposes of Item 17 or Item 18 of Form
20–F.
VerDate Aug<31>2005
§ 229.10(f)(1) of this chapter, its predecessors
or any businesses to which the smaller
reporting company is a successor shall be
prepared in accordance with generally
accepted accounting principles in the United
States.
Jkt 214001
Annual financial statements.
Smaller reporting companies shall file
an audited balance sheet as of the end
of each of the most recent two fiscal
years, or as of a date within 135 days if
the issuer has existed for a period of less
than one fiscal year, and audited
statements of income, cash flows and
changes in stockholders’ equity for each
of the two fiscal years preceding the
date of the most recent audited balance
PO 00000
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953
sheet (or such shorter period as the
registrant has been in business).
§ 210.8–03
Interim financial statements.
Interim financial statements may be
unaudited; however, before filing,
interim financial statements included in
quarterly reports on Form 10–Q
(§ 249.308(a) of this chapter) must be
reviewed by an independent public
accountant using professional standards
and procedures for conducting such
reviews, as established by generally
accepted auditing standards, as may be
modified or supplemented by the
Commission. If, in any filing, the issuer
states that interim financial statements
have been reviewed by an independent
public accountant, a report of the
accountant on the review must be filed
with the interim financial statements.
Interim financial statements shall
include a balance sheet as of the end of
the issuer’s most recent fiscal quarter, a
balance sheet as of the end of the
preceding fiscal year, and income
statements and statements of cash flows
for the interim period up to the date of
such balance sheet and the comparable
period of the preceding fiscal year.
(a) Condensed format. Interim
financial statements may be condensed
as follows:
(1) Balance sheets should include
separate captions for each balance sheet
component presented in the annual
financial statements that represents 10%
or more of total assets. Cash and
retained earnings should be presented
regardless of relative significance to
total assets. Registrants that present a
classified balance sheet in their annual
financial statements should present
totals for current assets and current
liabilities.
(2) Income statements should include
net sales or gross revenue, each cost and
expense category presented in the
annual financial statements that exceeds
20% of sales or gross revenues,
provision for income taxes,
discontinued operations, extraordinary
items and cumulative effects of changes
in accounting principles or practices.
(Financial institutions should substitute
net interest income for sales for
purposes of determining items to be
disclosed.) Dividends per share should
be presented.
(3) Cash flow statements should
include cash flows from operating,
investing and financing activities as
well as cash at the beginning and end
of each period and the increase or
decrease in such balance.
(4) Additional line items may be
presented to facilitate the usefulness of
the interim financial statements,
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mstockstill on PROD1PC66 with RULES2
including their comparability with
annual financial statements.
(b) Disclosure required and additional
instructions as to content—(1)
Footnotes. Footnote and other
disclosures should be provided as
needed for fair presentation and to
ensure that the financial statements are
not misleading.
(2) Material subsequent events and
contingencies. Disclosure must be
provided of material subsequent events
and material contingencies
notwithstanding disclosure in the
annual financial statements.
(3) Significant equity investees. Sales,
gross profit, net income (loss) from
continuing operations and net income
must be disclosed for equity investees
that constitute 20% or more of a
registrant’s consolidated assets, equity
or income from continuing operations.
(4) Significant dispositions and
purchase business combinations. If a
significant disposition or purchase
business combination has occurred
during the most recent interim period
and the transaction required the filing of
a Form 8–K (§ 249.308 of this chapter),
pro forma data must be presented that
reflects revenue, income from
continuing operations, net income and
income per share for the current interim
period and the corresponding interim
period of the preceding fiscal year as
though the transaction occurred at the
beginning of the periods.
(5) Material accounting changes.
Disclosure must be provided of the date
and reasons for any material accounting
change. The registrant’s independent
accountant must provide a letter in the
first Form 10–Q (§ 249.308a of this
chapter) filed after the change indicating
whether or not the change is to a
preferable method. Disclosure must be
provided of any retroactive change to
prior period financial statements,
including the effect of any such change
on income and income per share.
(6) Development stage companies. A
registrant in the development stage must
provide cumulative financial
information from inception.
Instruction 1 to § 210.8–03: Where Article
8 is applicable to a Form 10–Q and the
interim period is more than one quarter,
income statements must also be provided for
the most recent interim quarter and the
comparable quarter of the preceding fiscal
year.
Instruction 2 to § 210.8–03: Interim
financial statements must include all
adjustments that, in the opinion of
management, are necessary in order to make
the financial statements not misleading. An
affirmative statement that the financial
statements have been so adjusted must be
included with the interim financial
statements.
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§ 210.8–04 Financial statements of
businesses acquired or to be acquired.
(a) If a business combination
accounted for as a ‘‘purchase’’ has
occurred or is probable, financial
statements of the business acquired or to
be acquired shall be furnished for the
periods specified in paragraph (c) of this
section:
(1) The term ‘‘purchase’’ encompasses
the purchase of an interest in a business
accounted for by the equity method.
(2) Acquisitions of a group of related
businesses that are probable or that have
occurred subsequent to the latest fiscal
year end for which audited financial
statements of the issuer have been filed
shall be treated as if they are a single
business combination for purposes of
this section. The required financial
statements of related businesses may be
presented on a combined basis for any
periods they are under common control
or management. A group of businesses
is deemed to be related if:
(i) They are under common control or
management;
(ii) The acquisition of one business is
conditioned on the acquisition of each
other business; or
(iii) Each acquisition is conditioned
on a single common event.
(3) Annual financial statements
required by this rule shall be audited.
The form and content of the financial
statements shall be in accordance with
§§ 210.8–02 and 8–03.
(b) The periods for which financial
statements are to be presented are
determined by comparison of the most
recent annual financial statements of the
business acquired or to be acquired and
the smaller reporting company’s most
recent annual financial statements filed
at or before the date of acquisition to
evaluate each of the following
conditions:
(1) Compare the smaller reporting
company’s investments in and advances
to the acquiree to the total consolidated
assets of the smaller reporting company
as of the end of the most recently
completed fiscal year.
(2) Compare the smaller reporting
company’s proportionate share of the
total assets (after intercompany
eliminations) of the acquiree to the total
consolidated assets of the smaller
reporting company as of the end of the
most recently completed fiscal year.
(3) Compare the smaller reporting
company’s equity in the income from
continuing operations before income
taxes, extraordinary items and
cumulative effect of a change in
accounting principles of the acquiree to
such consolidated income of the smaller
reporting company for the most recently
completed fiscal year.
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Computational note to § 210.8–04(b): For
purposes of making the prescribed income
test the following guidance should be
applied: If income of the smaller reporting
company and its subsidiaries consolidated
for the most recent fiscal year is at least 10
percent lower than the average of the income
for the last five fiscal years, such average
income should be substituted for purposes of
the computation. Any loss years should be
omitted for purposes of computing average
income.
(c)(1) If none of the conditions
specified in paragraph (b) of this section
exceeds 20%, financial statements are
not required. If any of the conditions
exceed 20%, but none exceeds 40%,
financial statements shall be furnished
for the most recent fiscal year and any
interim periods specified in § 210.8–03.
If any of the conditions exceed 40%,
financial statements shall be furnished
for the two most recent fiscal years and
any interim periods specified in
§ 210.8–03.
(2) The separate audited balance sheet
of the acquired business is not required
when the smaller reporting company’s
most recent audited balance sheet filed
is for a date after the acquisition was
consummated.
(3) If the aggregate impact of
individually insignificant businesses
acquired since the date of the most
recent audited balance sheet filed for
the registrant exceeds 50%, financial
statements covering at least the
substantial majority of the businesses
acquired shall be furnished. Such
financial statements shall be for the
most recent fiscal year and any interim
periods specified in § 210.8–03.
(4) Registration statements not subject
to the provisions of § 230.419 of this
chapter (Regulation C) and proxy
statements need not include separate
financial statements of the acquired or
to be acquired business if it does not
meet or exceed any of the conditions
specified in paragraph (b) of this section
at the 50 percent level, and either:
(i) The consummation of the
acquisition has not yet occurred; or
(ii) The effective date of the
registration statement, or mailing date in
the case of a proxy statement, is no more
than 74 days after consummation of the
business combination, and the financial
statements have not been filed
previously by the registrant.
(5) An issuer that omits from its initial
registration statement financial
statements of a recently consummated
business combination pursuant to
paragraph (c)(4) of this section shall
furnish those financial statements and
any pro forma information specified by
§ 210.8–05 under cover of Form 8–K
(§ 249.308 of this chapter) no later than
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75 days after consummation of the
acquisition.
(d) If the smaller reporting company
made a significant business acquisition
after the latest fiscal year end and filed
a report on Form 8–K, which included
audited financial statements of such
acquired business for the periods
required by paragraph (c) of this section
and the pro forma financial information
required by § 210.8–05, the
determination of significance may be
made by using pro forma amounts for
the latest fiscal year in the report on
Form 8–K rather than by using the
historical amounts of the registrant. The
tests may not be made by ‘‘annualizing’’
data.
(e) If the business acquired or to be
acquired is a foreign business, financial
statements of the business meeting the
requirements of Item 17 of Form 20–F
(§ 249.220f of this chapter) will satisfy
this section.
§ 210.8–05
Pro forma financial information.
(a) Pro forma information showing the
effects of the acquisition shall be
furnished if financial statements of a
business acquired or to be acquired are
presented.
(b) Pro forma statements should be
condensed, in columnar form showing
pro forma adjustments and results, and
should include the following:
(1) If the transaction was
consummated during the most recent
fiscal year or subsequent interim period,
pro forma statements of income
reflecting the combined operations of
the entities for the latest fiscal year and
interim period, if any; or
(2) If consummation of the transaction
has occurred or is probable after the
date of the most recent balance sheet
required by § 210.8–02 or § 210.8–03, a
pro forma balance sheet giving effect to
the combination as of the date of the
most recent balance sheet. For a
purchase, pro forma statements of
income reflecting the combined
operations of the entities for the latest
fiscal year and interim period, if any,
are required.
mstockstill on PROD1PC66 with RULES2
§ 210.8–06 Real estate operations acquired
or to be acquired.
If, during the period for which income
statements are required, the smaller
reporting company has acquired one or
more properties that in the aggregate are
significant, or since the date of the latest
balance sheet required by § 210.8–02 or
§ 210.8–03, has acquired or proposes to
acquire one or more properties that in
the aggregate are significant, the
following shall be furnished with
respect to such properties:
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(a) Audited income statements (not
including earnings per unit) for the two
most recent years, which shall exclude
items not comparable to the proposed
future operations of the property such as
mortgage interest, leasehold rental,
depreciation, corporate expenses and
federal and state income taxes;
Provided, however, that such audited
statements need be presented for only
the most recent fiscal year if:
(1) The property is not acquired from
a related party;
(2) Material factors considered by the
smaller reporting company in assessing
the property are described with
specificity in the registration statement
with regard to the property, including
source of revenue (including, but not
limited to, competition in the rental
market, comparative rents, occupancy
rates) and expenses (including but not
limited to, utilities, ad valorem tax
rates, maintenance expenses, and
capital improvements anticipated); and
(3) The smaller reporting company
indicates that, after reasonable inquiry,
it is not aware of any material factors
relating to the specific property other
than those discussed in response to
paragraph (a)(2) of this section that
would cause the reported financial
information not to be necessarily
indicative of future operating results.
(b) If the property will be operated by
the smaller reporting company, a
statement shall be furnished showing
the estimated taxable operating results
of the smaller reporting company based
on the most recent twelve-month
period, including such adjustments as
can be factually supported. If the
property will be acquired subject to a
net lease, the estimated taxable
operating results shall be based on the
rent to be paid for the first year of the
lease. In either case, the estimated
amount of cash to be made available by
operations shall be shown. Disclosure
must be provided of the principal
assumptions that have been made in
preparing the statements of estimated
taxable operating results and cash to be
made available by operations.
(c) If appropriate under the
circumstances, a table should be
provided that shows, for a limited
number of years, the estimated cash
distribution per unit, indicating the
portion reportable as taxable income
and the portion representing a return of
capital with an explanation of annual
variations, if any. If taxable net income
per unit will be greater than the cash
available for distribution per unit, that
fact and the approximate year of
occurrence shall be stated, if significant.
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§ 210.8–07
955
Limited partnerships.
(a) Smaller reporting companies that
are limited partnerships must provide
the balance sheets of the general
partners as described in paragraphs (b)
through (d) of this section.
(b) Where a general partner is a
corporation, the audited balance sheet
of the corporation as of the end of its
most recently completed fiscal year
must be filed. Receivables, other than
trade receivables, from affiliates of the
general partner should be deducted
from shareholders’ equity of the general
partner. Where an affiliate has
committed itself to increase or maintain
the general partner’s capital, the audited
balance sheet of such affiliate must also
be presented.
(c) Where a general partner is a
partnership, there shall be filed an
audited balance sheet of such
partnership as of the end of its most
recently completed fiscal year.
(d) Where the general partner is a
natural person, there shall be filed, as
supplemental information, a balance
sheet of such natural person as of a
recent date. Such balance sheet need not
be audited. The assets and liabilities
should be carried at estimated fair
market value, with provisions for
estimated income taxes on unrealized
gains. The net worth of such general
partner(s), based on such balance
sheet(s), singly or in the aggregate, shall
be disclosed in the registration
statement.
§ 210.8–08
Age of financial statements.
At the date of filing, financial
statements included in filings other than
filings on Form 10–K must be not less
current than the financial statements
that would be required in Forms 10–K
and 10–Q if such reports were required
to be filed. If required financial
statements are as of a date 135 days or
more before the date a registration
statement becomes effective or proxy
material is expected to be mailed, the
financial statements shall be updated to
include financial statements for an
interim period ending within 135 days
of the effective or expected mailing date.
Interim financial statements must be
prepared and presented in accordance
with paragraph (b) of this section.
(a) When the anticipated effective or
mailing date falls within 45 days after
the end of the fiscal year, the filing may
include financial statements only as
current as of the end of the third fiscal
quarter; Provided, however, that if the
audited financial statements for the
recently completed fiscal year are
available or become available before
effectiveness or mailing, they must be
included in the filing; and
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(b) If the effective date or anticipated
mailing date falls after 45 days but
within 90 days of the end of the smaller
reporting company’s fiscal year, the
smaller reporting company is not
required to provide the audited
financial statements for such year end
provided that the following conditions
are met:
(1) If the smaller reporting company is
a reporting company, all reports due
must have been filed;
(2) For the most recent fiscal year for
which audited financial statements are
not yet available, the smaller reporting
company reasonably and in good faith
expects to report income from
continuing operations before taxes; and
(3) For at least one of the two fiscal
years immediately preceding the most
recent fiscal year the smaller reporting
company reported income from
continuing operations before taxes.
I 9. Amend § 210.10–01 by revising
paragraphs (b)(6) and the introductory
text of paragraph (c) to read as follows:
§ 210.10–01
Interim financial statements.
mstockstill on PROD1PC66 with RULES2
*
*
*
*
*
(b) * * *
(6) In addition to meeting the
reporting requirements specified by
existing standards for accounting
changes, the registrant shall state the
date of any material accounting change
and the reasons for making it. In
addition, for filings on Form 10–Q, a
letter from the registrant’s independent
accountant shall be filed as an exhibit
(in accordance with the provisions of
Item 601 of Regulation S–K, 17 CFR
229.601) in the first Form 10–Q after the
date of an accounting change indicating
whether or not the change is to an
alternative principle which, in the
accountant’s judgment, is preferable
under the circumstances; except that no
letter from the accountant need be filed
when the change is made in response to
a standard adopted by the Financial
Accounting Standards Board that
requires such change.
*
*
*
*
*
(c) Periods to be covered. The periods
for which interim financial statements
are to be provided in registration
statements are prescribed elsewhere in
this Regulation (see §§ 210.3–01 and 3–
02). For filings on Form 10–Q, financial
statements shall be provided as set forth
in this paragraph (c):
*
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PART 228 [REMOVED]
I
10. Part 228 is removed and reserved.
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Jkt 214001
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
11. The authority citation for part 229
continues to read in part as follows:
I
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j,
77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26),
77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n,
78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9,
80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37,
80a–38(a), 80a–39, 80b–11, and 7201 et seq.;
18 U.S.C. 1350, unless otherwise noted.
*
*
*
*
*
12. Amend § 229.10 by adding
paragraph (f) to read as follows:
I
§ 229.10
(Item 10) General.
*
*
*
*
*
(f) Smaller reporting companies. The
requirements of this part apply to
smaller reporting companies. A smaller
reporting company may comply with
either the requirements applicable to
smaller reporting companies or the
requirements applicable to other
companies for each item, unless the
requirements for smaller reporting
companies specify that smaller
reporting companies must comply with
the smaller reporting company
requirements. The following items of
this part set forth requirements for
smaller reporting companies that are
different from requirements applicable
to other companies:
INDEX OF SCALED DISCLOSURE AVAILABLE TO SMALLER REPORTING COMPANIES
Item 101 .....
Item 201 .....
Item 301 .....
Item 302 .....
Item 303 .....
Item 305 .....
Item 402 .....
Item 404 .....
Item 407 .....
Item 503 .....
Item 504 .....
Item 601 .....
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Description of business.
Market price of and dividends
on registrant’s common equity and related stockholder
matters.
Selected financial data.
Supplementary financial information.
Management’s discussion and
analysis of financial condition and results of operations.
Quantitative and qualitative
disclosures about market
risk.
Executive compensation.
Transactions with related persons, promoters and certain
control persons.
Corporate governance.
Prospectus summary, risk factors, and ratio of earnings to
fixed charges.
Use of proceeds.
Exhibits.
Fmt 4701
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(1) Definition of smaller reporting
company. As used in this part, the term
smaller reporting company means an
issuer that is not an investment
company, an asset-backed issuer (as
defined in § 229.1101), or a majorityowned subsidiary of a parent that is not
a smaller reporting company and that:
(i) Had a public float of less than $75
million as of the last business day of its
most recently completed second fiscal
quarter, computed by multiplying the
aggregate worldwide number of shares
of its voting and non-voting common
equity held by non-affiliates by the price
at which the common equity was last
sold, or the average of the bid and asked
prices of common equity, in the
principal market for the common equity;
or
(ii) In the case of an initial registration
statement under the Securities Act or
Exchange Act for shares of its common
equity, had a public float of less than
$75 million as of a date within 30 days
of the date of the filing of the
registration statement, computed by
multiplying the aggregate worldwide
number of such shares held by nonaffiliates before the registration plus, in
the case of a Securities Act registration
statement, the number of such shares
included in the registration statement by
the estimated public offering price of
the shares; or
(iii) In the case of an issuer whose
public float as calculated under
paragraph (i) or (ii) of this definition
was zero, had annual revenues of less
than $50 million during the most
recently completed fiscal year for which
audited financial statements are
available.
(2) Determination: Whether or not an
issuer is a smaller reporting company is
determined on an annual basis.
(i) For issuers that are required to file
reports under section 13(a) or 15(d) of
the Exchange Act, the determination is
based on whether the issuer came
within the definition of smaller
reporting company, using the amounts
specified in paragraph (f)(2)(iii) of this
Item, as of the last business day of the
second fiscal quarter of the issuer’s
previous fiscal year. An issuer in this
category must reflect this determination
in the information it provides in its
quarterly report on Form 10–Q for the
first fiscal quarter of the next year,
indicating on the cover page of that
filing, and in subsequent filings for that
fiscal year, whether or not it is a smaller
reporting company, except that, if a
determination based on public float
indicates that the issuer is newly
eligible to be a smaller reporting
company, the issuer may choose to
reflect this determination beginning
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with its first quarterly report on Form
10–Q following the determination,
rather than waiting until the first fiscal
quarter of the next year.
(ii) For determinations based on an
initial Securities Act or Exchange Act
registration statement under paragraph
(f)(1)(ii) of this Item, the issuer must
reflect the determination in the
information it provides in the
registration statement and must
appropriately indicate on the cover page
of the filing, and subsequent filings for
the fiscal year in which the filing is
made, whether or not it is a smaller
reporting company. The issuer must
redetermine its status at the end of its
second fiscal quarter and then reflect
any change in status as provided in
paragraph (f)(2)(i) of this Item. In the
case of a determination based on an
initial Securities Act registration
statement, an issuer that was not
determined to be a smaller reporting
company has the option to redetermine
its status at the conclusion of the
offering covered by the registration
statement based on the actual offering
price and number of shares sold.
(iii) Once an issuer fails to qualify for
smaller reporting company status, it will
remain unqualified unless it determines
that its public float, as calculated in
accordance with paragraph (f)(1) of this
Item, was less than $50 million as of the
last business day of its second fiscal
quarter or, if that calculation results in
zero because the issuer had no public
equity outstanding or no market price
for its equity existed, if the issuers had
annual revenues of less than $40 million
during its previous fiscal year.
I 13. Amend § 229.101 by:
I a. Revising (a)(2) introductory text,
(a)(2)(i), (a)(2)(ii), and (a)(2)(iii)
introductory text; and
I b. Adding paragraph (h) before the
Instructions to Item 101.
The revision and addition read as
follows:
§ 229.101 (Item 101) Description of
business.
mstockstill on PROD1PC66 with RULES2
*
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(a)(1) * * *
(2) Registrants:
(i) Filing a registration statement on
Form S–1 (§ 239.11 of this chapter)
under the Securities Act or on Form 10
(§ 249.210 of this chapter) under the
Exchange Act;
(ii) Not subject to the reporting
requirements of section 13(a) or 15(d) of
the Exchange Act immediately before
the filing of such registration statement;
and
(iii) That (including predecessors)
have not received revenue from
operations during each of the three
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fiscal years immediately before the
filing of such registration statement,
shall provide the following information:
*
*
*
*
*
(h) Smaller reporting companies. A
smaller reporting company, as defined
by § 229.10(f)(1), may satisfy its
obligations under this Item by
describing the development of its
business during the last three years. If
the smaller reporting company has not
been in business for three years, give the
same information for predecessor(s) of
the smaller reporting company if there
are any. This business development
description should include:
(1) Form and year of organization;
(2) Any bankruptcy, receivership or
similar proceeding; and
(3) Any material reclassification,
merger, consolidation, or purchase or
sale of a significant amount of assets not
in the ordinary course of business.
(4) Business of the smaller reporting
company. Briefly describe the business
and include, to the extent material to an
understanding of the smaller reporting
company:
(i) Principal products or services and
their markets;
(ii) Distribution methods of the
products or services;
(iii) Status of any publicly announced
new product or service;
(iv) Competitive business conditions
and the smaller reporting company’s
competitive position in the industry and
methods of competition;
(v) Sources and availability of raw
materials and the names of principal
suppliers;
(vi) Dependence on one or a few
major customers;
(vii) Patents, trademarks, licenses,
franchises, concessions, royalty
agreements or labor contracts, including
duration;
(viii) Need for any government
approval of principal products or
services. If government approval is
necessary and the smaller reporting
company has not yet received that
approval, discuss the status of the
approval within the government
approval process;
(ix) Effect of existing or probable
governmental regulations on the
business;
(x) Estimate of the amount spent
during each of the last two fiscal years
on research and development activities,
and if applicable, the extent to which
the cost of such activities is borne
directly by customers;
(xi) Costs and effects of compliance
with environmental laws (federal, state
and local); and
(xii) Number of total employees and
number of full-time employees.
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(5) Reports to security holders.
Disclose the following in any
registration statement you file under the
Securities Act of 1933:
(i) If you are not required to deliver
an annual report to security holders,
whether you will voluntarily send an
annual report and whether the report
will include audited financial
statements;
(ii) Whether you file reports with the
Securities and Exchange Commission. If
you are a reporting company, identify
the reports and other information you
file with the Commission; and
(iii) That the public may read and
copy any materials you file with the
Commission at the SEC’s Public
Reference Room at 100 F Street, NE.,
Washington, DC 20549, on official
business days during the hours of 10
a.m. to 3 p.m. State that the public may
obtain information on the operation of
the Public Reference Room by calling
the Commission at 1–800–SEC–0330.
State that the Commission maintains an
Internet site that contains reports, proxy
and information statements, and other
information regarding issuers that file
electronically with the Commission and
state the address of that site (https://
www.sec.gov). You are encouraged to
give your Internet address, if available.
(6) Foreign issuers. Provide the
information required by Item 101(g) of
Regulation S–K (§ 229.101(g)).
*
*
*
*
*
I 14. Amend § 229.102 by adding
Instructions 7, 8, and 9 to read as
follows:
§ 229.102
property.
(Item 102) Description of
*
*
*
*
*
Instructions to Item 102:
*
*
*
*
*
7. The attention of issuers engaged in
significant mining operations is directed to
the information called for in Guide 7
(§ 229.801(g) and § 229.802(g)).
8. The attention of issuers engaged in oil
and gas producing activities is directed to the
information called for in Guides 2 and 4
(§ 229.801(b), § 229.802(b) and § 299.801(d),
§ 229.802(d)).
9. The attention of issuers engaged in real
estate activities is directed to the information
called for in Guide 5 (§ 229.801(e) of this
chapter).
15. Amend § 229.201 by:
a. Revising paragraph (a)(1)(ii); and
b. Revising paragraph (a)(2); and
c. Revising Instruction 6 to Item
201(e).
The revision and addition read as
follows:
I
I
I
I
§ 229.201 (Item 201) Market price of and
dividends on the registrant’s common
equity and related stockholder matters.
(a) * * *
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(1) * * *
(ii) If the principal United States
market for such common equity is an
exchange, state the high and low sales
prices for the equity for each full
quarterly period within the two most
recent fiscal years and any subsequent
interim period for which financial
statements are included, or are required
to be included by Article 3–01 through
3–04 of Regulation S–X ( § 210.3–01
through 3–04 of this chapter), or Article
8–02 through 8–03 of Regulation S–X
(§ 210.8–02 through 8–03 of this
chapter) in the case of smaller reporting
companies, as reported in the
consolidated transaction reporting
system or, if not so reported, as reported
on the principal exchange market for
such equity.
*
*
*
*
*
(2) If the information called for by this
paragraph (a) is being presented in a
registration statement on Form S–1
(§ 239.11 of this chapter) under the
Securities Act or on Form 10 (§ 249.210
of this chapter) under the Exchange Act
relating to a class of common equity for
which at the time of filing there is no
established United States public trading
market, indicate the amount(s) of
common equity:
(i) That is subject to outstanding
options or warrants to purchase, or
securities convertible into, common
equity of the registrant;
(ii) That could be sold pursuant to
§ 230.144 of this chapter or that the
registrant has agreed to register under
the Securities Act for sale by security
holders; or
(iii) That is being, or has been
publicly proposed to be, publicly
offered by the registrant (unless such
common equity is being offered
pursuant to an employee benefit plan or
dividend reinvestment plan), the
offering of which could have a material
effect on the market price of the
registrant’s common equity.
*
*
*
*
*
Instructions to Item 201(e):
*
*
*
*
*
*
*
*
*
16. Amend § 229.301 by removing the
authority citation following the section
and adding paragraph (c) before the
Instruction to Item 301 to read as
follows:
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I
§ 229.301
data.
(Item 301) Selected financial
*
*
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*
17:05 Jan 03, 2008
§ 229.302 (Item 302) Supplementary
financial information.
*
*
*
*
*
(c) Smaller reporting companies. A
registrant that qualifies as a smaller
reporting company, as defined by
§ 229.10(f)(1), is not required to provide
the information required by this Item.
I 18. Amend § 229.303 by:
I a. Revising a sentence to Instruction 1
to paragraph 303(a);
I b. Adding Instructions 13 and 14;
I c. Revising a sentence to Instruction 1
to paragraph 303(b); and
I d. Adding paragraph (d) to read as
follows:
§ 229.303 (Item 303) Management’s
discussion and analysis of financial
condition and results of operations.
*
Jkt 214001
*
*
*
*
Instructions to paragraph 303(a): 1. The
registrant’s discussion and analysis shall be
of the financial statements and other
statistical data that the registrant believes
will enhance a reader’s understanding of its
financial condition, changes in financial
condition and results of operations.
Generally, the discussion shall cover the
three-year period covered by the financial
statements and shall use year-to-year
comparisons or any other formats that in the
registrant’s judgment enhance a reader’s
understanding. However, where trend
information is relevant, reference to the fiveyear selected financial data appearing
pursuant to Item 301 of Regulation S–K
(§ 229.301) may be necessary. A smaller
reporting company’s discussion shall cover
the two-year period required in Article 8 of
Regulation S–X and shall use year-to-year
comparisons or any other formats that in the
registrant’s judgment enhance a reader’s
understanding.
*
*
(6) Smaller reporting companies. A
registrant that qualifies as a smaller reporting
company, as defined by § 229.10(f)(1), is not
required to provide the information required
by paragraph (e) of this Item.
*
(c) Smaller reporting companies. A
registrant that qualifies as a smaller
reporting company, as defined by
§ 229.10(f)(1), is not required to provide
the information required by this Item.
*
*
*
*
*
I 17. Amend § 229.302 by adding
paragraph (c) to read as follows:
*
*
*
*
13. The attention of bank holding
companies is directed to the information
called for in Guide 3 (§ 229.801(c) and
§ 229.802(c)).
14. The attention of property-casualty
insurance companies is directed to the
information called for in Guide 6
(§ 229.801(f)).
*
*
*
*
*
Instructions to paragraph 303(b): 1. If
interim financial statements are presented
together with financial statements for full
fiscal years, the discussion of the interim
financial information shall be prepared
pursuant to this paragraph (b) and the
discussion of the full fiscal year’s
information shall be prepared pursuant to
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paragraph (a) of this Item. Such discussions
may be combined.
*
*
*
*
*
(d) Smaller reporting companies. A
smaller reporting company, as defined
by § 229.10(f)(1), may provide the
information required in paragraph
(a)(3)(iv) of this Item for the last two
most recent fiscal years of the registrant
if it provides financial information on
net sales and revenues and on income
from continuing operations for only two
years. A smaller reporting company is
not required to provide the information
required by paragraph (a)(5) of this Item.
I 19. Amend § 229.305 by revising
paragraph (e) to read as follows:
§ 229.305 (Item 305) Quantitative and
qualitative disclosures about market risk.
*
*
*
*
*
(e) Smaller reporting companies. A
smaller reporting company, as defined
by § 229.10(f)(1), is not required to
provide the information required by this
Item.
*
*
*
*
*
I 20. Amend § 229.401 by revising
Instruction 3 to paragraph (b) to read as
follows:
§ 229.401 (Item 401) Directors, executive
officers, promoters and control persons.
*
*
*
(b) * * *
*
*
Instructions to Paragraph (b) of Item 401:
*
*
*
*
*
3. The information regarding executive
officers called for by this Item need not be
furnished in proxy or information statements
prepared in accordance with Schedule 14A
under the Exchange Act (§ 240.14a–101 of
this chapter) by registrants relying on General
Instruction G of Form 10–K under the
Exchange Act (§ 249.310 of this chapter);
Provided, that such information is furnished
in a separate item captioned ‘‘Executive
officers of the registrant’’ and included in
Part I of the registrant’s annual report on
Form 10–K.
*
*
*
*
*
21. Amend § 229.402 by adding
paragraphs (l), (m), (n), (o), (p), (q), and
(r) before the Instruction to Item 402 to
read as follows:
I
§ 229.402 (Item 402) Executive
compensation.
*
*
*
*
*
(l) Smaller reporting companies. A
registrant that qualifies as a ‘‘smaller
reporting company,’’ as defined by Item
10(f) (§ 229.10(f)(1)), may provide the
scaled disclosure in paragraphs (m)
through (r) instead of paragraphs (a)
through (k) of this Item.
(m) Smaller reporting companies—
General—(1) All compensation covered.
This Item requires clear, concise and
understandable disclosure of all plan
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and non-plan compensation awarded to,
earned by, or paid to the named
executive officers designated under
paragraph (m)(2) of this Item, and
directors covered by paragraph (r) of
this Item, by any person for all services
rendered in all capacities to the smaller
reporting company and its subsidiaries,
unless otherwise specifically excluded
from disclosure in this Item. All such
compensation shall be reported
pursuant to this Item, even if also called
for by another requirement, including
transactions between the smaller
reporting company and a third party
where a purpose of the transaction is to
furnish compensation to any such
named executive officer or director. No
amount reported as compensation for
one fiscal year need be reported in the
same manner as compensation for a
subsequent fiscal year; amounts
reported as compensation for one fiscal
year may be required to be reported in
a different manner pursuant to this Item.
(2) Persons covered. Disclosure shall
be provided pursuant to this Item for
each of the following (the ‘‘named
executive officers’’):
(i) All individuals serving as the
smaller reporting company’s principal
executive officer or acting in a similar
capacity during the last completed fiscal
year (‘‘PEO’’), regardless of
compensation level;
(ii) The smaller reporting company’s
two most highly compensated executive
officers other than the PEO who were
serving as executive officers at the end
of the last completed fiscal year; and
(iii) Up to two additional individuals
for whom disclosure would have been
provided pursuant to paragraph
(m)(2)(ii) of this Item but for the fact that
the individual was not serving as an
executive officer of the smaller reporting
company at the end of the last
completed fiscal year.
mstockstill on PROD1PC66 with RULES2
Instructions to Item 402(m)(2).
1. Determination of most highly
compensated executive officers. The
determination as to which executive officers
are most highly compensated shall be made
by reference to total compensation for the last
completed fiscal year (as required to be
disclosed pursuant to paragraph (n)(2)(x) of
this Item) reduced by the amount required to
be disclosed pursuant to paragraph
(n)(2)(viii) of this Item, provided, however,
that no disclosure need be provided for any
executive officer, other than the PEO, whose
total compensation, as so reduced, does not
exceed $100,000.
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2. Inclusion of executive officer of a
subsidiary. It may be appropriate for a
smaller reporting company to include as
named executive officers one or more
executive officers or other employees of
subsidiaries in the disclosure required by this
Item. See Rule 3b–7 under the Exchange Act
(17 CFR 240.3b–7).
3. Exclusion of executive officer due to
overseas compensation. It may be
appropriate in limited circumstances for a
smaller reporting company not to include in
the disclosure required by this Item an
individual, other than its PEO, who is one of
the smaller reporting company’s most highly
compensated executive officers due to the
payment of amounts of cash compensation
relating to overseas assignments attributed
predominantly to such assignments.
(3) Information for full fiscal year. If
the PEO served in that capacity during
any part of a fiscal year with respect to
which information is required,
information should be provided as to all
of his or her compensation for the full
fiscal year. If a named executive officer
(other than the PEO) served as an
executive officer of the smaller reporting
company (whether or not in the same
position) during any part of the fiscal
year with respect to which information
is required, information shall be
provided as to all compensation of that
individual for the full fiscal year.
(4) Omission of table or column. A
table or column may be omitted if there
has been no compensation awarded to,
earned by, or paid to any of the named
executive officers or directors required
to be reported in that table or column
in any fiscal year covered by that table.
(5) Definitions. For purposes of this
Item:
(i) The term stock means instruments
such as common stock, restricted stock,
restricted stock units, phantom stock,
phantom stock units, common stock
equivalent units or any similar
instruments that do not have option-like
features, and the term option means
instruments such as stock options, stock
appreciation rights and similar
instruments with option-like features.
The term stock appreciation rights
(‘‘SARs’’) refers to SARs payable in cash
or stock, including SARs payable in
cash or stock at the election of the
smaller reporting company or a named
executive officer. The term equity is
used to refer generally to stock and/or
options.
(ii) The term plan includes, but is not
limited to, the following: Any plan,
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959
contract, authorization or arrangement,
whether or not set forth in any formal
document, pursuant to which cash,
securities, similar instruments, or any
other property may be received. A plan
may be applicable to one person.
Smaller reporting companies may omit
information regarding group life, health,
hospitalization, or medical
reimbursement plans that do not
discriminate in scope, terms or
operation, in favor of executive officers
or directors of the smaller reporting
company and that are available
generally to all salaried employees.
(iii) The term incentive plan means
any plan providing compensation
intended to serve as incentive for
performance to occur over a specified
period, whether such performance is
measured by reference to financial
performance of the smaller reporting
company or an affiliate, the smaller
reporting company’s stock price, or any
other performance measure. An equity
incentive plan is an incentive plan or
portion of an incentive plan under
which awards are granted that fall
within the scope of Financial
Accounting Standards Board Statement
of Financial Accounting Standards No.
123 (revised 2004), Share-Based
Payment, as modified or supplemented
(‘‘FAS 123R’’). A non-equity incentive
plan is an incentive plan or portion of
an incentive plan that is not an equity
incentive plan. The term incentive plan
award means an award provided under
an incentive plan.
(iv) The terms date of grant or grant
date refer to the grant date determined
for financial statement reporting
purposes pursuant to FAS 123R.
(v) Closing market price is defined as
the price at which the smaller reporting
company’s security was last sold in the
principal United States market for such
security as of the date for which the
closing market price is determined.
(n) Smaller reporting companies—
Summary compensation table—(1)
General. Provide the information
specified in paragraph (n)(2) of this
Item, concerning the compensation of
the named executive officers for each of
the smaller reporting company’s last
two completed fiscal years, in a
Summary Compensation Table in the
tabular format specified below.
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SUMMARY COMPENSATION TABLE
Name and principal position
Year
Salary
($)
(a)
(b)
(c)
Bonus
($)
Stock
awards
($)
Option
awards
($)
Nonequity incentive plan
compensation
($)
Nonqualified
deferred
compensation
earnings
($)
All other
compensation
($)
Total
($)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
PEO
A
B
(2) The Table shall include:
(i) The name and principal position of
the named executive officer (column
(a));
(ii) The fiscal year covered (column
(b));
(iii) The dollar value of base salary
(cash and non-cash) earned by the
named executive officer during the
fiscal year covered (column (c));
(iv) The dollar value of bonus (cash
and non-cash) earned by the named
executive officer during the fiscal year
covered (column (d));
mstockstill on PROD1PC66 with RULES2
Instructions to Item 402(n)(2)(iii) and (iv).
1. If the amount of salary or bonus earned
in a given fiscal year is not calculable
through the latest practicable date, a footnote
shall be included disclosing that the amount
of salary or bonus is not calculable through
the latest practicable date and providing the
date that the amount of salary or bonus is
expected to be determined, and such amount
must then be disclosed in a filing under Item
5.02(f) of Form 8–K (17 CFR 249.308).
2. Smaller reporting companies shall
include in the salary column (column (c)) or
bonus column (column (d)) any amount of
salary or bonus forgone at the election of a
named executive officer under which stock,
equity-based or other forms of non-cash
compensation instead have been received by
the named executive officer. However, the
receipt of any such form of non-cash
compensation instead of salary or bonus
must be disclosed in a footnote added to the
salary or bonus column and, where
applicable, referring to the narrative
disclosure to the Summary Compensation
Table (required by paragraph (o) of this Item)
where the material terms of the stock, option
or non-equity incentive plan award elected
by the named executive officer are reported.
(v) For awards of stock, the dollar
amount recognized for financial
statement reporting purposes with
respect to the fiscal year in accordance
with FAS 123R (column (e));
(vi) For awards of options, with or
without tandem SARs, the dollar
amount recognized for financial
statement reporting purposes with
respect to the fiscal year in accordance
with FAS 123R (column (f));
Instruction to Item 402(n)(2)(v) and (vi).
For awards reported in columns (e) and (f),
disregard the estimate of forfeitures related to
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service-based vesting conditions. Include a
footnote describing all forfeitures during the
year, and disclosing all assumptions made in
the valuation. Disclose assumptions made in
the valuation by reference to a discussion of
those assumptions in the registrant’s
financial statements, footnotes to the
financial statements, or discussion in the
Management’s Discussion and Analysis. The
sections so referenced are deemed part of the
disclosure provided pursuant to this Item.
(vii) The dollar value of all earnings
for services performed during the fiscal
year pursuant to awards under nonequity incentive plans as defined in
paragraph (m)(5)(iii) of this Item, and all
earnings on any outstanding awards
(column (g));
Instructions to Item 402(n)(2)(vii).
1. If the relevant performance measure is
satisfied during the fiscal year (including for
a single year in a plan with a multi-year
performance measure), the earnings are
reportable for that fiscal year, even if not
payable until a later date, and are not
reportable again in the fiscal year when
amounts are paid to the named executive
officer.
2. All earnings on non-equity incentive
plan compensation must be identified and
quantified in a footnote to column (g),
whether the earnings were paid during the
fiscal year, payable during the period but
deferred at the election of the named
executive officer, or payable by their terms at
a later date.
(viii) Above-market or preferential
earnings on compensation that is
deferred on a basis that is not taxqualified, including such earnings on
nonqualified defined contribution plans
(column (h));
Instruction to Item 402(n)(2)(viii). Interest
on deferred compensation is above-market
only if the rate of interest exceeds 120% of
the applicable federal long-term rate, with
compounding (as prescribed under section
1274(d) of the Internal Revenue Code, (26
U.S.C. 1274(d))) at the rate that corresponds
most closely to the rate under the smaller
reporting company’s plan at the time the
interest rate or formula is set. In the event of
a discretionary reset of the interest rate, the
requisite calculation must be made on the
basis of the interest rate at the time of such
reset, rather than when originally
established. Only the above-market portion of
the interest must be included. If the
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applicable interest rates vary depending
upon conditions such as a minimum period
of continued service, the reported amount
should be calculated assuming satisfaction of
all conditions to receiving interest at the
highest rate. Dividends (and dividend
equivalents) on deferred compensation
denominated in the smaller reporting
company’s stock (‘‘deferred stock’’) are
preferential only if earned at a rate higher
than dividends on the smaller reporting
company’s common stock. Only the
preferential portion of the dividends or
equivalents must be included. Footnote or
narrative disclosure may be provided
explaining the smaller reporting company’s
criteria for determining any portion
considered to be above-market.
(ix) All other compensation for the
covered fiscal year that the smaller
reporting company could not properly
report in any other column of the
Summary Compensation Table (column
(i)). Each compensation item that is not
properly reportable in columns (c)
through (h), regardless of the amount of
the compensation item, must be
included in column (i). Such
compensation must include, but is not
limited to:
(A) Perquisites and other personal
benefits, or property, unless the
aggregate amount of such compensation
is less than $10,000;
(B) All ‘‘gross-ups’’ or other amounts
reimbursed during the fiscal year for the
payment of taxes;
(C) For any security of the smaller
reporting company or its subsidiaries
purchased from the smaller reporting
company or its subsidiaries (through
deferral of salary or bonus, or otherwise)
at a discount from the market price of
such security at the date of purchase,
unless that discount is available
generally, either to all security holders
or to all salaried employees of the
smaller reporting company, the
compensation cost, if any, computed in
accordance with FAS 123R;
(D) The amount paid or accrued to
any named executive officer pursuant to
a plan or arrangement in connection
with:
(1) Any termination, including
without limitation through retirement,
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resignation, severance or constructive
termination (including a change in
responsibilities) of such executive
officer’s employment with the smaller
reporting company and its subsidiaries;
or
(2) A change in control of the smaller
reporting company;
(E) Smaller reporting company
contributions or other allocations to
vested and unvested defined
contribution plans;
(F) The dollar value of any insurance
premiums paid by, or on behalf of, the
smaller reporting company during the
covered fiscal year with respect to life
insurance for the benefit of a named
executive officer; and
(G) The dollar value of any dividends
or other earnings paid on stock or
option awards, when those amounts
were not factored into the grant date fair
value for the stock or option award; and
Instructions to Item 402(n)(2)(ix).
1. Non-equity incentive plan awards and
earnings and earnings on stock or options,
except as specified in paragraph (n)(2)(ix)(G)
of this Item, are required to be reported
elsewhere as provided in this Item and are
not reportable as All Other Compensation in
column (i).
2. Benefits paid pursuant to defined benefit
and actuarial plans are not reportable as All
Other Compensation in column (i) unless
accelerated pursuant to a change in control;
information concerning these plans is
reportable pursuant to paragraph (q)(1) of this
Item.
3. Reimbursements of taxes owed with
respect to perquisites or other personal
benefits must be included in the columns as
tax reimbursements (paragraph (n)(2)(ix)(B)
of this Item) even if the associated perquisites
or other personal benefits are not required to
be included because the aggregate amount of
such compensation is less than $10,000.
4. Perquisites and other personal benefits
shall be valued on the basis of the aggregate
incremental cost to the smaller reporting
company.
5. For purposes of paragraph (n)(2)(ix)(D)
of this Item, an accrued amount is an amount
for which payment has become due.
(x) The dollar value of total
compensation for the covered fiscal year
(column (j)). With respect to each
named executive officer, disclose the
sum of all amounts reported in columns
(c) through (i).
mstockstill on PROD1PC66 with RULES2
Instructions to Item 402(n).
1. Information with respect to the fiscal
year prior to the last completed fiscal year
will not be required if the smaller reporting
company was not a reporting company
pursuant to section 13(a) or 15(d) of the
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17:05 Jan 03, 2008
Jkt 214001
Exchange Act (15 U.S.C. 78m(a) or 78o(d)) at
any time during that year, except that the
smaller reporting company will be required
to provide information for any such year if
that information previously was required to
be provided in response to a Commission
filing requirement.
2. All compensation values reported in the
Summary Compensation Table must be
reported in dollars and rounded to the
nearest dollar. Reported compensation values
must be reported numerically, providing a
single numerical value for each grid in the
table. Where compensation was paid to or
received by a named executive officer in a
different currency, a footnote must be
provided to identify that currency and
describe the rate and methodology used to
convert the payment amounts to dollars.
3. If a named executive officer is also a
director who receives compensation for his
or her services as a director, reflect that
compensation in the Summary Compensation
Table and provide a footnote identifying and
itemizing such compensation and amounts.
Use the categories in the Director
Compensation Table required pursuant to
paragraph (r) of this Item.
4. Any amounts deferred, whether
pursuant to a plan established under section
401(k) of the Internal Revenue Code (26
U.S.C. 401(k)), or otherwise, shall be
included in the appropriate column for the
fiscal year in which earned.
(o) Smaller reporting companies—
Narrative disclosure to summary
compensation table. Provide a narrative
description of any material factors
necessary to an understanding of the
information disclosed in the Table
required by paragraph (n) of this Item.
Examples of such factors may include,
in given cases, among other things:
(1) The material terms of each named
executive officer’s employment
agreement or arrangement, whether
written or unwritten;
(2) If at any time during the last fiscal
year, any outstanding option or other
equity-based award was repriced or
otherwise materially modified (such as
by extension of exercise periods, the
change of vesting or forfeiture
conditions, the change or elimination of
applicable performance criteria, or the
change of the bases upon which returns
are determined), a description of each
such repricing or other material
modification;
(3) The waiver or modification of any
specified performance target, goal or
condition to payout with respect to any
amount included in non-stock incentive
plan compensation or payouts reported
in column (g) to the Summary
Compensation Table required by
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961
paragraph (n) of this Item, stating
whether the waiver or modification
applied to one or more specified named
executive officers or to all compensation
subject to the target, goal or condition;
(4) The material terms of each grant,
including but not limited to the date of
exercisability, any conditions to
exercisability, any tandem feature, any
reload feature, any tax-reimbursement
feature, and any provision that could
cause the exercise price to be lowered;
(5) The material terms of any nonequity incentive plan award made to a
named executive officer during the last
completed fiscal year, including a
general description of the formula or
criteria to be applied in determining the
amounts payable and vesting schedule;
(6) The method of calculating
earnings on nonqualified deferred
compensation plans including
nonqualified defined contribution
plans; and
(7) An identification to the extent
material of any item included under All
Other Compensation (column (i)) in the
Summary Compensation Table.
Identification of an item shall not be
considered material if it does not exceed
the greater of $25,000 or 10% of all
items included in the specified category
in question set forth in paragraph
(n)(2)(ix) of this Item. All items of
compensation are required to be
included in the Summary Compensation
Table without regard to whether such
items are required to be identified.
Instruction to Item 402(o). The disclosure
required by paragraph (o)(2) of this Item
would not apply to any repricing that occurs
through a pre-existing formula or mechanism
in the plan or award that results in the
periodic adjustment of the option or SAR
exercise or base price, an antidilution
provision in a plan or award, or a
recapitalization or similar transaction equally
affecting all holders of the class of securities
underlying the options or SARs.
(p) Smaller reporting companies—
Outstanding equity awards at fiscal
year-end table. (1) Provide the
information specified in paragraph
(p)(2) of this Item, concerning
unexercised options; stock that has not
vested; and equity incentive plan
awards for each named executive officer
outstanding as of the end of the smaller
reporting company’s last completed
fiscal year in the following tabular
format:
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option awards
Name
(a)
Number of
securities
underlying
unexercised
options
(#) exercisable
Number of
securities
underlying
unexercised
options
(#)
unexercisable
Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options
(#)
(b)
(c)
(d)
Stock awards
(e)
Option expiration
date
Market
value of
shares of
units of
stock that
have not
vested
($)
(f)
Option
exercise
price
($)
Number of
shares or
units of
stock that
have not
vested
(#)
Equity
incentive
plan
awards:
Number of
unearned
shares,
units or
other rights
that have
not vested
(#)
(g)
(h)
(i)
Equity
incentive
plan
awards:
Market or
payout
value of
unearned
shares,
units or
other rights
that have
not vested
($)
(j)
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PEO
A
B
(2) The Table shall include:
(i) The name of the named executive
officer (column (a));
(ii) On an award-by-award basis, the
number of securities underlying
unexercised options, including awards
that have been transferred other than for
value, that are exercisable and that are
not reported in column (d) (column (b));
(iii) On an award-by-award basis, the
number of securities underlying
unexercised options, including awards
that have been transferred other than for
value, that are unexercisable and that
are not reported in column (d) (column
(c));
(iv) On an award-by-award basis, the
total number of shares underlying
unexercised options awarded under any
equity incentive plan that have not been
earned (column (d));
(v) For each instrument reported in
columns (b), (c) and (d), as applicable,
the exercise or base price (column (e));
(vi) For each instrument reported in
columns (b), (c) and (d), as applicable,
the expiration date (column (f));
(vii) The total number of shares of
stock that have not vested and that are
not reported in column (i) (column (g));
(viii) The aggregate market value of
shares of stock that have not vested and
that are not reported in column (j)
(column (h));
(ix) The total number of shares of
stock, units or other rights awarded
under any equity incentive plan that
have not vested and that have not been
earned, and, if applicable the number of
shares underlying any such unit or right
(column (i)); and
(x) The aggregate market or payout
value of shares of stock, units or other
rights awarded under any equity
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incentive plan that have not vested and
that have not been earned (column (j)).
Instructions to Item 402(p)(2).
1. Identify by footnote any award that has
been transferred other than for value,
disclosing the nature of the transfer.
2. The vesting dates of options, shares of
stock and equity incentive plan awards held
at fiscal-year end must be disclosed by
footnote to the applicable column where the
outstanding award is reported.
3. Compute the market value of stock
reported in column (h) and equity incentive
plan awards of stock reported in column (j)
by multiplying the closing market price of
the smaller reporting company’s stock at the
end of the last completed fiscal year by the
number of shares or units of stock or the
amount of equity incentive plan awards,
respectively. The number of shares or units
reported in column (d) or (i), and the payout
value reported in column (j), shall be based
on achieving threshold performance goals,
except that if the previous fiscal year’s
performance has exceeded the threshold, the
disclosure shall be based on the next higher
performance measure (target or maximum)
that exceeds the previous fiscal year’s
performance. If the award provides only for
a single estimated payout, that amount
should be reported. If the target amount is
not determinable, smaller reporting
companies must provide a representative
amount based on the previous fiscal year’s
performance.
4. Multiple awards may be aggregated
where the expiration date and the exercise
and/or base price of the instruments is
identical. A single award consisting of a
combination of options, SARs and/or similar
option-like instruments shall be reported as
separate awards with respect to each tranche
with a different exercise and/or base price or
expiration date.
5. Options or stock awarded under an
equity incentive plan are reported in
columns (d) or (i) and (j), respectively, until
the relevant performance condition has been
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satisfied. Once the relevant performance
condition has been satisfied, even if the
option or stock award is subject to forfeiture
conditions, options are reported in column
(b) or (c), as appropriate, until they are
exercised or expire, or stock is reported in
columns (g) and (h) until it vests.
(q) Smaller reporting companies—
Additional narrative disclosure. Provide
a narrative description of the following
to the extent material:
(1) The material terms of each plan
that provides for the payment of
retirement benefits, or benefits that will
be paid primarily following retirement,
including but not limited to taxqualified defined benefit plans,
supplemental executive retirement
plans, tax-qualified defined contribution
plans and nonqualified defined
contribution plans.
(2) The material terms of each
contract, agreement, plan or
arrangement, whether written or
unwritten, that provides for payment(s)
to a named executive officer at,
following, or in connection with the
resignation, retirement or other
termination of a named executive
officer, or a change in control of the
smaller reporting company or a change
in the named executive officer’s
responsibilities following a change in
control, with respect to each named
executive officer.
(r) Smaller reporting companies—
Compensation of directors. (1) Provide
the information specified in paragraph
(r)(2) of this Item, concerning the
compensation of the directors for the
smaller reporting company’s last
completed fiscal year, in the following
tabular format:
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DIRECTOR COMPENSATION
Name
Fees
earned or
paid in cash
($)
Stock
awards
($)
Option
awards
($)
Non-equity incentive plan
compensation
($)
Nonqualified
deferred
compensation
earnings
($)
All other compensation
($)
Total
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
A
B
C
D
E
(2) The Table shall include:
(i) The name of each director unless
such director is also a named executive
officer under paragraph (m) of this Item
and his or her compensation for service
as a director is fully reflected in the
Summary Compensation Table pursuant
to paragraph (n) of this Item and
otherwise as required pursuant to
paragraphs (o) through (q) of this Item
(column (a));
(ii) The aggregate dollar amount of all
fees earned or paid in cash for services
as a director, including annual retainer
fees, committee and/or chairmanship
fees, and meeting fees (column (b));
(iii) For awards of stock, the dollar
amount recognized for financial
statement reporting purposes with
respect to the fiscal year in accordance
with FAS 123R (column (c));
(iv) For awards of stock options, with
or without tandem SARs, the dollar
amount recognized for financial
statement reporting purposes with
respect to the fiscal year in accordance
with FAS 123R (column (d));
mstockstill on PROD1PC66 with RULES2
Instruction to Item 402(r)(2)(iii) and (iv).
For each director, disclose by footnote to the
appropriate column, the aggregate number of
stock awards and the aggregate number of
option awards outstanding at fiscal year end.
(v) The dollar value of all earnings for
services performed during the fiscal
year pursuant to non-equity incentive
plans as defined in paragraph (m)(5)(iii)
of this Item, and all earnings on any
outstanding awards (column (e));
(vi) Above-market or preferential
earnings on compensation that is
deferred on a basis that is not taxqualified, including such earnings on
nonqualified defined contribution plans
(column (f));
(vii) All other compensation for the
covered fiscal year that the smaller
reporting company could not properly
report in any other column of the
Director Compensation Table (column
(g)). Each compensation item that is not
properly reportable in columns (b)
through (f), regardless of the amount of
the compensation item, must be
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included in column (g) and must be
identified and quantified in a footnote if
it is deemed material in accordance
with paragraph (o)(7) of this Item. Such
compensation must include, but is not
limited to:
(A) Perquisites and other personal
benefits, or property, unless the
aggregate amount of such compensation
is less than $10,000;
(B) All ‘‘gross-ups’’ or other amounts
reimbursed during the fiscal year for the
payment of taxes;
(C) For any security of the smaller
reporting company or its subsidiaries
purchased from the smaller reporting
company or its subsidiaries (through
deferral of salary or bonus, or otherwise)
at a discount from the market price of
such security at the date of purchase,
unless that discount is available
generally, either to all security holders
or to all salaried employees of the
smaller reporting company, the
compensation cost, if any, computed in
accordance with FAS 123R;
(D) The amount paid or accrued to
any director pursuant to a plan or
arrangement in connection with:
(1) The resignation, retirement or any
other termination of such director; or
(2) A change in control of the smaller
reporting company;
(E) Smaller reporting company
contributions or other allocations to
vested and unvested defined
contribution plans;
(F) Consulting fees earned from, or
paid or payable by the smaller reporting
company and/or its subsidiaries
(including joint ventures);
(G) The annual costs of payments and
promises of payments pursuant to
director legacy programs and similar
charitable award programs;
(H) The dollar value of any insurance
premiums paid by, or on behalf of, the
smaller reporting company during the
covered fiscal year with respect to life
insurance for the benefit of a director;
and
(I) The dollar value of any dividends
or other earnings paid on stock or
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option awards, when those amounts
were not factored into the grant date fair
value for the stock or option award; and
Instruction to Item 402(r)(2)(vii). Programs
in which smaller reporting companies agree
to make donations to one or more charitable
institutions in a director’s name, payable by
the smaller reporting company currently or
upon a designated event, such as the
retirement or death of the director, are
charitable awards programs or director legacy
programs for purposes of the disclosure
required by paragraph (r)(2)(vii)(G) of this
Item. Provide footnote disclosure of the total
dollar amount payable under the program
and other material terms of each such
program for which tabular disclosure is
provided.
(viii) The dollar value of total
compensation for the covered fiscal year
(column (h)). With respect to each
director, disclose the sum of all amounts
reported in columns (b) through (g).
Instruction to Item 402(r)(2). Two or more
directors may be grouped in a single row in
the Table if all elements of their
compensation are identical. The names of the
directors for whom disclosure is presented
on a group basis should be clear from the
Table.
(3) Narrative to director compensation
table. Provide a narrative description of
any material factors necessary to an
understanding of the director
compensation disclosed in this Table.
While material factors will vary
depending upon the facts, examples of
such factors may include, in given
cases, among other things:
(i) A description of standard
compensation arrangements (such as
fees for retainer, committee service,
service as chairman of the board or a
committee, and meeting attendance);
and
(ii) Whether any director has a
different compensation arrangement,
identifying that director and describing
the terms of that arrangement.
Instruction to Item 402(r). In addition to
the Instruction to paragraph (r)(2)(vii) of this
Item, the following apply equally to
paragraph (r) of this Item: Instructions 2 and
4 to paragraph (n) of this Item; the
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Instructions to paragraphs (n)(2)(iii) and (iv)
of this Item; the Instruction to paragraphs
(n)(2)(v) and (vi) of this Item; the Instructions
to paragraph (n)(2)(vii) of this Item; the
Instruction to paragraph (n)(2)(viii) of this
Item; the Instructions to paragraph (n)(2)(ix)
of this Item; and paragraph (o)(7) of this Item.
These Instructions apply to the columns in
the Director Compensation Table that are
analogous to the columns in the Summary
Compensation Table to which they refer and
to disclosures under paragraph (r) of this
Item that correspond to analogous
disclosures provided for in paragraph (n) of
this Item to which they refer.
22. Amend § 229.404 by revising the
introductory text of paragraph (c)(1) and
adding paragraph (d) before the
Instructions to Item 404 to read as
follows:
I
§ 229.404 (Item 404) Transactions with
related persons, promoters and certain
control persons.
*
*
*
*
(c) Promoters and certain control
persons. (1) Registrants that are filing a
registration statement on Form S–1
under the Securities Act (§ 239.11 of
this chapter) or on Form 10 under the
Exchange Act (§ 249.210 of this chapter)
and that had a promoter at any time
during the past five fiscal years shall:
*
*
*
*
*
(d) Smaller reporting companies. A
registrant that qualifies as a ‘‘smaller
reporting company,’’ as defined by
§ 229.10(f)(1), must provide the
following information in order to
comply with this Item:
(1) The information required by
paragraph (a) of this Item for the period
specified there for a transaction in
which the amount involved exceeds the
lesser of $120,000 or one percent of the
average of the smaller reporting
company’s total assets at year end for
the last two completed fiscal years;
(2) The information required by
paragraph (c) of this Item; and
(3) A list of all parents of the smaller
reporting company showing the basis of
control and as to each parent, the
percentage of voting securities owned or
other basis of control by its immediate
parent, if any.
mstockstill on PROD1PC66 with RULES2
*
Instruction to Item 404(d)
1. Include information for any material
underwriting discounts and commissions
upon the sale of securities by the smaller
reporting company where any of the persons
specified in paragraph (a) of this Item was or
is to be a principal underwriter or is a
controlling person or member of a firm that
was or is to be a principal underwriter.
2. For smaller reporting companies
information shall be given for the period
specified in paragraph (a) of this Item and,
in addition, for the fiscal year preceding the
small reporting company’s last fiscal year.
*
*
*
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*
*
17:05 Jan 03, 2008
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23. Amend § 229.407 by revising
paragraphs (a)(1)(iii), (d)(4)(i)(B) and
adding paragraph (g) before the
Instructions to Item 407 to read as
follows:
I
§ 229.407 (Item 407) Corporate
governance.
(a) * * *
(1) * * *
(iii) If the information called for by
paragraph (a) of this Item is being
presented in a registration statement on
Form S–1 (§ 239.11 of this chapter)
under the Securities Act or on a Form
10 (§ 249.210 of this chapter) under the
Exchange Act where the registrant has
applied for listing with a national
securities exchange or in an inter-dealer
quotation system that has requirements
that a majority of the board of directors
be independent, the definition of
independence that the registrant uses
for determining if a majority of the
board of directors is independent, and
the definition of independence that the
registrant uses for determining if
members of the specific committee of
the board of directors are independent,
that is in compliance with the
independence listing standards of the
national securities exchange or interdealer quotation system on which it has
applied for listing, or if the registrant
has not adopted such definitions, the
independence standards for determining
if the majority of the board of directors
is independent and if members of the
committee of the board of directors are
independent of that national securities
exchange or inter-dealer quotation
system.
*
*
*
*
*
(d) * * *
(4)(i) * * *
(B) The registrant is filing an annual
report on Form 10–K (§ 249.310 of this
chapter) or a proxy statement or
information statement pursuant to the
Exchange Act (15 U.S.C. 78a et seq.) if
action is to be taken with respect to the
election of directors; and
*
*
*
*
*
(g) Smaller reporting companies. A
registrant that qualifies as a ‘‘smaller
reporting company,’’ as defined by
§ 229.10(f)(1), is not required to provide:
(1) The disclosure required in
paragraph (d)(5) of this Item in its first
annual report filed pursuant to section
13(a) or 15(d) of the Exchange Act (15
U.S.C. 78m(a) or 78o(d)) following the
effective date of its first registration
statement filed under the Securities Act
(15 U.S.C. 77a et seq.) or Exchange Act
(15 U.S.C. 78a et seq.); and
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(2) Need not provide the disclosures
required by paragraphs (e)(4) and (e)(5)
of this Item.
*
*
*
*
*
I 24. Amend § 229.503 by adding
paragraph (e) before the Instruction to
Item 503 to read as follows:
§ 229.503 (Item 503) Prospectus summary,
risk factors, and ratio of earnings to fixed
charges.
*
*
*
*
*
(e) Smaller reporting companies. A
registrant that qualifies as a smaller
reporting company, as defined by
§ 229.10(f), need not comply with
paragraph (d) of this Item.
*
*
*
*
*
I 25. Amend § 229.504 by revising
Instruction 6 to Item 504 to read as
follows:
§ 229.504
(Item 504) Use of proceeds.
*
*
*
*
*
Instructions to Item 504:
*
*
*
*
*
6. Where the registrant indicates that the
proceeds may, or will, be used to finance
acquisitions of other businesses, the identity
of such businesses, if known, or, if not
known, the nature of the businesses to be
sought, the status of any negotiations with
respect to the acquisition, and a brief
description of such business shall be
included. Where, however, pro forma
financial statements reflecting such
acquisition are not required by Regulation S–
X (17 CFR 210.01 through 210.12–29),
including Rule 8–05 for smaller reporting
companies, to be included in the registration
statement, the possible terms of any
transaction, the identification of the parties
thereto or the nature of the business sought
need not be disclosed, to the extent that the
registrant reasonably determines that public
disclosure of such information would
jeopardize the acquisition. Where Regulation
S–X, including Rule 8–04 for smaller
reporting companies, as applicable, would
require financial statements of the business
to be acquired to be included, the description
of the business to be acquired shall be more
detailed.
*
*
*
*
*
26. Amend § 229.512 by revising the
introductory text of paragraph (e) to
read as follows:
I
§ 229.512
(Item 512) Undertakings.
*
*
*
*
*
(e) Incorporated annual and quarterly
reports. Include the following if the
registration statement specifically
incorporates by reference (other than by
indirect incorporation by reference
through a Form 10–K (§ 249.310 of this
chapter) report) in the prospectus all or
any part of the annual report to security
holders meeting the requirements of
Rule 14a–3 or Rule 14c–3 under the
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Exchange Act (§ 240.14a–3 or § 240.14c–
3 of this chapter):
*
*
*
*
*
I 27. Amend § 229.601 by:
I a. Revising paragraph (a)(4); the
Exhibit Table; and paragraphs (b)(4)(ii),
(b)(4)(v), (b)(10)(iii)(C)(6), introductory
text (b)(13), (b)(13)(i), (b)(15), (b)(19),
and (b)(22); and
I b. Adding paragraph (c) to read as
follows:
§ 229.601
arrangement, liquidation or succession
is executed or becomes effective during
the reporting period reflected by a Form
10–Q or Form 10–K, it shall be filed as
an exhibit to the Form 10–Q or Form
10–K filed for the corresponding period.
Any amendment or modification to a
previously filed exhibit to a Form 10,
10–K or 10–Q document shall be filed
as an exhibit to a Form 10–Q and Form
10–K. Such amendment or modification
need not be filed where such previously
filed exhibit would not be currently
required.
*
*
*
*
*
(Item 601) Exhibits.
(a) * * *
(4) If a material contract or plan of
acquisition, reorganization,
Exhibit Table
Instructions to the Exhibit Table.
1. The exhibit table indicates those
documents that must be filed as exhibits to
the respective forms listed.
2. The ‘‘X’’ designation indicates the
documents which are required to be filed
with each form even if filed previously with
another document, Provided, However, that
such previously filed documents may be
incorporated by reference to satisfy the filing
requirements.
3. The number used in the far left column
of the table refers to the appropriate
subsection in paragraph (b) where a
description of the exhibit can be found.
Whenever necessary, alphabetical or
numerical subparts may be used.
EXHIBIT TABLE
Securities Act forms
mstockstill on PROD1PC66 with RULES2
S–1
(1) Underwriting agreement .......
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession ...................
(3)(i) Articles of incorporation .....
(ii) Bylaws ...................................
(4) Instruments defining the
rights of security holders, including indentures ..................
(5) Opinion re legality .................
(6) [Reserved] ............................
(7) Correspondence from an
independent accountant regarding non-reliance on a previously issued audit report or
completed interim review ........
(8) Opinion re tax matters ..........
(9) Voting trust agreement .........
(10) Material contracts ...............
(11) Statement re computation
of per share earnings .............
(12) Statements re computation
of ratios ...................................
(13) Annual report to security
holders, Form 10–Q or quarterly report to security holders 3 .........................................
(14) Code of Ethics ....................
(15) Letter re unaudited interim
financial information ................
(16) Letter re change in certifying accountant 4 ...................
(17) Correspondence on departure of director ........................
(18) Letter re change in accounting principles ..................
(19) Report furnished to security
holders ....................................
(20) Other documents or statements to security holders .......
(21) Subsidiaries of the registrant ......................................
(22) Published report regarding
matters submitted to vote of
security holders ......................
(23) Consents of experts and
counsel ...................................
(24) Power of attorney ...............
(25) Statement of eligibility of
trustee .....................................
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S–3
S–4 1
S–8
S–11
Exchange Act forms
F–1
F–3
F–4 1
8–K 2
10
10–D
10–Q
10–K
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
EXHIBIT TABLE—Continued
Securities Act forms
Exchange Act forms
S–1
(26) Invitation for competitive
bids .........................................
(27) through (30) [Reserved] .....
(31)(i) Rule 13a–14(a)/15d–14(a)
Certifications ...........................
(ii) Rule 13a–14/15d–14 Certifications ....................................
(32) Section 1350 Certifications 6
(33) Report on assessment of
compliance with servicing criteria for asset-backed issuers
(34) Attestation report on assessment of compliance with
servicing criteria for assetbacked securities ....................
(35) Servicer compliance statement ........................................
(36) through (98) [Reserved] .....
(99) Additional exhibits ...............
(100) XBRL-Related Documents
S–3
S–4 1
S–8
S–11
F–1
F–3
F–4 1
10
8–K 2
10–D
10–Q
10–K
X
..........
X
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X
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1 An exhibit need not be provided about a company if: (1) With respect to such company an election has been made under Form S–4 or F–4
to provide information about such company at a level prescribed by Form S–3 or F–3; and (2) the form, the level of which has been elected
under Form S–4 or F–4, would not require such company to provide such exhibit if it were registering a primary offering.
2 A Form 8–K exhibit is required only if relevant to the subject matter reported on the Form 8–K report. For example, if the Form 8–K pertains
to the departure of a director, only the exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated
by reference from a previous filing.
3 Where incorporated by reference into the text of the prospectus and delivered to security holders along with the prospectus as permitted by
the registration statement; or, in the case of the Form 10–K, where the annual report to security holders is incorporated by reference into the text
of the Form 10–K.
4 If required pursuant to Item 304 of Regulation S–K.
5 Where the opinion of the expert or counsel has been incorporated by reference into a previously filed Securities Act registration statement.
6 Pursuant to §§ 240.13a–13(b)(3) and 240.15d–13(b)(3) of this chapter, asset-backed issuers are not required to file reports on Form 10–Q.
(b) * * *
(4) * * *
(ii) Except as set forth in paragraph
(b)(4)(iii) of this Item for filings on
Forms S–1, S–4, S–11, N–14, and F–4
under the Securities Act (§ 239.11,
239.25, 239.18, 239.23 and 239.34 of
this chapter) and Forms 10 and 10–K
under the Exchange Act (§§ 249.210 and
249.310 of this chapter) all instruments
defining the rights of holders of longterm debt of the registrant and its
consolidated subsidiaries and for any of
its unconsolidated subsidiaries for
which financial statements are required
to be filed.
*
*
*
*
*
(v) With respect to Forms 8–K and
10–Q under the Exchange Act that are
filed and that disclose, in the text of the
Form 10–Q, the interim financial
statements, or the footnotes thereto the
creation of a new class of securities or
indebtedness or the modification of
existing rights of security holders, file
all instruments defining the rights of
holders of these securities or
indebtedness. However, there need not
be filed any instrument with respect to
long-term debt not being registered
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which meets the exclusion set forth in
paragraph (b)(4)(iii)(A) of this Item.
*
*
*
*
*
(10) * * *
(iii) * * *
(C) * * *
(6) Any compensatory plan, contract,
or arrangement if the registrant is a
wholly owned subsidiary of a company
that has a class of securities registered
pursuant to section 12 or files reports
pursuant to section 15(d) of the
Exchange Act and is filing a report on
Form 10–K or registering debt
instruments or preferred stock that are
not voting securities on Form S–1.
*
*
*
*
*
(13) Annual report to security holders,
Form 10–Q or quarterly report to
security holders.
(i) The registrant’s annual report to
security holders for its last fiscal year,
its Form 10–Q (if specifically
incorporated by reference in the
prospectus) or its quarterly report to
security holders, if all or a portion
thereof is incorporated by reference in
the filing. Such report, except for those
portions thereof that are expressly
incorporated by reference in the filing,
is to be furnished for the information of
the Commission and is not to be deemed
‘‘filed’’ as part of the filing. If the
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financial statements in the report have
been incorporated by reference in the
filing, the accountant’s certificate shall
be manually signed in one copy. See
Rule 411(b) (§ 230.411(b) of this
chapter).
*
*
*
*
*
(15) Letter re unaudited interim
financial information. A letter, where
applicable, from the independent
accountant that acknowledges
awareness of the use in a registration
statement of a report on unaudited
interim financial information that
pursuant to Rule 436(c) under the
Securities Act (§ 230.436(c) of this
chapter) is not considered a part of a
registration statement prepared or
certified by an accountant or a report
prepared or certified by an accountant
within the meaning of sections 7 and 11
of that Act. Such letter may be filed
with the registration statement, an
amendment thereto, or a report on Form
10–Q which is incorporated by
reference into the registration statement.
*
*
*
*
*
(19) Report furnished to security
holders. If the registrant makes available
to its security holders or otherwise
publishes, within the period prescribed
for filing the report, a document or
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statement containing information
meeting some or all of the requirements
of Part I of Form 10–Q, the information
called for may be incorporated by
reference to such published document
or statement, provided copies thereof
are included as an exhibit to the
registration statement or to Part I of the
Form 10–Q report.
*
*
*
*
*
(22) Published report regarding
matters submitted to vote of security
holders. Published reports containing
all of the information called for by Item
4 of Part II of Form 10–Q or Item 4 of
Part I of Form 10–K that is referred to
therein in lieu of providing disclosure
in Form 10–Q or 10–K, that are required
to be filed as exhibits by Rule 12b–
23(a)(3) under the Exchange Act
(§ 240.12b–23(a)(3) of this chapter).
*
*
*
*
*
(c) Smaller reporting companies. A
smaller reporting company need not
provide the disclosure required in
paragraph (b)(12) of this Item,
Statements re computation of ratios.
I 28. Amend § 229.701 by revising
paragraph (e) to read as follows:
§ 229.701 (Item 701) Recent sales of
unregistered securities; use of proceeds
from registered securities.
*
*
*
*
*
(e) Terms of conversion or exercise. If
the information called for by this
paragraph (e) is being presented on
Form 8–K, Form 10–Q, Form 10–K, or
Form 10–D under the Exchange Act
(§ 249.308, § 249.308(a), § 240.310 or
§ 249.312) of this chapter, and where the
securities sold by the registrant are
convertible or exchangeable into equity
securities, or are warrants or options
representing equity securities, disclose
the terms of conversion or exercise of
the securities.
*
*
*
*
*
I 29. Amend § 229.1118 by revising
paragraph (b)(2) to read as follows:
§ 229.1118 (Item 1118) Reports and
additional information.
mstockstill on PROD1PC66 with RULES2
*
*
*
*
*
(b) * * *
(2) State that the public may read and
copy any materials filed with the
Commission at the Commission’s Public
Reference Room at 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. State that the public
may obtain information on the operation
of the Public Reference Room by calling
the Securities and Exchange
Commission at 1–800–SEC–0330. State
that the Commission maintains an
Internet site that contains reports, proxy
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Jkt 214001
and information statements, and other
information regarding issuers that file
electronically with the Commission and
state the address of that site (https://
www.sec.gov).
*
*
*
*
*
PART 230—GENERAL RULES AND
REGULATIONS, SECURITIES ACT OF
1933
30. The authority citation for part 230
continues to read in part as follows:
I
Authority: 15 U.S.C. 77b, 77c, 77d, 77f,
77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d,
78j, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d),
78mm, 80a–8, 80a–24, 80a–28, 80a–29, 80a–
30, and 80a–37, unless otherwise noted.
*
*
*
*
*
I 31. Amend § 230.110 by revising
paragraph (a) to read as follows:
§ 230.110 Business hours of the
Commission.
(a) General. The principal office of the
Commission, at 100 F Street, NE.,
Washington, DC 20549, is open each
day, except Saturdays, Sundays, and
Federal holidays, from 9 a.m. to 5:30
p.m., Eastern Standard Time or Eastern
Daylight Saving Time, whichever is
currently in effect, provided that hours
for the filing of documents pursuant to
the Act or the rules and regulations
thereunder are as set forth in paragraphs
(b), (c) and (d) of this section.
*
*
*
*
*
I 32. Amend § 230.138 by revising
paragraph (a)(2)(i) to read as follows:
§ 230.138 Publications or distributions of
research reports by brokers or dealers
about securities other than those they are
distributing.
(a) * * *
(2) * * *
(i) Is required to file reports, and has
filed all periodic reports required during
the preceding 12 months (or such
shorter time that the issuer was required
to file such reports) on Forms 10–K
(§ 249.310 of this chapter), 10–Q
(§ 249.308a of this chapter), and 20–F
(§ 249.220f of this chapter) pursuant to
Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (15
U.S.C. 78m or 78o(d)); or
*
*
*
*
*
I 33. Amend § 230.139 by revising
paragraph (a)(1)(i)(A)(2) to read as
follows:
§ 230.139 Publications or distributions of
research reports by brokers or dealers
distributing securities.
Frm 00035
(2) As of the date of reliance on this
section, has filed all periodic reports
required during the preceding 12
months on Forms 10–K (§ 249.310 of
this chapter), 10–Q (§ 249.308a of this
chapter), and 20–F (§ 249.220f of this
chapter) pursuant to section 13 or
section 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78m or 78o(d));
or
*
*
*
*
*
I 34. Amend § 230.158 by revising
paragraphs (a)(1)(i), (a)(2)(i), and (b) to
read as follows:
§ 230.158 Definitions of certain terms in
the last paragraph of section 11(a).
(a) * * *
(1) * * *
(i) In Item 8 of Form 10–K (§ 239.310
of this chapter), part I, Item 1 of Form
10–Q (§ 240.308a of this chapter), or
Rule 14a–3(b) (§ 240.14a–3(b) of this
chapter) under the Securities Exchange
Act of 1934;
*
*
*
*
*
(2) * * *
(i) On Form 10–K, Form 10–Q, Form
8–K (§ 249.308 of this chapter), or in the
annual report to security holders
pursuant to Rule 14a–3 under the
Securities Exchange Act of 1934
(§ 240.14a–3 of this chapter); or
*
*
*
*
*
(b) For purposes of the last paragraph
of section 11(a) only, the ‘‘earning
statement’’ contemplated by paragraph
(a) of this section shall be deemed to be
‘‘made generally available to its security
holders’’ if the registrant:
(1) Is required to file reports pursuant
to section 13 or 15(d) of the Securities
Exchange Act of 1934 and
(2) Has filed its report or reports on
Form 10–K and Form 10–KSB, Form
10–Q and Form 10–QSB, Form 8–K,
Form 20–F, Form 40–F, or Form 6–K, or
has supplied to the Commission copies
of the annual report sent to security
holders pursuant to Rule 14a–3(c),
(§ 240.14a–3(c) of this chapter)
containing such information.
A registrant may use other methods to
make an earning statement ‘‘generally
available to its security holders’’ for
purposes of the last paragraph of section
11(a).
*
*
*
*
*
I 35. Amend § 230.175 by revising
paragraphs (b)(1), (b)(1)(i), and (b)(2) to
read as follows:
§ 230.175 Liability for certain statements
by issuers.
*
*
*
*
*
(b) * * *
(1) A forward-looking statement (as
defined in paragraph (c) of this section)
(a) * * *
(1) * * *
(i) * * *
(A) * * *
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
made in a document filed with the
Commission, in Part I of a quarterly
report on Form 10–Q, (§ 249.308a of this
chapter), or in an annual report to
security holders meeting the
requirements of Rule 14a–3(b) and (c) or
14c–3(a) and (b) under the Securities
Exchange Act of 1934 (§§ 240.14a–3(b)
and (c) or 240.14c–3(a) and (b) of this
chapter), a statement reaffirming such
forward-looking statement after the date
the document was filed or the annual
report was made publicly available, or
a forward-looking statement made
before the date the document was filed
or the date the annual report was
publicly available if such statement is
reaffirmed in a filed document, in Part
I of a quarterly report on Form 10–Q, or
in an annual report made publicly
available within a reasonable time after
the making of such forward-looking
statement; Provided, that
(i) At the time such statements are
made or reaffirmed, either the issuer is
subject to the reporting requirements of
section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and has complied
with the requirements of Rule 13a–1 or
15d–1 (§§ 239.13a–1 or 239.15d–1 of
this chapter) thereunder, if applicable,
to file its most recent annual report on
Form 10–K, Form 20–F, or Form 40–F;
or if the issuer is not subject to the
reporting requirements of Section 13(a)
or 15(d) of the Securities Exchange Act
of 1934, the statements are made in a
registration statement filed under the
Act, offering statement or solicitation of
interest, written document or broadcast
script under Regulation A or pursuant to
sections 12(b) or (g) of the Securities
Exchange Act of 1934; and
*
*
*
*
*
(2) Information that is disclosed in a
document filed with the Commission, in
Part I of a quarterly report on Form 10–
Q (§ 249.308a of this chapter) or in an
annual report to shareholders meeting
the requirements of Rules 14a–3 (b) and
(c) or 14c–3 (a) and (b) under the
Securities Exchange Act of 1934
(§§ 240.14a–3(b) and (c) or 240.14c–3(a)
and (b) of this chapter) and that relates
to:
(i) The effects of changing prices on
the business enterprise, presented
voluntarily or pursuant to Item 303 of
Regulation S–K (§ 229.303 of this
chapter), ‘‘Management’s Discussion
and Analysis of Financial Condition and
Results of Operations,’’ Item 5 of Form
20–F (§ 249.220(f) of this chapter),
‘‘Operating and Financial Review and
Prospects,’’ Item 302 of Regulation S–K
(§ 229.302 of this chapter),
‘‘Supplementary Financial
Information,’’ or Rule 3–20(c) of
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17:05 Jan 03, 2008
Jkt 214001
Regulation S–X (§ 210.3–20(c) of this
chapter); or
(ii) The value of proved oil and gas
reserves (such as a standardized
measure of discounted future net cash
flows relating to proved oil and gas
reserves as set forth in paragraphs 30–
34 of Statement of Financial Accounting
Standards No. 69) presented voluntarily
or pursuant to Item 302 of Regulation S–
K (§ 229.302 of this chapter).
*
*
*
*
*
I 36. Amend § 230.405 by removing the
definition of ‘‘small business issuer’’
and adding the definition of ‘‘smaller
reporting company’’ in alphabetical
order to read as follows:
§ 230.405
Definitions of terms.
*
*
*
*
*
Smaller reporting company: As used
in this part, the term smaller reporting
company means an issuer that is not an
investment company, an asset-backed
issuer (as defined in § 229.1101 of this
chapter), or a majority-owned subsidiary
of a parent that is not a smaller
reporting company and that:
(1) Had a public float of less than $75
million as of the last business day of its
most recently completed second fiscal
quarter, computed by multiplying the
aggregate worldwide number of shares
of its voting and non-voting common
equity held by non-affiliates by the price
at which the common equity was last
sold, or the average of the bid and asked
prices of common equity, in the
principal market for the common equity;
or
(2) In the case of an initial registration
statement under the Securities Act or
Exchange Act for shares of its common
equity, had a public float of less than
$75 million as of a date within 30 days
of the date of the filing of the
registration statement, computed by
multiplying the aggregate worldwide
number of such shares held by nonaffiliates before the registration plus, in
the case of a Securities Act registration
statement, the number of such shares
included in the registration statement by
the estimated public offering price of
the shares; or
(3) In the case of an issuer whose
public float as calculated under
paragraph (1) or (2) of this definition
was zero, had annual revenues of less
than $50 million during the most
recently completed fiscal year for which
audited financial statements are
available.
(4) Determination: Whether or not an
issuer is a smaller reporting company is
determined on an annual basis.
(i) For issuers that are required to file
reports under section 13(a) or 15(d) of
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the Exchange Act, the determination is
based on whether the issuer came
within the definition of smaller
reporting company using the amounts
specified in paragraph (f)(2)(iii) of Item
10 of Regulation S–K (§ 229.10(f)(1)(i) of
this chapter), as of the last business day
of the second fiscal quarter of the
issuer’s previous fiscal year. An issuer
in this category must reflect this
determination in the information it
provides in its quarterly report on Form
10–Q for the first fiscal quarter of the
next year, indicating on the cover page
of that filing, and in subsequent filings
for that fiscal year, whether or not it is
a smaller reporting company, except
that, if a determination based on public
float indicates that the issuer is newly
eligible to be a smaller reporting
company, the issuer may choose to
reflect this determination beginning
with its first quarterly report on Form
10–Q following the determination,
rather than waiting until the first fiscal
quarter of the next year.
(ii) For determinations based on an
initial Securities Act or Exchange Act
registration statement under paragraph
(f)(1)(ii) of Item 10 of Regulation S–K
(§ 229.10(f)(1)(ii) of this chapter), the
issuer must reflect the determination in
the information it provides in the
registration statement and must
appropriately indicate on the cover page
of the filing, and subsequent filings for
the fiscal year in which the filing is
made, whether or not it is a smaller
reporting company. The issuer must
redetermine its status at the end of its
second fiscal quarter and then reflect
any change in status as provided in
paragraph (4)(i) of this definition. In the
case of a determination based on an
initial Securities Act registration
statement, an issuer that was not
determined to be a smaller reporting
company has the option to redetermine
its status at the conclusion of the
offering covered by the registration
statement based on the actual offering
price and number of shares sold.
(iii) Once an issuer fails to qualify for
smaller reporting company status, it will
remain unqualified unless it determines
that its public float, as calculated in
accordance with paragraph (f)(1) of this
definition, was less than $50 million as
of the last business day of its second
fiscal quarter or, if that calculation
results in zero because the issuer had no
public equity outstanding or no market
price for its equity existed, if the issuer
had annual revenues of less than $40
million during its previous fiscal year.
*
*
*
*
*
I 37. Amend § 230.415 by revising
paragraph (a)(3) to read as follows:
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§ 230.415 Delayed or continuous offerings
and sale of securities.
(a) * * *
(3) The registrant furnishes the
undertakings required by Item 512(a) of
Regulation S–K (§ 229.512(a) of this
chapter), except that a registrant that is
an investment company filing on Form
N–2 must furnish the undertakings
required by Item 34.4 of Form N–2
(§ 239.14 and § 274.11a–1 of this
chapter).
*
*
*
*
*
I 38. Amend § 230.428 by revising
paragraphs (b)(2)(ii), (b)(2)(iii), (b)(2)(iv),
and (b)(4) to read as follows:
§ 230.428 Documents constituting a
section 10(a) prospectus for Form S–8
registration statement; requirements
relating to offerings of securities registered
on Form S–8.
mstockstill on PROD1PC66 with RULES2
*
*
*
*
*
(b) * * *
(2) * * *
(ii) The registrant’s annual report on
Form 10–K (§ 249.310 of this chapter),
20–F (§ 249.220f of this chapter) or, in
the case of registrants described in
General Instruction A.(2) of Form 40–F
(§ 249.240f of this chapter), for its latest
fiscal year;
(iii) The latest prospectus filed
pursuant to Rule 424(b) (§ 230.424(b))
under the Act that contains audited
financial statements for the registrant’s
latest fiscal year, Provided that the
financial statements are not
incorporated by reference from another
filing, and Provided further that such
prospectus contains substantially the
information required by Rule 14a–3(b)
(§ 240.14a–3(b) of this chapter) or the
registration statement was on Form
S–1 (§ 239.11 of this chapter) or F–1
(§ 239.31 of this chapter); or
(iv) The registrant’s effective
Exchange Act registration statement on
Form 10 (§ 249.210 of this chapter),
20–F or, in the case of registrants
described in General Instruction A.(2) of
Form 40–F, containing audited financial
statements for the registrant’s latest
fiscal year.
*
*
*
*
*
(4) Where interests in a plan are
registered, the registrant shall deliver or
cause to be delivered promptly, without
charge, to each employee to whom
information is required to be delivered,
upon written or oral request, a copy of
the then latest annual report of the plan
filed pursuant to section 15(d) of the
Exchange Act, whether on Form 11–K
(§ 249.311 of this chapter) or included
as part of the registrant’s annual report
on Form 10–K.
*
*
*
*
*
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39. Amend § 230.430B by revising
paragraphs (f)(4) introductory text, (ii),
and (i) to read as follows:
969
42. Amend § 30.502 by revising
paragraphs (b)(2)(i)(B)(1), (b)(2)(i)(B)(2),
(b)(2)(ii)(A), (b)(2)(ii)(B), and (b)(2)(iii)
to read as follows:
I
I
§ 230.430B Prospectus in a registration
statement after effective date.
§ 230.502
*
*
*
*
*
*
(f) * * *
(4) Except for an effective date
resulting from the filing of a form of
prospectus filed for purposes of
including information required by
section 10(a)(3) of the Act or pursuant
to Item 512(a)(1)(ii) of Regulation S–K
(§ 229.512(a)(1)(ii) of this chapter), the
date a form of prospectus is deemed part
of and included in the registration
statement pursuant to this paragraph
shall not be an effective date established
pursuant to paragraph (f)(2) of this
section as to:
(i) * * *
(ii) Any person signing any report or
document incorporated by reference
into the registration statement, except
for such a report or document
incorporated by reference for purposes
of including information required by
section 10(a)(3) of the Act or pursuant
to Item 512(a)(1)(ii) of Regulation S–K
(such person except for such reports
being deemed not to be a person who
signed the registration statement within
the meaning of section 11(a) of the Act).
*
*
*
*
*
(i) Issuers relying on this section shall
furnish the undertakings required by
Item 512(a) of Regulation S–K.
*
*
*
*
*
I 40. Amend § 230.430C by revising
paragraph (d) to read as follows:
§ 230.430C Prospectus in a registration
statement pertaining to an offering other
than pursuant to Rule 430A or Rule 430B
after the effective date.
*
*
*
*
*
(d) Issuers subject to paragraph (a) of
this section shall furnish the
undertakings required by Item 512(a) of
Regulation S–K (§ 229.512(a) of this
chapter) or Item 34.4 of Form N–2
(§§ 239.14 and 274.11a–1 of this
chapter), as applicable.
I 41. Revise § 230.455 to read as
follows:
§ 230.455
Place of filing.
All registration statements and other
papers filed with the Commission shall
be filed at its principal office. Such
material may be filed by delivery to the
Commission; provided, however, that
only registration statements and posteffective amendments thereto filed
pursuant to Rule 462(b) (§ 230.462(b))
and Rule 110(d) (§ 230.110(d)) may be
filed by means of facsimile
transmission.
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General conditions to be met.
*
*
*
*
(b) * * *
(2) * * *
(i) * * *
(B) Financial statement information.
(1) Offerings up to $2,000,000. The
information required in Article 8 of
Regulation S–X (§ 210.8 of this chapter),
except that only the issuer’s balance
sheet, which shall be dated within 120
days of the start of the offering, must be
audited.
(2) Offerings up to $7,500,000. The
financial statement information required
in Form S–1 (§ 239.10 of this chapter)
for smaller reporting companies. If an
issuer, other than a limited partnership,
cannot obtain audited financial
statements without unreasonable effort
or expense, then only the issuer’s
balance sheet, which shall be dated
within 120 days of the start of the
offering, must be audited. If the issuer
is a limited partnership and cannot
obtain the required financial statements
without unreasonable effort or expense,
it may furnish financial statements that
have been prepared on the basis of
Federal income tax requirements and
examined and reported on in
accordance with generally accepted
auditing standards by an independent
public or certified accountant.
*
*
*
*
*
(ii) * * *
(A) The issuer’s annual report to
shareholders for the most recent fiscal
year, if such annual report meets the
requirements of Rules 14a–3 or 14c–3
under the Exchange Act (§ 240.14a–3 or
§ 240.14c–3 of this chapter), the
definitive proxy statement filed in
connection with that annual report, and
if requested by the purchaser in writing,
a copy of the issuer’s most recent Form
10–K (§ 249.310 of this chapter) under
the Exchange Act.
(B) The information contained in an
annual report on Form 10–K (§ 249.310
of this chapter) under the Exchange Act
or in a registration statement on Form
S–1 (§ 239.11 of this chapter) or S–11
(§ 239.18 of this chapter) under the Act
or on Form 10 (§ 249.210 of this chapter)
under the Exchange Act, whichever
filing is the most recent required to be
filed.
*
*
*
*
*
(iii) Exhibits required to be filed with
the Commission as part of a registration
statement or report, other than an
annual report to shareholders or parts of
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that report incorporated by reference in
a Form 10–K report, need not be
furnished to each purchaser that is not
an accredited investor if the contents of
material exhibits are identified and such
exhibits are made available to a
purchaser, upon his or her written
request, a reasonable time before his or
her purchase.
*
*
*
*
*
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Accelerated filer
b Non-accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
PART 239—FORMS PRESCRIBED
UNDER THE SECURITIES ACT OF 1933
*
43. The authority citation for part 239
continues to read in part as follows:
*
I
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n,
78o(d), 78u–5, 78w(a), 78ll, 78mm, 80a–2(a),
80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 80a–
24, 80a–26, 80a–29, 80a–30, and 80a–37,
unless otherwise noted.
*
*
*
*
*
44. Amend § 239.0–1 by revising
paragraph (b) to read as follows:
I
§ 239.0–1
Availability of forms.
*
*
*
*
*
(b) Any person may obtain a copy of
any form prescribed for use in this part
by written request to the Securities and
Exchange Commission, 100 F Street, NE,
Washington, DC 20549. Any persons
may inspect the forms at this address
and at the Commission’s regional
offices. (See § 200.11 of this chapter for
the addresses of the SEC regional
offices.)
I 45. By removing and reserving
§§ 239.9 and 239.10 and removing Form
SB–1 and Form SB–2.
Note: The text of Forms SB–1 and SB–2
does not appear in the Code of Federal
Regulations.
46. Amend Form S–1 (referenced in
§ 239.11) by:
I a. Adding to the cover page, above the
calculation of the registration fee table,
check boxes requesting the registrant to
indicate whether it is a large accelerated
filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting
company; and
I b. Revising Items 11(e), 11A, and
12(a)(1) in Part I.
The revisions and addition read as
follows:
Note: The text of Form S–1 does not and
this amendment will not appear in the Code
of Federal Regulations.
mstockstill on PROD1PC66 with RULES2
*
*
*
*
FORM S–1—REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
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*
*
*
*
*
*
*
Item 11. Information With Respect to the
Registrant
*
*
*
*
*
*
*
*
*
Item 11A. Material Changes
If the registrant elects to incorporate
information by reference pursuant to General
Instruction VII, describe any and all material
changes in the registrant’s affairs that have
occurred since the end of the latest fiscal year
for which audited financial statements were
included in the latest Form 10–K and that
have not been described in a Form 10–Q or
Form 8–K filed under the Exchange Act.
*
*
*
*
*
(a) * * *
(1) The registrant’s latest annual report on
Form 10–K filed pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that
contains financial statements for the
registrant’s latest fiscal year for which a Form
10–K was required to have been filed; and
*
*
*
*
*
47. Amend Form S–3 (referenced in
§ 239.13) by adding to the cover page,
above the calculation of the registration
fee table, check boxes requesting the
registrant to indicate whether it is a
large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller
reporting company and revising General
Instruction II C., and in Part I, Items
11(a) and 12(a)(1) to read as follows.
I
Note: The text of Form S–3 does not and
this amendment will not appear in the Code
of Federal Regulations.
*
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*
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*
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*
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*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
*
*
*
*
*
GENERAL INSTRUCTIONS
*
(e) Financial statements meeting the
requirements of Regulation S–X (17 CFR part
210) (Schedules required under Regulation
S–X shall be filed as ‘‘Financial Statements
Schedules’’ pursuant to Item 15, Exhibits and
Financial Statement Schedules, of this form),
as well as any financial information required
by Rule 3–05 and Article 11 of Regulation S–
X. A smaller reporting company may provide
the information in Rule 8–04 and 8–05 of
Regulation S–X in lieu of the financial
information required by Rule 3–05 and
Article 11 of Regulation S–X;
Item 12. Incorporation of Certain Information
by Reference
I
*
*
PART I—INFORMATION REQUIRED IN
PROSPECTUS
FORM S–3—REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
*
*
*
*
*
II. Application of General Rules and
Regulations
*
*
*
*
*
C. A smaller reporting company, defined in
Rule 405 (17 CFR 230.405), that is eligible to
use Form S–3 shall use the disclosure items
in Regulation S–K (17 CFR 229.10 et seq.)
with specific attention to the scaled
disclosure provided for smaller reporting
companies, if any. Smaller reporting
companies may provide the financial
information called for by Article 8 of
Regulation S–X in lieu of the financial
information called for by Item 11 in this
form.
*
*
*
*
*
PART I—INFORMATION REQUIRED IN
PROSPECTUS
*
*
*
*
*
Item 11. Material Changes
(a) Describe any and all material changes
in the registrant’s affairs that have occurred
since the end of the latest fiscal year for
which certified financial statements were
included in the latest annual report to
security holders and that have not been
described in a report on Form 10–Q
(§ 249.308a of this chapter) or Form 8–K
(§ 249.308 of this chapter) filed under the
Exchange Act.
*
*
*
*
*
Item 12. Incorporation of Certain Information
by Reference
(a) * * *
(1) The registrant’s latest annual report on
Form 10–K (17 CFR 249.310) filed pursuant
to Section 13(a) or 15(d) of the Exchange Act
that contains financial statements for the
registrant’s latest fiscal year for which a Form
10–K was required to be filed; and
*
*
*
*
*
48. Amend Form S–8 (referenced in
§ 239.16b) by adding to the cover page,
above the calculation of registration fee
table, check boxes requesting the
registrant to indicate whether a
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer,
or a smaller reporting company and
I
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revising General Instructions A.1(a)(6)
and B.3. to read as follows:
Note: The text of Form S–8 does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM S–8—REGISTRATION OF
SECURITIES UNDER THE SECURITIES ACT
OF 1933
*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
*
*
*
*
*
*
*
*
*
*
*
*
3. A ‘‘smaller reporting company,’’ defined
in § 230.405, shall use the disclosure items in
Regulation S–K (17 CFR 229.10 et seq.) with
specific attention to the scaled disclosure
provided for smaller reporting companies, if
any.
*
*
*
*
*
49. Amend Form S–11 (referenced in
§ 229.18) by:
I a. Adding to the cover page, above the
calculation of registration fee table,
check boxes requesting the registrant to
indicate whether it is a large accelerated
filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting
company; and
I b. Revising Item 27.
The revision and addition read as
follows:
mstockstill on PROD1PC66 with RULES2
I
Note: The text of Form S–11 does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM S–11—FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OF
SECURITIES OF CERTAIN REAL ESTATE
COMPANIES
*
*
*
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*
*
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accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
*
GENERAL INSTRUCTIONS
*
*
*
*
*
*
*
Item 4. Terms of the Transaction
*
*
*
*
*
FORM S–4—REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
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*
*
*
Note: The text of Form S–4 does not and
this amendment will not appear in the Code
of Federal Regulations.
*
*
Item 27. Financial Statements and
Information
Include in the prospectus the financial
statements required by Regulation S–X, the
supplementary financial information
required in Item 302 of Regulation S–K
(§ 229.302 of this chapter) and the
information concerning changes in and
disagreements with accountants on
accounting and financial disclosure required
by Item 304 of Regulation S–K (§ 229.304 of
this chapter). Although all schedules
required by Regulation S–X are to be
included in the registration statement, all
such schedules other than those prepared in
accordance with Rules 12–12, 12–28, and 12–
29 of Regulation S–X (§§ 210.12–12, 12–28,
and 12–29 of this chapter) may be omitted
from the prospectus. A smaller reporting
company may provide the information in
Article 8 of Regulation S–X (§ 210.8 of this
chapter) in lieu of the financial information
required by other parts of Regulation S–X,
and need not provide the supplementary
financial information required in Item 302 of
Regulation S–K.
*
*
*
*
50. Amend Form S–4 (referenced in
§ 239.25) by:
I a. Adding to the cover page, above the
calculation of the registration fee table,
check boxes requesting the registrant to
indicate whether it is a large accelerated
filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting
company;
I b. Removing paragraph 4 of General
Instruction D; and
I c. Revising paragraph 1 of General
Instruction I and in Part I Item 4(b), Item
5, Item 12(a) before the Instruction, the
introductory text of Item 12(b),
paragraph 3 of Item 12(c), Item 17(b)(8),
Item 18(b), and Item 19(c).
The addition and revisions read as
follows:
*
*
*
*
*
*
*
I
*
B. Application of General Rules and
Regulations
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
*
*
GENERAL INSTRUCTIONS
A. Rule as to Use of Form S–8
1. * * *
(a) * * *
(6) The term ‘‘Form 10 information’’ means
the information that is required by Form 10
or Form 20–F (§ 249.210 or § 249.220f of this
chapter), as applicable to the registrant, to
register under the Securities Exchange Act of
1934 each class of securities being registered
using this form. A registrant may provide the
Form 10 information in another Commission
filing with respect to the registrant.
971
*
I. Roll-Up Transactions
1. If securities to be registered on this Form
will be issued in a roll-up transaction as
defined in Item 901(c) of Regulation S–K (17
CFR 229.901(c)), then the disclosure
provisions of Subpart 229.900 of Regulation
S–K (17 CFR 229.900) shall apply to the
transaction in addition to the provisions of
this Form. A smaller reporting company,
defined in § 230.405, that is engaged in a rollup transaction shall refer to the disclosure
items in subpart 900 of Regulation S–K. To
the extent that the disclosure requirements of
Subpart 229.900 are inconsistent with the
disclosure requirements of any other
applicable forms or schedules, the
requirements of Subpart 229.900 are
controlling.
*
*
*
*
*
PART I—INFORMATION REQUIRED IN THE
PROSPECTUS
*
*
*
*
*
A. Information About the Transaction
*
*
*
*
*
*
*
*
*
(b) If a report, opinion or appraisal
materially relating to the transaction has been
received from an outside party, and such
report, opinion or appraisal is referred to in
the prospectus, furnish the same information
as would be required by Item 1015(b) of
Regulation M–A (§ 229.1015(b) of this
chapter).
Item 5. Pro Forma Financial Information
Furnish financial information required by
Article 11 of Regulation S–X (§ 210.11–01 et
seq. of this chapter) with respect to this
transaction. A smaller reporting company
may provide the information in Rule 8–05 of
Regulation S–X (§ 210.8–05 of this chapter)
in lieu of the financial information required
by Article 11 of Regulation S–X.
*
*
*
*
*
Item 12. Information With Respect to S–3
Registrants
*
*
*
*
*
(a) If the registrant elects to deliver this
prospectus together with a copy of either its
latest Form 10–K filed pursuant to Section
13(a) or 15(d) of the Exchange Act or its latest
annual report to security holders, which at
the time of original preparation met the
requirements of either Rule 14a–3 or Rule
14c–3:
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(1) Indicate that the prospectus is
accompanied by either a copy of the
registrant’s latest Form 10–K or a copy of its
latest annual report to security holders,
whichever the registrant elects to deliver
pursuant to paragraph (a) of this Item.
(2) Provide financial and other information
with respect to the registrant in the form
required by Part I of Form 10–Q as of the end
of the most recent fiscal quarter which ended
after the end of the latest fiscal year for
which certified financial statements were
included in the latest Form 10–K or the latest
report to security holders (whichever the
registrant elects to deliver pursuant to
paragraph (a) of this Item), and more than
forty-five days before the effective date of this
registration statement (or as of a more recent
date) by one of the following means:
(i) Including such information in the
prospectus;
(ii) Providing without charge to each
person to whom a prospectus is delivered a
copy of the registrant’s latest Form 10–Q; or
(iii) Providing without charge to each
person to whom a prospectus is delivered a
copy of the registrant’s latest quarterly report
that was delivered to security holders and
included the required financial information.
(3) If not reflected in the registrant’s latest
Form 10–K or its latest annual report to
security holders (whichever the registrant
elects to deliver pursuant to paragraph (a) of
this Item) provide information required by
Rule 3–05 (§ 210.3–05 of this chapter) and
Article 11 (§ 210.11–01 through 210.11.03 of
this chapter) of Regulation S–X. Smaller
reporting companies may provide the
information required by Rules 8–04 and 8–
05 of Regulation S–X.
(4) Describe any and all material changes
in the registrant’s affairs that have occurred
since the end of the latest fiscal year for
which audited financial statements were
included in the latest Form 10–K or latest
annual report to security holders (whichever
the registrant elects to deliver pursuant to
paragraph (a) of this Item) and that were not
described in a Form 10–Q or quarterly report
delivered with the prospectus in accordance
with paragraph (a)(2)(ii) or (iii) of this Item.
*
*
*
*
*
(b) If the registrant does not elect to deliver
its latest Form 10–K or its latest annual
report to security holders:
*
*
*
*
*
(c) * * *
(3) Such restatement of financial
statements or disposition of assets was not
reflected in the registrant’s latest annual
report to security holders and/or in its latest
Form 10–K filed pursuant to Section 13(a) or
15(d) of the Exchange Act.
*
*
*
*
*
Item 17. Information With Respect to
Companies Other Than S–3 Companies
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*
*
*
*
*
(b) * * *
(8) The quarterly financial and other
information that would have been required
had the company being acquired been
required to file Part I of Form 10–Q
(§ 249.308a of this chapter) for the most
recent quarter for which such a report would
have been on file at the time the registration
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statement becomes effective or for a period
ending as of a more recent date.
*
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*
Item 18. Information if Proxies, Consents or
Authorizations Are To Be Solicited
*
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*
(b) If the registrant or the company being
acquired meets the requirements for use of
Form S–3, any information required by
paragraphs (a)(5)(ii) and (7) of this Item with
respect to such company may be
incorporated by reference from its latest
annual report on Form 10–K.
Item 19. Information if Proxies, Consents or
Authorizations Are Not To Be Solicited or in
an Exchange Offer
*
*
*
*
*
(c) If the registrant or the company being
acquired meets the requirements for use of
Form S–3, any information required by
paragraphs (a)(5) and (7) of this Item with
respect to such company may be
incorporated by reference from its latest
annual report on Form 10–K.
*
I
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51. Revise § 239.42 to read as follows:
§ 239.42 Form F–X, for appointment of
agent for service of process and
undertaking for issuers registering
securities on Form F–8, F–9, F–10, or F–80
(§§ 239.38, 239.39, 239.40, or 239.41), or
registering securities or filing periodic
reports on Form 40–F (§ 249.240f of this
chapter), or by any issuer or other non-U.S.
person filing tender offer documents on
Schedule 13E–4F, 14D–1F, or 14D–9F
(§§ 240.13e–102, 240.14d–102, or 240.14d–
103 of this chapter), by any non-U.S. person
acting as trustee with respect to securities
registered on Form F–7 (§ 239.37), F–8, F–
9, F–10, or by a Canadian issuer qualifying
an offering statement pursuant to
Regulation A (§ 230.251 et seq. of this
chapter) on Form 1–A (§ 239.90), or by any
non-U.S. issuer providing Form CB
(§ 249.480 of this chapter) to the
Commission in connection with a tender
offer, rights offering or business
combination.
Form F–X shall be filed with the
Commission:
(a) By any issuer registering securities
on Form F–8, F–9, F–10, or F–80 under
the Securities Act of 1933;
(b) By any issuer registering securities
on Form 40–F under the Securities
Exchange Act of 1934;
(c) By any issuer filing a periodic
report on Form 40–F, if it has not
previously filed a Form F–X in
connection with the class of securities
in relation to which the obligation to file
a report on Form 40–F arises;
(d) By any issuer or other non-U.S.
person filing tender offer documents on
Schedule 13E–4F, 14D–1F, or 14D–9F;
(e) By any non-U.S. person acting as
trustee with respect to securities
registered on Form F–7, F–8, F–9, F–10,
or F–80;
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(f) By a Canadian issuer qualifying an
offering statement pursuant to the
provisions of Regulation A; and
(g) By any non-U.S. issuer providing
Form CB to the Commission in
connection with a tender offer, rights
offering or business combination.
I 52. Amend Form F–X (referenced in
§ 239.42) by revising General
Instructions I.(e) and II.F.(a) and (c) to
read as follows:
Note: The text of Form F–X does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM F–X—APPOINTMENT OF AGENT
FOR SERVICE OF PROCESS AND
UNDERTAKING
GENERAL INSTRUCTIONS
I. * * *
*
*
*
*
*
(e) By any non-U.S. person acting as trustee
with respect to securities registered on Form
F–7, F–8, F–9, F–10, or F–80; and
*
*
*
*
*
II. * * *
F. Each person filing this Form in
connection with:
(a) The use of Form F–9, F–10, or 40–F or
Schedule 13E–4F, 14D–1F, or 14D–9F
stipulates and agrees to appoint a successor
agent for service of process and file an
amended Form F–X if the Filer discharges
the Agent or the Agent is unwilling or unable
to accept service on behalf of the Filer at any
time until six years have elapsed from the
date the issuer of the securities to which such
Forms and Schedules relate has ceased
reporting under the Exchange Act;
*
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*
*
(c) Its status as trustee with respect to
securities registered on Form F–7, F–8, F–9,
F–10, or F–80 stipulates and agrees to
appoint a successor agent for service of
process and file an amended Form F–X if the
Filer discharges the Agent or the Agent is
unwilling or unable to accept service on
behalf of the Filer at any time during which
any of the securities subject to the indenture
remain outstanding; and
*
*
*
*
*
53. Amend Form 1–A (referenced in
§ 239.90) by revising paragraph B in Part
II to read as follows:
I
Note: The text of Form 1–A does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM 1–A—REGULATION A OFFERING
STATEMENT UNDER THE SECURITIES
ACT OF 1933
*
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*
*
*
PART II—OFFERING CIRCULAR
*
*
*
*
*
B. For all other issuers and for any issuer
that so chooses—the information required by
either Part I of Form S–1, (17 CFR 239.11),
except for the financial statements called for
there, or Model B of this Part II of Form 1–
A. Offering circulars prepared pursuant to
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this instruction need not follow the order of
the items or other requirements of the
disclosure form. Such information shall not,
however, be set forth in such a fashion as to
obscure any of the required information or
information necessary to keep the required
information from being incomplete or
misleading. Information requested to be
presented in a specified tabular format shall
be given in substantially the tabular form
specified in the item.
*
*
*
*
*
PART 240—GENERAL RULES AND
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
54. The authority citations for part
240 continue to read in part as follows:
I
Authority: 15 U.S.C. 77c, 77d, 77g, 77j,
77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j,
78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–
20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4,
80b–11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
*
*
*
*
*
55. Amend § 240.0–2 by revising
paragraph (a) to read as follows:
I
§ 240.0–2 Business hours of the
Commission.
(a) The principal office of the
Commission, at 100 F Street, NE,
Washington, DC 20549, is open each
day, except Saturdays, Sundays, and
Federal holidays, from 9 a.m. to 5:30
p.m., Eastern Standard Time or Eastern
Daylight Saving Time, whichever
currently is in effect in Washington, DC,
provided that hours for the filing of
documents pursuant to the Act or the
rules and regulations thereunder are as
set forth in paragraphs (b) and (c) of this
section.
*
*
*
*
*
I 56. Amend § 240.0–12 by revising the
second sentence of paragraph (c) to read
as follows:
§ 240.0–12 Commission procedures for
filing applications for orders for exemptive
relief under Section 36 of the Exchange Act.
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(c) * * * Five copies of every paper
application and every amendment to
such an application must be submitted
to the Office of the Secretary at 100 F
Street, NE., Washington, DC 20549–
1090. * * *
*
*
*
*
*
I 57. Amend § 240.3b–6 by revising the
introductory text of paragraph (b)(1),
paragraphs (b)(1)(i) and (b)(2) to read as
follows:
§ 240.3b–6 Liability for certain statements
by issuers.
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(b) * * *
(1) A forward-looking statement (as
defined in paragraph (c) of this section)
made in a document filed with the
Commission, in Part I of a quarterly
report on Form 10–Q, § 249.308a of this
chapter, or in an annual report to
security holders meeting the
requirements of Rules 14a–3(b) and (c)
or 14c–3(a) and (b) (§§ 240.14a–3(b) and
(c) or 240.14c–3(a) and (b)), a statement
reaffirming such forward-looking
statement after the date the document
was filed or the annual report was made
publicly available, or a forward-looking
statement made before the date the
document was filed or the date the
annual report was made publicly
available if such statement is reaffirmed
in a filed document, in Part I of a
quarterly report on Form 10–Q, or in an
annual report made publicly available
within a reasonable time after the
making of such forward-looking
statement; Provided, that:
(i) At the time such statements are
made or reaffirmed, either the issuer is
subject to the reporting requirements of
Section 13(a) or 15(d) of the Act and has
complied with the requirements of Rule
13a–1 or 15d–1 thereunder, if
applicable, to file its most recent annual
report on Form 10–K, Form 20–F or
Form 40–F; or if the issuer is not subject
to the reporting requirements of Section
13(a) or 15(d) of the Act, the statements
are made in a registration statement
filed under the Securities Act of 1933
offering statement or solicitation of
interest, written document or broadcast
script under Regulation A or pursuant to
Section 12(b) or (g) of the Securities
Exchange Act of 1934; and
*
*
*
*
*
(2) Information that is disclosed in a
document filed with the Commission in
Part I of a quarterly report on Form 10–
Q (§ 249.308a of this chapter) or in an
annual report to security holders
meeting the requirements of Rules 14a–
3(b) and (c) or 14c–3(a) and (b) under
the Act (§§ 240.14a–3(b) and (c) or
240.14c–3(a) and (b) of this chapter) and
that relates to:
(i) The effects of changing prices on
the business enterprise, presented
voluntarily or pursuant to Item 303 of
Regulation S–K (§ 229.303 of this
chapter), ‘‘Management’s Discussion
and Analysis of Financial Condition and
Results of Operations,’’ Item 5 of Form
20–F (§ 240.220(f) of this chapter),
‘‘Operating and Financial Review and
Prospects,’’ Item 302 of Regulation S–K
(§ 229.302 of this chapter)
‘‘Supplementary Financial
Information,’’ or Rule 3–20(c) of
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973
Regulation S–X (§ 210.3–20(c) of this
chapter); or
(ii) The value of proved oil and gas
reserves (such as a standardized
measure of discounted future net cash
flows relating to proved oil and gas
reserves as set forth in paragraphs 30–
34 of Statement of Financial Accounting
Standards No. 69), presented voluntarily
or pursuant to Item 302 of Regulation S–
K (§ 229.302 of this chapter).
*
*
*
*
*
I 58. Amend § 240.10A–1 by revising
paragraphs (a)(4)(ii) and (b)(3) to read as
follows:
§ 240.10A–1 Notice to the Commission
Pursuant to Section 10A of the Act.
(a)(1) * * *
(4) * * *
(ii) The disclosure requirements of
Item 304 of Regulation S–K, § 229.304 of
this chapter.
(b)(1) * * *
(3) Submission of the report (or
documentation) by the independent
accountant as described in paragraphs
(b)(1) and (b)(2) of this section shall not
replace, or otherwise satisfy the need
for, the newly engaged and former
accountants’ letters under Items
304(a)(2)(D) and 304(a)(3) of Regulation
S–K, §§ 229.304(a)(2)(D) and
229.304(a)(3) of this chapter,
respectively, and shall not limit, reduce,
or affect in any way the independent
accountant’s obligations to comply fully
with all other legal and professional
responsibilities, including, without
limitation, those under generally
accepted auditing standards and the
rules or interpretations of the
Commission that modify or supplement
those auditing standards.
*
*
*
*
*
I 59. Amend § 240.10A–3 by revising
paragraph (a)(5)(i)(A) to read as follows:
§ 240.10A–3 Listing standards relating to
audit committees.
(a) * * *
(5) * * *
(i) * * *
(A) July 31, 2005 for foreign private
issuers and smaller reporting companies
(as defined in § 240.12b–2); and
*
*
*
*
*
I 60. Amend § 240.12b–2 by:
I a. Revising paragraphs (1)(iv) and
(2)(iv) in the definition of accelerated
filer and large accelerated filer;
I b. Removing the definition of small
business issuer; and
I c. Adding the definition of smaller
reporting company in alphabetical
order.
The revisions and addition to read as
follows:
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§ 240.12b–2
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Definitions.
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Accelerated filer and large
accelerated filer
(1) * * *
(iv) The issuer is not eligible to use
the requirements for smaller reporting
companies in Part 229 of this chapter for
its annual and quarterly reports.
(2) * * *
(iv) The issuer is not eligible to use
the requirements for smaller reporting
companies in Part 229 of this chapter for
its annual and quarterly reports.
*
*
*
*
*
Smaller reporting company: As used
in this part, the term smaller reporting
company means an issuer that is not an
investment company, an asset-backed
issuer (as defined in § 229.1101 of this
chapter), or a majority-owned subsidiary
of a parent that is not a smaller
reporting company and that:
(1) Had a public float of less than $75
million as of the last business day of its
most recently completed second fiscal
quarter, computed by multiplying the
aggregate worldwide number of shares
of its voting and non-voting common
equity held by non-affiliates by the price
at which the common equity was last
sold, or the average of the bid and asked
prices of common equity, in the
principal market for the common equity;
or
(2) In the case of an initial registration
statement under the Securities Act or
Exchange Act for shares of its common
equity, had a public float of less than
$75 million as of a date within 30 days
of the date of the filing of the
registration statement, computed by
multiplying the aggregate worldwide
number of such shares held by nonaffiliates before the registration plus, in
the case of a Securities Act registration
statement, the number of such shares
included in the registration statement by
the estimated public offering price of
the shares; or
(3) In the case of an issuer whose
public float as calculated under
paragraph (1) or (2) of this definition
was zero, had annual revenues of less
than $50 million during the most
recently completed fiscal year for which
audited financial statements are
available.
(4) Determination: Whether or not an
issuer is a smaller reporting company is
determined on an annual basis.
(i) For issuers that are required to file
reports under section 13(a) or 15(d) of
the Exchange Act, the determination is
based on whether the issuer came
within the definition of smaller
reporting company using the amounts
specified in paragraph (f)(2)(iii) of Item
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10 of Regulation S–K (§ 229.10(f)(1)(i) of
this chapter), as of the last business day
of the second fiscal quarter of the
issuer’s previous fiscal year. An issuer
in this category must reflect this
determination in the information it
provides in its quarterly report on Form
10–Q for the first fiscal quarter of the
next year, indicating on the cover page
of that filing, and in subsequent filings
for that fiscal year, whether or not it is
a smaller reporting company, except
that, if a determination based on public
float indicates that the issuer is newly
eligible to be a smaller reporting
company, the issuer may choose to
reflect this determination beginning
with its first quarterly report on Form
10–Q following the determination,
rather than waiting until the first fiscal
quarter of the next year.
(ii) For determinations based on an
initial Securities Act or Exchange Act
registration statement under paragraph
(f)(1)(ii) of Item 10 of Regulation S–K
(§ 229.10(f)(1)(ii) of this chapter), the
issuer must reflect the determination in
the information it provides in the
registration statement and must
appropriately indicate on the cover page
of the filing, and subsequent filings for
the fiscal year in which the filing is
made, whether or not it is a smaller
reporting company. The issuer must
redetermine its status at the end of its
second fiscal quarter and then reflect
any change in status as provided in
paragraph (4)(i) of this definition. In the
case of a determination based on an
initial Securities Act registration
statement, an issuer that was not
determined to be a smaller reporting
company has the option to redetermine
its status at the conclusion of the
offering covered by the registration
statement based on the actual offering
price and number of shares sold.
(iii) Once an issuer fails to qualify for
smaller reporting company status, it will
remain unqualified unless it determines
that its public float, as calculated in
accordance with paragraph (f)(1) of this
definition, was less than $50 million as
of the last business day of its second
fiscal quarter or, if that calculation
results in zero because the issuer had no
public equity outstanding or no market
price for its equity existed, if the issuers
had annual revenues of less than $40
million during its previous fiscal year.
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*
I 61. Amend § 240.12b–23 by revising
paragraphs (a)(3)(i) and (b) to read as
follows:
§ 240.12b–23
Incorporation by reference.
(a) * * *
(3) * * *
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(i) A proxy or information statement
incorporated by reference in response to
Part III of Form 10–K (17 CFR 249.310);
*
*
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*
(b) Any incorporation by reference of
matter pursuant to this section shall be
subject to the provisions of § 229.10(d)
of this chapter restricting incorporation
by reference of documents that
incorporate by reference other
information. Material incorporated by
reference shall be clearly identified in
the reference by page, paragraph, and
caption or otherwise. Where only
certain pages of a document are
incorporated by reference and filed as
an exhibit, the document from which
the material is taken shall be clearly
identified in the reference. An express
statement that the specified matter is
incorporated by reference shall be made
at the particular place in the statement
or report where the information is
required. Matter shall not be
incorporated by reference in any case
where such incorporation would render
the statement or report incomplete,
unclear or confusing.
I 62. Amend § 240.12b–25 by revising
the section heading and paragraphs (a)
and (b)(2)(ii) to read as follows:
§ 240.12b–25 Notification of inability to
timely file all or any required portion of a
Form 10–K, 20–F, 11–K, N–SAR, N–CSR,
10–Q, or 10–D.
(a) If all or any required portion of an
annual or transition report on Form 10–
K, 20–F or 11–K (17 CFR 249.310,
249.220f or 249.311), a quarterly or
transition report on Form 10–Q (17 CFR
249.308a), or a distribution report on
Form 10–D (17 CFR 249.312) required to
be filed pursuant to Section 13 or 15(d)
of the Act (15 U.S.C. 78m or 78o(d)) and
rules thereunder, or if all or any
required portion of a semi-annual,
annual or transition report on Form N–
CSR (17 CFR 249.331; 17 CFR 274.128)
or Form N–SAR (17 CFR 249.330; 17
CFR 274.101) required to be filed
pursuant to Section 13 or 15(d) of the
Act or section 30 of the Investment
Company Act of 1940 (15 U.S.C. 80a–
29) and the rules thereunder, is not filed
within the time period prescribed for
such report, the registrant, no later than
one business day after the due date for
such report, shall file a Form 12b–25 (17
CFR 249.322) with the Commission
which shall contain disclosure of its
inability to file the report timely and the
reasons therefore in reasonable detail.
(b) * * *
(2) * * *
(ii) The subject annual report, semiannual report or transition report on
Form 10–K, 20–F, 11–K, N–SAR, or N–
CSR, or portion thereof, will be filed no
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later than the fifteenth calendar day
following the prescribed due date; or the
subject quarterly report or transition
report on Form 10–Q or distribution
report on Form 10–D, or portion thereof,
will be filed no later than the fifth
calendar day following the prescribed
due date; and
*
*
*
*
*
I 63. Amend § 240.12h–3 by revising
paragraph (e) to read as follows:
§ 240.12h–3 Suspension of duty to file
reports under section 15(d).
*
*
*
*
*
(e) If the suspension provided by this
section is discontinued because a class
of securities does not meet the eligibility
criteria of paragraph (b) of this section
on the first day of an issuer’s fiscal year,
then the issuer shall resume periodic
reporting pursuant to section 15(d) of
the Act by filing an annual report on
Form 10–K for its preceding fiscal year,
not later than 120 days after the end of
such fiscal year.
I 64. Amend § 240.13a–10 by revising
paragraphs (c), (d)(2)(ii), (d)(2)(iii), the
introductory text of paragraph (e),
paragraphs (e)(1), (e)(2), (e)(4), the Note
to paragraphs (c) and (e) and the
introductory text of paragraph (j)(2) to
read as follows:
§ 240.13a–10
Transition reports.
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(c) If the transition period covers a
period of less than six months, in lieu
of the report required by paragraph (b)
of this section, a report may be filed for
the transition period on Form 10–Q
(§ 249.308a of this chapter) not more
than the number of days specified in
paragraph (j) of this section after either
the close of the transition period or the
date of the determination to change the
fiscal closing date, whichever is later.
The report on Form 10–Q shall cover
the period from the close of the last
fiscal year end and shall indicate clearly
the period covered. The financial
statements filed therewith need not be
audited but, if they are not audited, the
issuer shall file with the first annual
report for the newly adopted fiscal year
separate audited statements of income
and cash flows covering the transition
period. The notes to financial
statements for the transition period
included in such first annual report may
be integrated with the notes to financial
statements for the full fiscal period. A
separate audited balance sheet as of the
end of the transition period shall be
filed in the annual report only if the
audited balance sheet as of the end of
the fiscal year prior to the transition
period is not filed. Schedules need not
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be filed in transition reports on Form
10–Q.
(d) * * *
(2) * * *
(ii) The first report required to be filed
by the issuer for the newly adopted
fiscal year after the date of the
determination to change the fiscal year
end is a quarterly report on Form 10–
Q; and
(iii) Information on the transition
period is included in the issuer’s
quarterly report on Form 10–Q for the
first quarterly period (except the fourth
quarter) of the newly adopted fiscal year
that ends after the date of the
determination to change the fiscal year.
The information covering the transition
period required by Part II and Item 2 of
Part I may be combined with the
information regarding the quarter.
However, the financial statements
required by Part I, which may be
unaudited, shall be furnished separately
for the transition period.
(e) Every issuer required to file
quarterly reports on Form 10–Q
pursuant to § 240.13a–13 of this chapter
that changes its fiscal year end shall:
(1) File a quarterly report on Form 10–
Q within the time period specified in
General Instruction A.1. to that form for
any quarterly period (except the fourth
quarter) of the old fiscal year that ends
before the date on which the issuer
determined to change its fiscal year end,
except that the issuer need not file such
quarterly report if the date on which the
quarterly period ends also is the date on
which the transition period ends;
(2) File a quarterly report on Form 10–
Q within the time specified in General
Instruction A.1. to that form for each
quarterly period of the old fiscal year
within the transition period. In lieu of
a quarterly report for any quarter of the
old fiscal year within the transition
period, the issuer may file a quarterly
report on Form 10–Q for any period of
three months within the transition
period that coincides with a quarter of
the newly adopted fiscal year if the
quarterly report is filed within the
number of days specified in paragraph
(j) of this section after the end of such
three month period, provided the issuer
thereafter continues filing quarterly
reports on the basis of the quarters of
the newly adopted fiscal year;
*
*
*
*
*
(4) Unless such information is or will
be included in the transition report, or
the first annual report on Form 10–K for
the newly adopted fiscal year, include
in the initial quarterly report on Form
10–Q for the newly adopted fiscal year
information on any period beginning on
the first day subsequent to the period
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covered by the issuer’s final quarterly
report on Form 10–Q or annual report
on Form 10–K for the old fiscal year.
The information covering such period
required by Part II and Item 2 of Part I
may be combined with the information
regarding the quarter. However, the
financial statements required by Part I,
which may be unaudited, shall be
furnished separately for such period.
Note to paragraphs (c) and (e): If it is not
practicable or cannot be cost-justified to
furnish in a transition report on Form 10–Q
or a quarterly report for the newly adopted
fiscal year financial statements for
corresponding periods of the prior year
where required, financial statements may be
furnished for the quarters of the preceding
fiscal year that most nearly are comparable if
the issuer furnishes an adequate discussion
of seasonal and other factors that could affect
the comparability of information or trends
reflected, an assessment of the comparability
of the data, and a representation as to the
reason recasting has not been undertaken.
*
*
*
*
*
(j) * * *
(2) For transition reports to be filed on
Form 10–Q (§ 249.308a of this chapter)
the number of days shall be:
*
*
*
*
*
I 65. Amend § 240.13a–13 by revising
the section heading, paragraph (a), the
introductory text of paragraph (c), and
paragraph (d) to read as follows:
§ 240.13a–13 Quarterly reports on Form
10–Q (§ 249.308a of this chapter).
(a) Except as provided in paragraphs
(b) and (c) of this section, every issuer
that has securities registered pursuant to
section 12 of the Act and is required to
file annual reports pursuant to section
13 of the Act, and has filed or intends
to file such reports on Form 10–K
(§ 249.310 of this chapter), shall file a
quarterly report on Form 10–Q
(§ 249.308a of this chapter) within the
period specified in General Instruction
A.1. to that form for each of the first
three quarters of each fiscal year of the
issuer, commencing with the first fiscal
quarter following the most recent fiscal
year for which full financial statements
were included in the registration
statement, or, if the registration
statement included financial statements
for an interim period subsequent to the
most recent fiscal year end meeting the
requirements of Article 10 of Regulation
S–X and Rule 8–03 of Regulation S–X
for smaller reporting companies, for the
first fiscal quarter subsequent to the
quarter reported upon in the registration
statement. The first quarterly report of
the issuer shall be filed either within 45
days after the effective date of the
registration statement or on or before the
date on which such report would have
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been required to be filed if the issuer
has been required to file reports on
Form 10–Q as of its last fiscal quarter,
whichever is later.
*
*
*
*
*
(c) Part I of the quarterly reports on
Form 10–Q need not be filed by:
*
*
*
*
*
(d) Notwithstanding the foregoing
provisions of this section, the financial
information required by Part I of Form
10–Q shall not be deemed to be ‘‘filed’’
for the purpose of Section 18 of the Act
or otherwise subject to the liabilities of
that section of the Act, but shall be
subject to all other provisions of the Act.
I 66. Amend § 240.13a–14 by revising
paragraph (a) to read as follows:
§ 240.13a–14 Certification of disclosure in
annual and quarterly reports.
(a) Each report, including transition
reports, filed on Form 10–Q, Form 10–
K, Form 20–F or Form 40–F
(§§ 249.308a, 249.310, 249.220f or
249.240f of this chapter) under Section
13(a) of the Act (15 U.S.C. 78m(a)), other
than a report filed by an Asset-Backed
Issuer (as defined in § 229.1101 of this
chapter) or a report on Form 20–F filed
under § 240.13a–19, must include
certifications in the form specified in
the applicable exhibit filing
requirements of such report and such
certifications must be filed as an exhibit
to such report. Each principal executive
and principal financial officer of the
issuer, or persons performing similar
functions, at the time of filing of the
report must sign a certification. The
principal executive and principal
financial officers of an issuer may omit
the portion of the introductory language
in paragraph 4 as well as language in
paragraph 4(b) of the certification that
refers to the certifying officers’
responsibility for designing, establishing
and maintaining internal control over
financial reporting for the issuer until
the issuer becomes subject to the
internal control over financial reporting
requirements in § 240.13a–15 or
240.15d–15.
*
*
*
*
*
I 67. Amend § 240.13a–16 by revising
paragraph (a)(3) to read as follows:
mstockstill on PROD1PC66 with RULES2
§ 240.13a–16 Reports of foreign private
issuers on Form 6–K (17 CFR 249.306).
(a) * * *
(3) Issuers filing periodic reports on
Form 10–K, Form 10–Q, and Form 8–K;
or
*
*
*
*
*
I 68. Amend § 240.13a–20 by revising
the introductory text of paragraph (a) to
read as follows:
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§ 240.13a–20 Plain English presentation of
specified information.
(a) Any information included or
incorporated by reference in a report
filed under section 13(a) of the Act (15
U.S.C. 78m(a)) that is required to be
disclosed pursuant to Item 402, 403, 404
or 407 of Regulation S–K (§ 229.402,
229.403, 229.404 or 229.407 of this
chapter) must be presented in a clear,
concise and understandable manner.
You must prepare the disclosure using
the following standards:
*
*
*
*
*
I 69. Amend § 240.14a–3 by:
I a. Removing the Note to Small
Business Issuers following the
introductory text of paragraph (b);
I b. Revising paragraph (b)(1) and Note
1;
I c. Revising the heading ‘‘Note 2’’ to
read ‘‘Note 2 to Paragraph (b)(i)’’; and
I d. Revising paragraphs (b)(5)(ii),
(b)(10) and its Note, and (d) to read as
follows:
§ 240.14a–3 Information to be furnished to
security holders.
*
*
*
*
*
(b) * * *
(1) The report shall include, for the
registrant and its subsidiaries,
consolidated and audited balance sheets
as of the end of the two most recent
fiscal years and audited statements of
income and cash flows for each of the
three most recent fiscal years prepared
in accordance with Regulation S–X (part
210 of this chapter), except that the
provisions of Article 3 (other than
§§ 210.3–03(e), 210.3–04 and 210.3–20)
and Article 11 shall not apply. Any
financial statement schedules or
exhibits or separate financial statements
which may otherwise be required in
filings with the Commission may be
omitted. If the financial statements of
the registrant and its subsidiaries
consolidated in the annual report filed
or to be filed with the Commission are
not required to be audited, the financial
statements required by this paragraph
may be unaudited. A smaller reporting
company may provide the information
in Article 8 of Regulation S–X (§ 210.8
of this chapter) in lieu of the financial
information required by this paragraph
9(b)(1).
Note 1 to Paragraph (b)(1): If the financial
statements for a period prior to the most
recently completed fiscal year have been
examined by a predecessor accountant, the
separate report of the predecessor accountant
may be omitted in the report to security
holders, provided the registrant has obtained
from the predecessor accountant a reissued
report covering the prior period presented
and the successor accountant clearly
indicates in the scope paragraph of his or her
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report (a) that the financial statements of the
prior period were examined by other
accountants, (b) the date of their report, (c)
the type of opinion expressed by the
predecessor accountant and (d) the
substantive reasons therefore, if it was other
than unqualified. It should be noted,
however, that the separate report of any
predecessor accountant is required in filings
with the Commission. If, for instance, the
financial statements in the annual report to
security holders are incorporated by
reference in a Form 10–K, the separate report
of a predecessor accountant shall be filed in
Part II or in Part IV as a financial statement
schedule.
*
*
*
*
*
(5) * * *
(ii) The report shall contain
management’s discussion and analysis
of financial condition and results of
operations required by Item 303 of
Regulation S–K (§ 229.303 of this
chapter).
*
*
*
*
*
(10) The registrant’s proxy statement,
or the report, shall contain an
undertaking in bold face or otherwise
reasonably prominent type to provide
without charge to each person solicited
upon the written request of any such
person, a copy of the registrant’s annual
report on Form 10–K, including the
financial statements and the financial
statement schedules, required to be filed
with the Commission pursuant to Rule
13a–1 (§ 240.13a–1 of this chapter)
under the Act for the registrant’s most
recent fiscal year, and shall indicate the
name and address (including title or
department) of the person to whom such
a written request is to be directed. In the
discretion of management, a registrant
need not undertake to furnish without
charge copies of all exhibits to its Form
10–K, provided that the copy of the
annual report on Form 10–K furnished
without charge to requesting security
holders is accompanied by a list briefly
describing all the exhibits not contained
therein and indicating that the registrant
will furnish any exhibit upon the
payment of a specified reasonable fee,
which fee shall be limited to the
registrant’s reasonable expenses in
furnishing such exhibit. If the
registrant’s annual report to security
holders complies with all of the
disclosure requirements of Form 10–K
and is filed with the Commission in
satisfaction of its Form 10–K filing
requirements, such registrant need not
furnish a separate Form 10–K to security
holders who receive a copy of such
annual report.
Note to Paragraph (b)(10): Pursuant to the
undertaking required by paragraph (b)(10) of
this section, a registrant shall furnish a copy
of its annual report on Form 10–K (§ 249.310
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of this chapter) to a beneficial owner of its
securities upon receipt of a written request
from such person. Each request must set forth
a good faith representation that, as of the
record date for the solicitation requiring the
furnishing of the annual report to security
holders pursuant to paragraph (b) of this
section, the person making the request was
a beneficial owner of securities entitled to
vote.
*
*
*
*
*
(d) An annual report to security
holders prepared on an integrated basis
pursuant to General Instruction H to
Form 10–K (§ 249.310 of this chapter)
may also be submitted in satisfaction of
this section. When filed as the annual
report on Form 10–K, responses to the
Items of that form are subject to section
18 of the Act notwithstanding paragraph
(c) of this section.
*
*
*
*
*
I 70. Amend § 240.14a–5 by removing
the authority citation following the
section and revising paragraph (f) to
read as follows:
§ 240.14a–5 Presentation of information in
proxy statement.
*
*
*
*
*
(f) If the date of the next annual
meeting is subsequently advanced or
delayed by more than 30 calendar days
from the date of the annual meeting to
which the proxy statement relates, the
registrant shall, in a timely manner,
inform shareholders of such change, and
the new dates referred to in paragraphs
(e)(1) and (e)(2) of this section, by
including a notice, under Item 5, in its
earliest possible quarterly report on
Form 10–Q (§ 249.308a of this chapter),
or, in the case of investment companies,
in a shareholder report under
§ 270.30d–1 of this chapter under the
Investment Company Act of 1940, or, if
impracticable, any means reasonably
calculated to inform shareholders.
I 71. Amend § 240.14a–8, by revising
paragraph (e)(1) to read as follows:
§ 240.14a–8
Shareholder proposals.
mstockstill on PROD1PC66 with RULES2
*
*
*
*
*
(e) * * *
(1) If you are submitting your
proposal for the company’s annual
meeting, you can in most cases find the
deadline in last year’s proxy statement.
However, if the company did not hold
an annual meeting last year, or has
changed the date of its meeting for this
year more than 30 days from last year’s
meeting, you can usually find the
deadline in one of the company’s
quarterly reports on Form 10–Q
(§ 249.308a of this chapter), or in
shareholder reports of investment
companies under § 270.30d–1 of this
chapter of the Investment Company Act
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of 1940. In order to avoid controversy,
shareholders should submit their
proposals by means, including
electronic means, that permit them to
prove the date of delivery.
*
*
*
*
*
I 72. Amend § 240.14a–101 by:
I a. Revising Notes C. and D.1, and the
introductory text of Note E.;
I b. Removing Notes F. and G. to the
cover page;
I c. Revising paragraph (e)(1) of Item 9,
and revising paragraph (a)(1) of Item 13.
The revisions to read as follows:
977
with statutory and regulatory filings or
engagements for those fiscal years.
*
*
*
*
*
§ 240.14a–101 Schedule 14A. Information
required in proxy statement.
Item 13. Financial and other information.
(See Notes D and E at the beginning of this
Schedule.)
(a) * * *
(1) Financial statements meeting the
requirements of Regulation S–X, including
financial information required by Rule 3–05
and Article 11 of Regulation S–X with
respect to transactions other than pursuant to
which action is to be taken as described in
this proxy statement (A smaller reporting
company may provide the information in
Rules 8–04 and 8–05 of Regulation S–X
(§ 210.8–04 and § 210.8–05 of this chapter) in
lieu of the financial information required by
Rule 3–05 and Article 11 of Regulation S–X);
*
*
*
*
*
*
Schedule 14A Information
*
*
*
*
Notes: * * *
C. Except as otherwise specifically
provided, where any item calls for
information for a specified period with
regard to directors, executive officers, officers
or other persons holding specified positions
or relationships, the information shall be
given with regard to any person who held
any of the specified positions or relationship
at any time during the period. Information,
other than information required by Item 404
of Regulation S–K (§ 229.404 of this chapter),
need not be included for any portion of the
period during which such person did not
hold any such position or relationship,
provided a statement to that effect is made.
D. * * *
1. Any incorporation by reference of
information pursuant to the provisions of this
schedule shall be subject to the provisions of
§ 229.10(d) of this chapter restricting
incorporation by reference of documents that
incorporate by reference other information. A
registrant incorporating any documents, or
portions of documents, shall include a
statement on the last page(s) of the proxy
statement as to which documents, or portions
of documents, are incorporated by reference.
Information shall not be incorporated by
reference in any case where such
incorporation would render the statement
incomplete, unclear or confusing.
*
*
*
*
*
E. In Item 13 of this Schedule, the
reference to ‘‘meets the requirement of Form
S–3’’ shall refer to a registrant who meets the
following requirements:
*
*
*
*
*
Item 9. Independent public accountants.
*
*
*
*
*
(e)(1) Disclose, under the caption Audit
Fees, the aggregate fees billed for each of the
last two fiscal years for professional services
rendered by the principal accountant for the
audit of the registrant’s annual financial
statements and review of financial statements
included in the registrant’s Form 10–Q (17
CFR 249.308a) or services that are normally
provided by the accountant in connection
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*
§ 240.14c–3
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
*
*
*
*
[Amended]
73. Amend § 240.14c–3 by removing
the Note to Small Business Issuers
following paragraph (a)(2).
I 74. Amend § 240.14c–101 by revising
the Note that follows the cover page to
read as follows:
I
§ 240.14c–101 Schedule 14C. Information
required in information statement.
Schedule 14C Information
Information Statement Pursuant to Section
14(c) of the Securities Exchange Act of 1934
*
*
*
*
*
Note to Cover Page: Where any item, other
than Item 4, calls for information with
respect to any matter to be acted upon at the
meeting or, if no meeting is being held, by
written authorization or consent, such item
need be answered only with respect to
proposals to be made by the registrant.
Registrants and acquirees that meet the
definition of ‘‘smaller reporting company’’
under Rule 12b–2 of the Exchange Act
(§ 240.12b–2) shall refer to the disclosure
items in Regulation S–K (§§ 229.10 through
229.1123 of this chapter) with specific
attention to the scaled disclosure
requirements for smaller reporting
companies, if any. A smaller reporting
company may provide the information in
Article 8 of Regulation S–X in lieu of any
financial statements required by Item 1 of
§ 240.14c–101.
*
*
*
*
*
75. Amend § 240.14d–3 by removing
the authority citation following the
section and revising paragraph (a)(3)(i)
to read as follows:
I
§ 240.14d–3 Filing and transmission of
tender offer statement.
(a) * * *
(3) * * *
(i) To each national securities
exchange where such class of the
subject company’s securities is
registered and listed for trading (which
may be based upon information
contained in the subject company’s
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most recent Annual Report on Form 10–
K (§ 249.310 of this chapter) filed with
the Commission unless the bidder has
reason to believe that such information
is not current), which telephonic notice
shall be made when practicable before
the opening of each such exchange; and
*
*
*
*
*
I 76. Amend § 240.15d–10 by revising
paragraphs (c), (d)(2)(ii), (d)(2)(iii), the
introductory text of (e), paragraphs
(e)(1), (e)(2), (e)(4), the Note to
paragraphs (c) and (e), paragraph (f), and
the introductory text of (j)(2) to read as
follows:
§ 240.15d–10
Transition reports.
mstockstill on PROD1PC66 with RULES2
*
*
*
*
*
(c) If the transition period covers a
period of less than six months, in lieu
of the report required by paragraph (b)
of this section, a report may be filed for
the transition period on Form 10–Q
(§ 249.308 of this chapter) not more than
the number of days specified in
paragraph (j) of this section after either
the close of the transition period or the
date of the determination to change the
fiscal closing date, whichever is later.
The report on Form 10–Q shall cover
the period from the close of the last
fiscal year end and shall indicate clearly
the period covered. The financial
statements filed therewith need not be
audited but, if they are not audited, the
issuer shall file with the first annual
report for the newly adopted fiscal year
separate audited statements of income
and cash flows covering the transition
period. The notes to financial
statements for the transition period
included in such first annual report may
be integrated with the notes to financial
statements for the full fiscal period. A
separate audited balance sheet as of the
end of the transition period shall be
filed in the annual report only if the
audited balance sheet as of the end of
the fiscal year before the transition
period is not filed. Schedules need not
be filed in transition reports on Form
10–Q.
(d) * * *
(2)(i) * * *
(ii) The first report required to be filed
by the issuer for the newly adopted
fiscal year after the date of the
determination to change the fiscal year
end is a quarterly report on Form 10–
Q; and
(iii) Information on the transition
period is included in the issuer’s
quarterly report on Form 10–Q for the
first quarterly period (except the fourth
quarter) of the newly adopted fiscal year
that ends after the date of the
determination to change the fiscal year.
The information covering the transition
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Jkt 214001
period required by Part II and Item 2 of
Part I may be combined with the
information regarding the quarter.
However, the financial statements
required by Part I, which may be
unaudited, shall be furnished separately
for the transition period.
*
*
*
*
*
(e) Every issuer required to file
quarterly reports on Form 10–Q
pursuant to § 240.15d–13 that changes
its fiscal year end shall:
(1) File a quarterly report on Form 10–
Q within the time period specified in
General Instruction A.1. to that form for
any quarterly period (except the fourth
quarter) of the old fiscal year that ends
before the date on which the issuer
determined to change its fiscal year end,
except that the issuer need not file such
quarterly report if the date on which the
quarterly period ends also is the date on
which the transition period ends;
(2) File a quarterly report on Form 10–
Q within the time specified in General
Instruction A.1 to that form for each
quarterly period of the old fiscal year
within the transition period. In lieu of
a quarterly report for any quarter of the
old fiscal year within the transition
period, the issuer may file a quarterly
report on Form 10–Q for any period of
three months within the transition
period that coincides with a quarter of
the newly adopted fiscal year if the
quarterly report is filed within the
number of days specified in paragraph
(j) of this section after the end of such
three month period, provided the issuer
thereafter continues filing quarterly
reports on the basis of the quarters of
the newly adopted fiscal year;
*
*
*
*
*
(4) Unless such information is or will
be included in the transition report, or
the first annual report on Form 10–K for
the newly adopted fiscal year, include
in the initial quarterly report on Form
10–Q for the newly adopted fiscal year
information on any period beginning on
the first day after the period covered by
the issuer’s final quarterly report on
Form 10–Q or annual report on Form
10–K for the old fiscal year. The
information covering such period
required by Part II and Item 2 of Part I
may be combined with the information
regarding the quarter. However, the
financial statements required by Part I,
which may be unaudited, shall be
furnished separately for such period.
Note to Paragraphs (c) and (e): If it is not
practicable or cannot be cost-justified to
furnish in a transition report on Form 10–Q
or a quarterly report for the newly adopted
fiscal year financial statements for
corresponding periods of the prior year
where required, financial statements may be
furnished for the quarters of the preceding
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fiscal year that most nearly are comparable if
the issuer furnishes an adequate discussion
of seasonal and other factors that could affect
the comparability of information or trends
reflected, an assessment of the comparability
of the data, and a representation as to the
reason recasting has not been undertaken.
(f) Every successor issuer that has a
different fiscal year from that of its
predecessor(s) shall file a transition
report pursuant to this section,
containing the required information
about each predecessor, for the
transition period, if any, between the
close of the fiscal year covered by the
last annual report of each predecessor
and the date of succession. The report
shall be filed for the transition period on
the form appropriate for annual reports
of the issuer not more than the number
of days specified in paragraph (j) of this
section after the date of the succession,
with financial statements in conformity
with the requirements set forth in
paragraph (b) of this section. If the
transition period covers a period of less
than six months, in lieu of a transition
report on the form appropriate for the
issuer’s annual reports, the report may
be filed for the transition period on
Form 10-Q not more than the number of
days specified in paragraph (j) of this
section after the date of the succession,
with financial statements in conformity
with the requirements set forth in
paragraph (c) of this section.
Notwithstanding the foregoing, if the
transition period covers a period of one
month or less, the successor issuer need
not file a separate transition report if the
information is reported by the successor
issuer in conformity with the
requirements set forth in paragraph (d)
of this section.
*
*
*
*
*
(j) * * *
(2) For transition reports to be filed on
Form 10–Q (§ 249.308 of this chapter),
the number of days shall be:
*
*
*
*
*
I 77. Amend § 240.15d–13 by revising
the section heading, paragraph (a), the
introductory text of (c), and paragraphs
(d) and (e) to read as follows:
§ 240.15d–13 Quarterly reports on Form
10–Q (§ 249.308 of this chapter).
(a) Except as provided in paragraphs
(b) and (c) of this section, every issuer
that has securities registered pursuant to
the Securities Act and is required to file
annual reports pursuant to section 15(d)
of the Act on Form 10–K (§ 249.310 of
this chapter) shall file a quarterly report
on Form 10–Q (§ 249.308 of this
chapter) within the period specified in
General Instruction A.1 to that form for
each of the first three quarters of each
fiscal year of the issuer, commencing
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report must sign a certification. The
principal executive and principal
financial officers of an issuer may omit
the portion of the introductory language
in paragraph 4 as well as language in
paragraph 4(b) of the certification that
refers to the certifying officers’
responsibility for designing, establishing
and maintaining internal control over
financial reporting for the issuer until
the issuer becomes subject to the
internal control over financial reporting
requirements in § 240.13a–15 or
240.15d–15.
*
*
*
*
*
I 79. Amend § 240.15d–20 by revising
the introductory text of paragraph (a) to
read as follows:
I
§ 240.15d–20 Plain English presentation of
specified information.
I
§ 240.15d–14 Certification of disclosure in
annual and quarterly reports.
mstockstill on PROD1PC66 with RULES2
with the first fiscal quarter following the
most recent fiscal year for which full
financial statements were included in
the registration statement, or, if the
registration statement included financial
statements for an interim period after
the most recent fiscal year end meeting
the requirements of Article 10 of
Regulation S–X, or Rule 8–03 of
Regulation S–X for smaller reporting
companies, for the first fiscal quarter
after the quarter reported upon in the
registration statement. The first
quarterly report of the issuer shall be
filed either within 45 days after the
effective date of the registration
statement or on or before the date on
which such report would have been
required to be filed if the issuer had
been required to file reports on Form
10–Q as of its last fiscal quarter,
whichever is later.
*
*
*
*
*
(c) Part I of the quarterly reports on
Form 10-Q need not be filed by:
*
*
*
*
*
(d) Notwithstanding the foregoing
provisions of this section, the financial
information required by Part I of Form
10–Q shall not be deemed to be ‘‘filed’’
for the purpose of section 18 of the Act
or otherwise subject to the liabilities of
that section of the Act, but shall be
subject to all other provisions of the Act.
(e) Notwithstanding the foregoing
provisions of this section, the financial
information required by Part I of Form
10–Q, or financial information
submitted in lieu thereof pursuant to
paragraph (d) of this section, shall not
be deemed to be ‘‘filed’’ for the purpose
of section 18 of the Act or otherwise
subject to the liabilities of that section
of the Act, but shall be subject to all
other provisions of the Act.
I 78. Amend § 240.15d–14 by revising
paragraph (a) to read as follows:
I
(a) Each report, including transition
reports, filed on Form 10–Q, Form 10–
K, Form 20–F or Form 40–F (§ 249.308a,
249.310, 249.220f or 249.240f of this
chapter) under section 15(d) of the Act
(15 U.S.C. 78o(d)), other than a report
filed by an Asset-Backed Issuer (as
defined in § 229.1101 of this chapter) or
a report on Form 20–F filed under
§ 240.15d–19, must include
certifications in the form specified in
the applicable exhibit filing
requirements of such report, and such
certifications must be filed as an exhibit
to such report. Each principal executive
and principal financial officer of the
issuer, or persons performing similar
functions, at the time of filing of the
Authority: 15 U.S.C. 78a et seq., 7202,
7233, 7241, 7262, 7264, and 7265; and 18
U.S.C. 1350, unless otherwise noted.
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(a) Any information included or
incorporated by reference in a report
filed under section 15(d) of the Act (15
U.S.C. 78o(d)) that is required to be
disclosed pursuant to Item 402, 403, 404
or 407 of Regulation S–K (§ 229.402,
229.403, 229.404 or 229.407 of this
chapter) must be presented in a clear,
concise and understandable manner.
You must prepare the disclosure using
the following standards:
*
*
*
*
*
I 80. Amend § 240.15d–21 by revising
paragraph (a)(1) to read as follows:
§ 240.15d–21 Reports for employee stock
purchase, savings and similar plans.
(a) * * *
(1) The issuer of the stock or other
securities offered to employees through
their participation in the plan files
annual reports on Form 10–K (§ 249.310
of this chapter); and
*
*
*
*
*
83. Amend Form 8–A (referenced in
§ 249.208a) by revising Item 1 before the
Instruction to read as follows:
Note: The text of Form 8–A does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM 8–A—FOR REGISTRATION OF
CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES ACT OF 1934
*
*
*
*
*
Item 1. Description of Registrant’s Securities
to be Registered
Furnish the information required by Item
202 of Regulation S–K (§ 229.202 of this
chapter), as applicable.
*
*
*
*
*
84. Amend Form 10 (referenced in
§ 249.210) by:
I a. Adding check boxes to the cover
page, above the Information Requested
in Registration Statement, requesting the
registrant indicate by check mark
whether it is a large accelerated filer, an
accelerated filer, a non-accelerated filer,
or a smaller reporting company;
I b. Revising Item 1A; and
I c. Revising Item 13.
The addition and revision read as
follows:
Note: The text of Form 10 does not and this
amendment will not appear in the Code of
Federal Regulations.
FORM 10—GENERAL FORM FOR
REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The
Securities Exchange Act of 1934
*
*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
I
*
PART 249—FORMS, SECURITIES
EXCHANGE ACT OF 1934
81. The authority citations for part
249 continues to read in part as follows:
*
*
*
*
82. Amend § 249.0–1 by revising
paragraph (b) to read as follows:
§ 249.0–1
Availability of forms.
*
*
*
*
*
(b) Any person may obtain a copy of
any form prescribed for use in this part
by written request to the Securities and
Exchange Commission, 100 F Street, NE,
Washington, DC 20549. Any person may
inspect the forms at this address and at
the Commission’s regional offices. (See
§ 200.11 of this chapter for the addresses
of SEC regional offices).
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*
*
*
*
Item 1A. Risk Factors
Set forth, under the caption ‘‘Risk Factors,’’
where appropriate, the risk factors described
in Item 503(c) of Regulation S–K
(§ 229.503(c) of this chapter) applicable to the
registrant. Provide any discussion of risk
factors in plain English in accordance with
Rule 421(d) of the Securities Act of 1933
(§ 230.421(d) of this chapter). Smaller
reporting companies are not required to
provide the information required by this
item.
*
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
Item 13. Financial Statements and
Supplementary Data
FORM 8–K—CURRENT REPORT
Furnish all financial statements required
by Regulation S–X and supplementary
financial information required by Item 302 of
Regulation S–K (§ 229.302 of this chapter).
Smaller reporting companies may provide
the financial information required by Article
8 of Regulation S–X in lieu of the information
required by in other parts of Regulation S–
X.
*
*
*
§ 249.210b
*
*
[Removed]
85. By removing and reserving
§ 249.210b and removing Form 10–SB.
I
Note: The text of Form 10–SB does not
appear in the Code of Federal Regulations.
86. Amend Form 20–F (referenced in
§ 249.220f) by adding instruction (f) to
the General Instructions B to read as
follows:
I
Note: The text of Form 20–F does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM 20–F
*
*
*
*
*
GENERAL INSTRUCTIONS
*
*
*
*
*
B. General Rules and Regulation That Apply
to this Form
*
*
*
*
*
(f) A foreign private issuer that is a smaller
reporting company, as defined in Rule 12b–
2 under the Exchange Act (17 CFR 240.12b–
2), may not use the scaled disclosure
requirements in Regulation S–X and
Regulation S–K available to smaller reporting
companies for the purposes of preparing this
form.
*
*
*
*
*
87. Amend Form 8–K (referenced in
§ 249.308) by revising General
Instruction B.4.; removing General
Instruction C.3; revising Item 2.01
paragraph (f) before the Instructions;
Instructions 2 and 4 to Item 2.02; Item
2.03 paragraph (d); Item 3.02 paragraphs
(a) and (b) before the Instructions and
Instruction 2; Item 4.01 paragraphs (a)
and (b) before the Instructions; Item 4.02
the introductory text of paragraph (a);
Item 5.01 paragraphs (a)(8) and (b); Item
5.02 paragraphs (c)(2), (d)(4), (f), and
Instruction 4; in Item 5.03 paragraph (b),
revise the phrase ‘‘Form 10–K, Form 10–
KSB, Form 10–Q or Form 10–QSB’’ to
read ‘‘Form 10–K or Form 10–Q’’, and
revise Instruction 1; Item 5.05 paragraph
(a); and Item 9.01 paragraphs (a)(1),
(a)(3), (b)(1) and (d) before the
Instruction
The revisions read as follows:
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Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
*
(d) For purposes of this Item 2.03, offbalance sheet arrangement has the meaning
set forth in Item 303(a)(4)(ii) of Regulation S–
K (17 CFR 229.303(a)(4)(ii)).
*
*
*
*
*
GENERAL INSTRUCTIONS
*
*
*
*
*
B. Events to be Reported and Time for Filing
of Reports
*
*
*
*
*
4. Copies of agreements, amendments or
other documents or instruments required to
be filed pursuant to Form 8–K are not
required to be filed or furnished as exhibits
to the Form 8–K unless specifically required
to be filed or furnished by the applicable
Item. This instruction does not affect the
requirement to otherwise file such
agreements, amendments or other documents
or instruments, including as exhibits to
registration statements and periodic reports
pursuant to the requirements of Item 601 of
Regulation S–K.
*
*
*
*
*
Item 2.01 Completion of Acquisition or
Disposition of Assets
*
*
*
*
*
(f) If the registrant was a shell company,
other than a business combination related
shell company, as those terms are defined in
Rule 12b–2 under the Exchange Act (17 CFR
240.12b–2), immediately before the
transaction, the information that would be
required if the registrant were filing a general
form for registration of securities on Form 10
under the Exchange Act reflecting all classes
of the registrant’s securities subject to the
reporting requirements of Section 13 (15
U.S.C. 78m) or Section 15(d) (15 U.S.C.
78o(d)) of such Act upon consummation of
the transaction, with such information
reflecting the registrant and its securities
upon consummation of the transaction.
Notwithstanding General Instruction B.3 to
Form 8–K, if any disclosure required by this
Item 2.01(f) is previously reported, as that
term is defined in Rule 12b–2 under the
Exchange Act (17 CFR 240.12b–2), the
registrant may identify the filing in which
that disclosure is included instead of
including that disclosure in this report.
*
*
*
*
Item 3.02 Unregistered Sales of Equity
Securities
(a) If a registrant sells equity securities in
a transaction that is not registered under the
Securities Act, furnish the information set
forth in paragraphs (a) and (c) through (e) of
Item 701 of Regulation S–K (17 CFR
229.701(a) and (c) through (e)). For purposes
of determining the required filing date for the
Form 8–K under this Item 3.02(a), the
registrant has no obligation to disclose
information under this Item 3.02 until the
registrant enters into an agreement
enforceable against the registrant, whether or
not subject to conditions, under which the
equity securities are to be sold. If there is no
such agreement, the registrant must provide
the disclosure within four business days after
the occurrence of the closing or settlement of
the transaction or arrangement under which
the equity securities are to be sold.
(b) No report need be filed under this Item
3.02 if the equity securities sold, in the
aggregate since its last report filed under this
Item 3.02 or its last periodic report,
whichever is more recent, constitute less
than 1% of the number of shares outstanding
of the class of equity securities sold. In the
case of a smaller reporting company, no
report need be filed if the equity securities
sold, in the aggregate since its last report
filed under this Item 3.02 or its last periodic
report, whichever is more recent, constitute
less than 5% of the number of shares
outstanding of the class of equity securities
sold.
Instructions.
*
*
*
*
*
2. A smaller reporting company is defined
in Item 10(f)(1) of Regulation S–K (17 CFR
229.10(f)(1)).
*
*
*
*
*
4. This Item 2.02 does not apply in the case
of a disclosure that is made in a quarterly
report filed with the Commission on Form
10–Q (17 CFR 249.308a) or an annual report
filed with the Commission on Form 10–K (17
CFR 249.310).
Item 2.03 Creation of a Direct Financial
Obligation or an Obligation under an OffBalance Sheet Arrangement of a Registrant
Item 4.01 Changes in Registrant’s Certifying
Accountant
(a) If an independent accountant who was
previously engaged as the principal
accountant to audit the registrant’s financial
statements, or an independent accountant
upon whom the principal accountant
expressed reliance in its report regarding a
significant subsidiary, resigns (or indicates
that it declines to stand for re-appointment
after completion of the current audit) or is
dismissed, disclose the information required
by Item 304(a)(1) of Regulation S–K
(§ 229.304(a)(1) of this chapter), including
compliance with Item 304(a)(3) of Regulation
S–K (§ 229.304(a)(3) of this chapter).
(b) If a new independent accountant has
been engaged as either the principal
accountant to audit the registrant’s financial
statements or as an independent accountant
on whom the principal accountant is
expected to express reliance in its report
regarding a significant subsidiary, the
registrant must disclose the information
required by Item 304(a)(2) of Regulation S–
K (17 CFR 229.302(a)(2)).
*
*
*
*
*
*
*
Item 2.02 Results of Operations and
Financial Condition
*
*
*
*
*
*
*
Instructions.
*
*
*
2. The requirements of paragraph (e)(1)(i)
of Item 10 of Regulation S–K (17 CFR
229.10(e)(1)(i)) shall apply to disclosures
under this Item 2.02.
*
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
Item 4.02 Non-Reliance on Previously
Issued Financial Statements or a Related
Audit Report or Completed Interim Review
(a) If the registrant’s board of directors, a
committee of the board of directors or the
officer or officers of the registrant authorized
to take such action if board action is not
required, concludes that any previously
issued financial statements, covering one or
more years or interim periods for which the
registrant is required to provide financial
statements under Regulation S–X (17 CFR
210) should no longer be relied upon because
of an error in such financial statements as
addressed in Accounting Principles Board
Opinion No. 20, as may be modified,
supplemented or succeeded, disclose the
following information:
*
*
*
*
*
Item 5.01 Changes in Control of the
Registrant
(a) * * *
(8) if the registrant was a shell company,
other than a business combination related
shell company, as those terms are defined in
Rule 12b–2 under the Exchange Act (17 CFR
240.12b–2), immediately before the change in
control, the information that would be
required if the registrant were filing a general
form for registration of securities on Form 10
under the Exchange Act reflecting all classes
of the registrant’s securities subject to the
reporting requirements of Section 13 (15
U.S.C. 78m) or Section 15(d) (15 U.S.C.
78o(d)) of such Act upon consummation of
the change in control, with such information
reflecting the registrant and its securities
upon consummation of the transaction.
Notwithstanding General Instruction B.3. to
Form 8–K, if any disclosure required by this
Item 5.01(a)(8) is previously reported, as that
term is defined in Rule 12b–2 under the
Exchange Act (17 CFR 240.12b–2), the
registrant may identify the filing in which
that disclosure is included instead of
including that disclosure in this report.
(b) Furnish the information required by
Item 403(c) of Regulation S–K (17 CFR
229.403(c)).
Item 5.02 Departure of Directors or Certain
Officers; Election of Directors; Appointment
of Certain Officers; Compensatory
Arrangements of Certain Officers
*
*
*
*
*
(c) * * *
(2) the information required by Items
401(b), (d), (e) and Item 404(a) of Regulation
S–K (17 CFR 229.401(b), (d), (e) and
229.404(a); and
*
*
*
*
*
(d) * * *
(4) the information required by Item 404(a)
of Regulation S–K (17 CFR 229.404(a)).
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*
*
*
*
*
(f) If the salary or bonus of a named
executive officer cannot be calculated as of
the most recent practicable date and is
omitted from the Summary Compensation
Table as specified in Instruction 1 to Item
402(c)(2)(iii) and (iv) of Regulation S–K,
disclose the appropriate information under
this Item 5.02(f) when there is a payment,
grant, award, decision or other occurrence as
a result of which such amounts become
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calculable in whole or in part. Disclosure
under this Item 5.02(f) shall include a new
total compensation figure for the named
executive officer, using the new salary or
bonus information to recalculate the
information that was previously provided
with respect to the named executive officer
in the registrant’s Summary Compensation
Table for which the salary and bonus
information was omitted in reliance on
Instruction 1 to Item 402(c)(2)(iii) and (iv) of
Regulation S–K (17 CFR 229.402(c)(2)(iii) and
(iv)).
Instructions to Item 5.02
*
*
*
*
*
(4) For purposes of this Item, the term
‘‘named executive officer’’ shall refer to those
executive officers for whom disclosure was
required in the registrant’s most recent filing
with the Commission under the Securities
Act (15 U.S.C. 77a et seq.) or Exchange Act
(15 U.S.C. 78a et seq.) that required
disclosure pursuant to Item 402(c) of
Regulation S–K (17 CFR 229.402(c)).
Item 5.03 Amendments to Articles of
Incorporation or Bylaws; Change in Fiscal
Year
*
*
*
*
*
Instructions to Item 5.03
1. Refer to Item 601(b)(3) of Regulation S–
K (17 CFR 229.601(b)(3)) regarding the filing
of exhibits to this Item 5.03.
*
*
*
*
*
Item 5.05 Amendments to the Registrant’s
Code of Ethics, or Waiver of a Provision of
the Code of Ethics
(a) Briefly describe the date and nature of
any amendment to a provision of the
registrant’s code of ethics that applies to the
registrant’s principal executive officer,
principal financial officer, principal
accounting officer or controller or persons
performing similar functions and that relates
to any element of the code of ethics
definition enumerated in Item 406(b) of
Regulation S–K (17 CFR 229.406(b)).
*
*
Item 9.01
*
*
*
*
*
Financial Statements and Exhibits
*
*
*
(a) * * *
(1) For any business acquisition required to
be described in answer to Item 2.01 of this
form, financial statements of the business
acquired shall be filed for the periods
specified in Rule 3–05(b) of Regulation S–X
(17 CFR 210.3–05(b)) or Rule 8–04(b) of
Regulation S–X (17 CFR 210.8–04(b)) for
smaller reporting companies.
*
*
*
*
*
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or Rule 8–05 of Regulation S–X (§ 210.8–05
of this chapter) for smaller reporting
companies.
*
*
*
*
*
(d) Exhibits. The exhibits will be deemed
to be filed or furnished, depending upon the
relevant item requiring such exhibit, in
accordance with the provisions of Item 601
of Regulation S–K (17 CFR 229.601) and
Instruction B.2 of this form.
*
*
*
*
*
88. Amend Form 10–Q (referenced in
§ 249.308a) by:
I a. Revising the cover page of Form 10–
Q to add, above Part I Financial
Information, check boxes requesting the
registrant to indicate whether it is a
large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller
reporting company;
I b. In Part I, revising the text of Item
1; and
I c. In Part II, revising the text of Item
1A.
The revisions and addition read as
follows:
Note: The text of Form 10–Q does not and
this amendment will not appear in the Code
of Federal Regulations.
FORM 10–Q
*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
Part I—Financial Information
Item 1. Financial Statements
Provide the information required by Rule
10–01 of Regulation S–X (17 CFR 210). A
smaller reporting company, defined in Rule
12b–2 (§ 240.12b–2 of this chapter) may
provide the information required by Article
8–03 of Regulation S–X (§ 210.8–03 of this
chapter).
*
*
*
*
*
Part II—Other Information
*
(2) * * *
(3) With regard to the acquisition of one or
more real estate properties, the financial
statements and any additional information
specified by Rules 3–14 (17 CFR 210.3–14) or
Rule 8–06 of Regulation S–X ( 17 CFR 210.8–
06) for smaller reporting companies.
(b) * * *
(1) For any transaction required to be
described in answer to Item 2.01 of this form,
furnish any pro forma financial information
that would be required pursuant to Article 11
of Regulation S–X (§ 210.11 of this chapter)
981
*
*
*
*
Item 1A. Risk Factors
Set forth any material changes from risk
factors as previously disclosed in the
registrant’s Form 10–K (§ 249.310) in
response to Item 1A to Part 1 of Form 10–
K. Smaller reporting companies are not
required to provide the information required
by this item.
§ 249.308b
[Removed]
89. By removing and reserving
§ 249.308b and removing Form 10–QSB.
I
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Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
Note: The text of Form 10–QSB does not
appear in the Code of Federal Regulations.
Item 8. Financial Statements and
Supplementary Data
90. Amend Form 10–K (referenced in
§ 249.310) by:
I a. Revising the cover page of Form 10–
K to add, above the line asking the
registrant to indicate whether it is a
shell company, check boxes requesting
the registrant to indicate whether it is a
large accelerated filer, or an accelerated
filer; a non-accelerated filer, or a smaller
reporting company;
I b. Revising Item 1A; and
I c. Revising Item 5 paragraph (a), Item
8 and Item 14 paragraph (1).
The additions and revisions read as
follows:
(a) Furnish financial statements meeting
the requirements of Regulation S–X (§ 210 of
this chapter), except § 210.3–05 and Article
11 thereof, and the supplementary financial
information required by Item 302 of
Regulation S–K (§ 229.302 of this chapter).
Financial statements of the registrant and its
subsidiaries consolidated (as required by
Rule 14a–3(b)) shall be filed under this item.
Other financial statements and schedules
required under Regulation S–X may be filed
as ‘‘Financial Statement Schedules’’ pursuant
to Item 15, Exhibits, Financial Statement
Schedules, and Reports on Form 8–K, of this
Form.
(b) A smaller reporting company may
provide the information required by Article
8 of Regulation S–X in lieu of any financial
statements required by Item 8 of this Form.
I
Note: The text of Form 10–K does not and
this amendment will not appear in the Code
of Federal Regulations.
Form 10–K—Annual Report Pursuant to
Section 13 or 15(d) of the Securities
Exchange Act of 1934
*
Form 10–K
*
*
*
*
*
*
Indicate by check mark whether the
registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the
definitions of ‘‘large accelerated filer,’’
‘‘accelerated filer’’ and ‘‘smaller reporting
company’’ in Rule 12b–2 of the Exchange
Act. (Check one):
b Large accelerated filer
b Non-accelerated filer
b Accelerated filer
b Smaller reporting company
(Do not check if a smaller reporting
company)
*
*
*
*
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*
*
*
Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
(a) Furnish the information required by
Item 201 of Regulation S–K (17 CFR 229.201)
and Item 701 of Regulation S–K (17 CFR
229.701) as to all equity securities of the
registrant sold by the registrant during the
period covered by the report that were not
registered under the Securities Act. If the
Item 701 information previously has been
included in a Quarterly Report on Form 10–
Q (17 CFR 249.308a) or in a Current Report
on Form 8–K (17 CFR 249.308), it need not
be furnished.
*
*
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*
*
*
*
*
*
*
(1) Disclose, under the caption Audit Fees,
the aggregate fees billed for each of the last
two fiscal years for professional services
rendered by the principal accountant for the
audit of the registrant’s annual financial
statements and review of financial statements
included in the registrant’s Form 10–Q (17
CFR 249.308a) or services that are normally
provided by the accountant in connection
with statutory and regulatory filings or
engagements for those fiscal years.
*
*
*
§ 249.310b
*
*
[Removed]
91. By removing and reserving
§ 249.310b and removing Form 10–KSB.
I
*
Item 1A. Risk Factors
Set forth, under the caption ‘‘Risk Factors,’’
where appropriate, the risk factors described
in Item 503(c) of Regulation S–K
(§ 229.503(c) of this chapter) applicable to the
registrant. Provide any discussion of risk
factors in plain English in accordance with
Rule 421(d) of the Securities Act of 1933
(§ 230.421(d) of this chapter). Smaller
reporting companies are not required to
provide the information required by this
item.
*
*
Item 14. Principal Accounting Fees and
Services
Note: The text of Form 10–KSB does not
appear in the Code of Federal Regulations.
92. Amend Form 11–K (referenced in
§ 249.311) by removing General
Instruction E(b) and redesignating the
text of General Instruction E(a) as
General Instruction E.
I
93. Amend Form SE (referenced in
§ 249.444) by revising General
Instruction 3.C to read as follows:
*
*
*
*
*
I
Form SE—Form for Submission of Paper
Format Exhibits by Edgar Electronic Filers
*
*
*
*
Form SE General Instructions
*
*
*
*
*
3. Filing of Form SE
*
*
*
*
*
C. Identify the exhibit being filed. Attach
to the Form SE the paper format exhibit and
an exhibit index if required by Item 601 of
Regulation S–K (§ 229.601 of this chapter).
*
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PART 260—GENERAL RULE AND
REGULATIONS, TRUST INDENTURE
ACT OF 1939
94. The authority citation for part 260
continues to read as follows:
I
Authority: 15 U.S.C. 77eee, 77ggg, 77nnn,
77sss, 78ll(d), 80b–3, 80b–4, and 80b–11.
95. Amend § 260.0–11 by revising the
introductory text of paragraph (b)(1),
paragraphs (b)(1)(i) and (b)(2) to read as
follows:
I
§ 260.0–11 Liability for certain statements
by issuers.
*
*
*
*
*
(b) * * *
(1) A forward-looking statement (as
defined in paragraph (c) of this section)
made in a document filed with the
Commission, in Part I of a quarterly
report on Form 10–Q, § 249.308a of this
chapter, or in an annual report to
security holders meeting the
requirements of Rules 14a–3(b) and (c)
or 14c–3(a) and (b) under the Securities
Exchange Act of 1934 (§ 240.14a–3(b)
and (c) or § 240.14c–3(a) and (b) of this
chapter), a statement reaffirming such
forward-looking statement after the date
the document was filed or the annual
report was made publicly available, or
a forward-looking statement made
before the date the document was filed
or the date the annual report was made
publicly available if such statement is
reaffirmed in a filed document, in Part
I of a quarterly report on Form 10–Q, or
in an annual report made publicly
available within a reasonable time after
the making of such forward-looking
statement; Provided, that:
(i) At the time such statements are
made or reaffirmed, either the issuer is
subject to the reporting requirements of
section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and has complied
with the requirements of Rule 13a–1 or
15d–1 (§ 240.13a–1 or § 240.15d–1 of
this chapter) thereunder, if applicable,
to file its most recent annual report on
Form 10–K, Form 20–F, or Form 40–F;
or if the issuer is not subject to the
reporting requirements of section 13(a)
or 15(d) of the Securities Exchange Act
of 1934, the statements are made in a
registration statement filed under the
Securities Act of 1933 or pursuant to
section 12(b) or (g) of the Securities
Exchange Act of 1934; and
*
*
*
*
*
(2) Information relating to the effects
of changing prices on the business
enterprise presented voluntarily or
pursuant to Item 303 of Regulation S–
K (§ 229.303 of this chapter), Item 5 of
Form 20–F (§ 249.220f of this chapter),
‘‘Operating and Financial Review and
E:\FR\FM\04JAR2.SGM
04JAR2
Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules and Regulations
Prospects,’’ Item 302 of Regulation S–K
(§ 229.302 of this chapter),
‘‘Supplementary Financial
Information,’’ or Rule 3–20(c) of
Regulation S–X (§ 210.3–20(c) of this
chapter), and disclosed in a document
filed with the Commission, in Part I of
a quarterly report on Form 10–Q, or in
an annual report to shareholders
meeting the requirements of Rules 14a–
3(b) and (c) or 14c–3(a) and (b)
(§ 240.14a–3(b) and (c) or § 240.14c–3(a)
and (b)) under the Securities Exchange
Act of 1934.
*
*
*
*
*
I 96. Amend § 260.4d–9 by revising the
introductory text to read as follows:
§ 260.4d–9 Exemption for Canadian Trust
Indentures from Specified Provisions of the
Act.
mstockstill on PROD1PC66 with RULES2
Any trust indenture filed in
connection with offerings on a
registration statement on Form S–1,
(§ 239.1 of this chapter) F–7, F–8, F–9,
F–10 or F–80 (§§ 239.37 through 239.41
of this chapter) shall be exempt from the
operation of sections 310(a)(3) and
310(a)(4), sections 310(b) through
316(a), and sections 316(c) through
VerDate Aug<31>2005
17:05 Jan 03, 2008
Jkt 214001
983
318(a) of the Act; provided that the trust
indenture is subject to:
*
*
*
*
*
PART 269—FORMS PRESCRIBED
UNDER THE TRUST INDENTURE ACT
OF 1939
97. Amend § 260.10a–5 by revising
paragraph (a) to read as follows:
I
§ 260.10a–5
Trustees.
Authority: 15 U.S.C. 77ddd(c), 77eee,
77ggg, 77hhh, 77iii, 77jjj, 77sss, and 78ll(d),
unless otherwise noted.
I
Eligibility of Canadian
(a) Subject to paragraph (b) of this
section, any trust company, acting as
trustee under an indenture qualified or
to be qualified under the Act and filed
in connection with offerings on a
registration statement on Form S–1
(§ 239.11 of this chapter) F–7, F–8, F–9,
F–10 or F–80 (§§ 239.37 through 239.41
of this chapter) that is incorporated and
regulated as a trust company under the
laws of Canada or any of its political
subdivisions and that is subject to
supervision or examination pursuant to
the Trust Companies Act (Canada),
R.S.C. 1985, or the Canada Deposit
Insurance Corporation Act, R.S.C. 1985
shall not be subject to the requirement
of domicile in the United States under
section 310(a) of the Act (15 U.S.C.
77jjj(a)).
*
*
*
*
*
PO 00000
Frm 00051
Fmt 4701
Sfmt 4700
98. The authority citation for part 269
is revised to read as follows:
99. Amend § 260.01 by revising
paragraph (b) to read as follows:
I
§ 269.0–1
Availability of forms.
*
*
*
*
*
(b) Any person may obtain a copy of
any form prescribed for use in this part
by written request to the Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Any person
may inspect the forms at this address
and at the Commission’s regional
offices. (See § 200.11 of this chapter for
the addresses of SEC regional offices.)
By the Commission.
Dated: December 19, 2007.
Nancy M. Morris,
Secretary.
[FR Doc. E7–24965 Filed 1–3–08; 8:45 am]
BILLING CODE 8011–01–P
E:\FR\FM\04JAR2.SGM
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]]>Agencies
[Federal Register Volume 73, Number 3 (Friday, January 4, 2008)]
[Rules and Regulations]
[Pages 934-983]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-24965]
[[Page 933]]
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Part II
Securities and Exchange Commission
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17 CFR Parts 210, 228 et al.
Smaller Reporting Company Regulatory Relief and Simplification; Final
Rule
Federal Register / Vol. 73, No. 3 / Friday, January 4, 2008 / Rules
and Regulations
[[Page 934]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 228, 229, 230, 239, 240, 249, 260, and 269
[Release Nos. 33-8876; 34-56994; 39-2451; File No. S7-15-07]
RIN 3235-Aj86
Smaller Reporting Company Regulatory Relief and Simplification
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission is adopting amendments
to its disclosure and reporting requirements under the Securities Act
of 1933 and the Securities Exchange Act of 1934 to expand the number of
companies that qualify for its scaled disclosure requirements for
smaller reporting companies. Companies that have less than $75 million
in public equity float will qualify for the scaled disclosure
requirements under the amendments. Companies without a calculable
public equity float will qualify if their revenues were below $50
million in the previous year. To streamline and simplify regulation,
the amendments move the scaled disclosure requirements from Regulation
S-B into Regulation S-K.
DATES: Effective Date: February 4, 2008, except for amendments Sec.
249.308b and Form 10-QSB, which are effective October 31, 2008, and
amendments Part 228, Sec. 249.310b, and Form 10-KSB, which are
effective March 15, 2009.
Compliance Dates: For information on compliance, see the
SUPPLEMENTARY INFORMATION section below.
FOR FURTHER INFORMATION CONTACT: Kevin M. O'Neill, Special Counsel, or
Johanna Vega Losert, Attorney-Advisor, Office of Small Business Policy,
Division of Corporation Finance, Securities and Exchange Commission,
100 F Street, NE., Washington, DC 20549-3628, (202) 551-3460.
SUPPLEMENTARY INFORMATION: After the effective date of the rule
amendments, companies currently qualifying as ``small business
issuers'' under Regulation S-B will have the option to file their next
annual report for a fiscal year ending on or after December 15, 2007 on
either Form 10-KSB, using the scaled disclosure requirements in
Regulation S-B, or Form 10-K, using the new scaled disclosure
requirements in Regulation S-K. After a ``small business issuer'' files
that next annual report, it will be required to file quarterly reports
on Form 10-Q and annual reports on Form 10-K, and may elect to comply
with the new scaled disclosure requirements of Regulation S-K.
Companies newly qualifying as ``smaller reporting companies'' will have
the option to use the new scaled Regulation S-K requirements when
filing their next periodic report due after the effective date of the
amendments. These companies will determine eligibility for smaller
reporting company status based on the last business day of their most
recent second fiscal quarter, or based on the alternative initial
registration statement calculation discussed in Section IV. If a
registration statement was filed on an ``SB'' form before the effective
date of the rule amendments, and the company seeks to amend it after
the effective date of the rule amendments, the company must file the
amendment on the appropriate form available to the issuer without an
``SB'' designation. As discussed in Section IV, to provide a transition
period, these issuers will be able to continue using the disclosure
format and content based on the ``SB'' form until six months after the
effective date.
We are adopting amendments to Regulation S-K,\1\ and rules and
forms under the Securities Act of 1933,\2\ Securities Exchange Act of
1934,\3\ and Trust Indenture Act of 1939.\4\ In Regulation S-K, we are
adopting amendments to Items 10, 101, 102, 201, 301, 302, 303, 305,
401, 402, 404, 407, 503, 504, 512, 601, 701, and 1118.\5\ We are
adopting amendments to Securities Act Rules 110, 138, 139, 158, 175,
405, 415, 428, 430B, 430C, 455, and 502.\6\ Further, we are rescinding
Regulation S-B \7\ and eliminating the forms associated with it, Forms
SB-1, SB-2, 10-SB, 10-QSB, and 10-KSB.\8\ We are amending Securities
Act Forms 0-1, S-1, S-3, S-4, S-8, S-11, 1-A, and F-X,\9\ Exchange Act
Rules 0-2, 0-12, 3b-6, 10A-1, 10A-3, 12b-2, 12b-23, 12b-25, 12h-3, 13a-
10, 13a-13, 13a-14, 13a-16, 13a-20, 14a-3, 14a-5, 14a-8, 14c-3, 14d-3,
15d-10, 15d-13, 15d-14, 15d-20, and 15d-21,\10\ and Exchange Act Forms
0-1, 8-A, 8-K, 10, 10-Q, 10-K, 11-K, 20-F, and SE.\11\ We are amending
Schedules 14A and 14C.\12\ In Regulation S-X,\13\ we are amending Rules
210.3-01, 210.3-05, 210.3-10, 210.3-12, 210.3-14, 210.4-01, and 210.10-
01 and adding a new Article 8 containing thefinancial statement
requirements available to smaller reporting companies.\14\ Finally, we
are amending Trust Indenture Act Rules 0-11, 4d-9, and 10a-5 \15\ and
Section 269.0-1 of the Trust Indenture Act Forms.\16\
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\1\ 17 CFR 229.10-229.1123.
\2\ 15 U.S.C. 77a et seq.
\3\ 15 U.S.C. 78a et seq.
\4\ 15 U.S.C. 77aaa et seq.
\5\ 17 CFR 229.10, 229.101, 229.102, 229.201, 229.301, 229.302,
229.303, 229.305, 229.401, 229.402, 229.404, 229.407, 229.503,
229.504, 229.512, 229.601, 229.701, and 229.1118.
\6\ 17 CFR 230.110, 230.138, 230.139, 230.158, 230.175, 230.405,
230.415, 230.428, 230.430B, 230.430C, 230.455, and 230.502.
\7\ 17 CFR 228.10-228.703.
\8\ 17 CFR 239.9, 239.10, 249.210b, 249.308b, and 249.310b.
\9\ 17 CFR 239.0-1, 239.11, 239.13, 239.25, 239.16b, 239.18,
239.90, and 239.42.
\10\ 17 CFR 240.0-2, 240.0-12, 240.3b-6, 240.10A-1, 240.10A-3,
240.12b-2, 240.12b-23, 240.12b-25, 240.12h-3, 240.13a-10, 240.13a-
13, 240.13a-14, 240.13a-16, 240.13a-20, 240.14a-3, 240.14a-5,
240.14a-8, 240.14c-3, 240.14d-3, 240.15d-10, 240.15d-13, 240.15d-14,
240.15d-20, and 240.15d-21.
\11\ 17 CFR 249.0-1, 249.208a, 249.210, 249.308, 249.308a,
239.310, 249.311, 249.220f, and 249.444.
\12\ 17 CFR 240.14a-101 and 240.14c-101.
\13\ 17 CFR 210.3-01--210.12-29.
\14\ 17 CFR 210.3-01, 210.3-05, 210.3-10, 210.3-12, 210.3-14,
210.4-01, 210.10-01, and new Article 8 210.8-01-8-08.
\15\ 17 CFR 260.0-11, 260.4d-9, and 260.10a-5.
\16\ 17 CFR 269.0-1.
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Table of Contents
I. Background and Summary
II. Description of Proposed Amendments
III. Discussion of Amendments We Are Adopting
A. Moving Scaled Disclosure Item Requirements From Regulation S-
B Into Regulation S-K
B. Moving Smaller Reporting Company Financial Statement
Requirements From Item 310 of Regulation S-B Into New Article 8 of
Regulation S-X; Additional Regulation S-X Changes
C. Adopting Scaled Disclosure Item Requirements in Regulation S-
K
1. Overview
2. Electing Scaled Disclosure Standards on ``A La Carte'' Basis
D. Eliminating ``SB'' Forms Associated with Regulation S-B
E. Qualifying Standards for Treatment as ``Smaller Reporting
Company''
1. Eligibility and Exclusions
2. Determination Dates
a. Reporting Companies
b. Non-Reporting Companies Filing an Initial Registration
Statement
c. Alternative Revenue Test for Reporting and Non-Reporting
Companies
d. Entering and Exiting Smaller Reporting Company Status
F. Miscellaneous
1. Indexing for Inflation
2. Eliminating Transitional Small Business Issuer Format
3. Checking the ``Smaller Reporting Company'' Box
IV. Compliance Dates
V. Paperwork Reduction Act
A. Background
B. Summary of Comment Letters and Revisions to the Proposals
VI. Cost-Benefit Analysis
[[Page 935]]
A. Background
B. Summary of Rules
C. Benefits
D. Costs
VII. Consideration of Impact on the Economy, Burden on Competition
and Promotion of Efficiency, Competition and Capital Formation
VIII. Final Regulatory Flexibility Act Analysis
A. Reasons for and Objectives of Amendments
1. The Advisory Committee on Smaller Public Companies
Recommended Scaled Federal Securities Regulation for Smaller
Companies
2. Expanding Eligibility for Smaller Company Scaled Regulation
Under Amended Regulation S-K
3. Integrating Substantive Requirements of Regulation S-B Into
Regulations S-K and S-X
B. Significant Issues Raised by Public Comment
C. Small Entities Subject to the Final Amendments
D. Reporting, Recordkeeping, and Other Compliance Requirements
E. Agency Action to Minimize Effect on Small Entities
IX. Statutory Basis and Text of Amendments
I. Background and Summary
At an open Commission meeting on May 23, 2007, we approved
publication of eight releases designed to update and improve federal
securities regulations that significantly affect smaller companies and
their investors in today's capital markets.\17\ These releases
reflected our efforts during the past few years to provide responsive
solutions addressing the special characteristics and needs of smaller
companies and their investors. One of the releases (the ``Proposing
Release'') proposed rule amendments intended to provide general
regulatory relief and simplification for smaller companies reporting
under our rules.\18\ In that release, we proposed a series of
amendments to our scaled disclosure and reporting requirements for
smaller reporting companies. The release had three stated objectives:
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\17\ These releases included (1) Release No. 33-8812 (June 20,
2007) [72 FR 35118] (proposing to expand eligibility requirements of
Forms S-3 and F-3 to permit registration of annual primary offerings
of up to a specified percentage of public float by companies with a
public float of less than $75 million). The Commission voted to
approve this proposal at a December 11, 2007 open meeting (archived
webcast available at https://www.sec.gov/news/openmeetings.shtml);
(2) Release No. 33-8813 (June 22, 2007) [72 FR 36822] (proposing
amendments to Rule 144 to revise the holding period for the resale
of restricted securities, simplify compliance for non-affiliates,
revise the Form 144 filing thresholds, and codify certain staff
interpretations, as well as to amend Rule 145). This proposal was
adopted in Release No. 33-8869 (Dec. 6, 2007) [72 FR 71546]; (3)
Release No. 33-8814 (June 29, 2007) [72 FR 37376] (proposing
revisions to Form D and to mandate electronic filing of Form D). The
Commission voted to approve this proposal at the December 11, 2007
open meeting (archived webcast available at https://www.sec.gov/news/
openmeetings.shtml); (4) Release No. 33-8819 (July 5, 2007) [72 FR
39670] (proposing to increase the number of companies eligible for
our scaled disclosure and reporting requirements for smaller
companies); (5) Release No. 33-8828 (Aug. 3, 2007) [72 FR 45116]
(proposing new Regulation D exemption for offers and sales of
securities to a newly defined category of ``large accredited
investors,'' as well as proposing revisions to the Regulation D
definition of ``accredited investor,'' disqualification provisions,
and integration safe harbor); (6) Release No. 34-56010 (July 5,
2007) [72 FR 37608] (proposing exemptions from requirement to
register class of securities for compensatory stock options granted
by reporting and non-reporting companies). This proposal was adopted
in Release No. 34-56887 (Dec. 3, 2007) [72 FR 69554]; (7) Release
No. 33-8810 (June 20, 2007) [72 FR 35324] (providing interpretive
guidance regarding management's report on internal control over
financial reporting under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934); and (8) Release No. 33-8811 (June 20, 2007)
[72 FR 35346] (requesting additional comment on the definition of a
significant deficiency). The last proposal was adopted in Release
No. 33-8829 (Aug. 3, 2007) [72 FR 44927] (adopting definition of
``significant deficiency'').
\18\ Release No. 33-8819 (July 5, 2007) [72 FR 39670].
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Expanding the number of smaller companies eligible to use
scaled disclosure requirements;
Reducing unnecessary complexity in our regulations by
combining the category of ``small business issuers'' with the category
of ``non-accelerated filers'' to the extent feasible; and
Simplifying disclosure requirements by moving our scaled
disclosure requirements for smaller companies from Regulation S-B into
Regulation S-K, the integrated disclosure system for other companies.
Several of the amendments in the Proposing Release had their
genesis in the recommendations made by the Advisory Committee on
Smaller Public Companies in 2006. The Commission had chartered the
Advisory Committee in March 2005 to assess the current regulatory
system for smaller companies under the federal securities laws and make
recommendations for changes.\19\ Among the specific charges of the
Committee was to consider the corporate disclosure and reporting
requirements for smaller companies, including differing regulatory
requirements based on market capitalization, and other measurements of
size or market characteristics.\20\ In its Final Report, the Advisory
Committee made several recommendations relating to scaling securities
regulation for smaller companies and labeled them as priority
items.\21\
In 2006, 3,395 reporting companies elected to take advantage of our
current scaled disclosure and reporting requirements for small business
issuers by filing their annual reports on Form 10-KSB.\22\ We estimate
that a total of 4,976 companies will be eligible to use our scaled
disclosure requirements under today's amendments, a difference of 1,581
additional companies.\23\ The 1,581 companies would represent about 13%
of the total 11,898 reporting companies that filed annual reports with
us in 2006.
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\19\ See SEC Advisory Committee on Smaller Public Companies,
Final Report (2006) (``Advisory Committee Final Report''), available
at https://www.sec.gov/info/smallbus/acspc.shtml.
\20\ Advisory Committee Final Report (p. 1).
\21\ Advisory Committee Final Report Recommendations II.P.1 (pp.
14-22), IV.P.1 (pp. 60-64), and IV.P.2 (pp. 65-68).
\22\ As stated in the Proposing Release, these statistics are
based on 2006 data from the Commission's EDGAR (Electronic Data
Gathering, Analysis and Retrieval) filing system.
\23\ As we noted in the Proposing Release, these statistics are
based on Thomson Financial (Datastream). The data includes available
information on registered public firms trading on the New York Stock
Exchange, the American Stock Exchange, the Nasdaq, the Over-the-
Counter Bulletin Board, and the Pink Sheets and excludes closed end
funds, exchange traded funds, American depositary receipts, and
direct foreign listings.
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The amendments that we are adopting address the need to revisit and
adjust the Commission's small company policies to reflect changes in
our securities markets as well as changes to the regulatory landscape
since 1992, when the Commission first adopted an integrated scaled
disclosure system for small business in Regulation S-B.\24\ The
Commission adopted Regulation S-B and its associated Forms SB-1 and SB-
2 based upon the success of Form S-18, which was a simplified
registration form for smaller companies under the Securities Act that
preceded Forms SB-1 and SB-2.\25\ Regulation S-B was designed to reduce
compliance costs and improve the ability of start-ups and other small
businesses to obtain financing through the public capital markets.
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\24\ See Release No. 33-6949 (July 30, 1992) [57 FR 36442].
\25\ The Commission adopted Forms SB-1 and SB-2 after 10 years
of issuers using Form S-18, an experimental form the Commission
created to benefit small issuers in raising capital. Release No. 33-
6924, p. 40 (Mar. 20, 1992) [57 FR 9768].
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The amendments we are adopting will result in the substantive
changes highlighted below. The new provisions:
Establish a category of ``smaller reporting companies''
eligible to use our scaled disclosure requirements. The primary
determinant for eligibility will be that the company have less than $75
million in public float. When a company is unable to calculate public
float, however, such as if it has no common equity outstanding or no
[[Page 936]]
market price for its outstanding common equity exists at the time of
the determination, the standard will be less than $50 million in
revenue in the last fiscal year;
Move 12 non-financial scaled disclosure item requirements
from Regulation S-B into Regulation S-K.\26\ These scaled requirements
will be available only for smaller reporting companies. The remaining
24 item requirements of Regulation S-B \27\ are substantially the same
as their corresponding Regulation S-K item requirements. We therefore
are not amending them except in one minor instance explained below;
\28\
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\26\ The 12 scaled item requirements are: (1) Description of
Business (Item 101); (2) Market Price of and Dividends on
Registrant's Common Equity and Related Stockholder Matters (Item
201); (3) Selected Financial Data (Item 301); (4) Supplementary
Financial Information (Item 302); (5) Management's Discussion and
Analysis of Financial Condition and Results of Operations (Item
303); (6) Quantitative and Qualitative Disclosures about Market Risk
(Item 305); (7) Executive Compensation (Item 402); (8) Transactions
with Related Persons, Promoters and Certain Control Persons (Item
404); (9) Corporate Governance (Item 407); (10) Prospectus Summary,
Risk Factors, and Ratio of Earnings to Fixed Charges (Item 503);
(11) Use of Proceeds (Item 504); and (12) Exhibits (Item 601).
\27\ We did not propose changes to the following items of
Regulation S-K because we believe our analysis showed that the
disclosure standards in these items currently are substantially the
same as the Regulation S-B requirements: (1) Description of Property
(Item 102); (2) Legal Proceedings (Item 103); (3) Description of
Registrant's Securities (Item 202); (4) Changes In and Disagreements
with Accountants on Accounting and Financial Disclosure (Item 304);
(5) Disclosure Controls and Procedures (Item 307); (6) Internal
Control Over Financial Reporting (Item 308); (7) Internal Control
Over Financial Reporting (Item 308T); (8) Directors, Executive
Officers, Promoters and Control Persons (Item 401); (9) Security
Ownership of Certain Beneficial Owners and Management (Item 403);
(10) Compliance with Section 16(a) of the Exchange Act (Item 405);
(11) Code of Ethics (Item 406); (12) Forepart of Registration
Statement and Outside Front Cover Page of Prospectus (Item 501);
(13) Inside Front and Outside Back Cover Pages of Prospectus (Item
502); (14) Determination of Offering Price (Item 505); (15) Dilution
(Item 506); (16) Selling Security Holders (Item 507); (17) Plan of
Distribution (Item 508); (18) Interest of Named Experts and Counsel
(Item 509); (19) Disclosure of Commission Position on
Indemnification for Securities Act Liabilities (Item 510); (20)
Other Expenses of Issuance and Distribution (Item 511); (21) Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities (Item 701); (22) Indemnification of Directors and
Officers (Item 702); and (23) Purchases of Equity Securities by the
Issuer and Affiliated Purchasers (Item 703). In addition, although
we proposed to amend Undertakings (Item 512), we are not adopting
this change because we believe it is clear which undertakings may
and may not apply to a smaller reporting company.
\28\ See the discussion of Description of Property (Item 102)
below. In addition, we are making technical changes to numerous item
requirements to remove references to Regulation S-B and its
associated ``SB'' forms.
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Move the scaled financial statement requirements in Item
310 of Regulation S-B into new Article 8 of Regulation S-X, and amend
these requirements to provide a scaled disclosure option for smaller
reporting companies, requiring two years of balance sheet data instead
of one year, and make other minor adjustments after considering
comments we received; \29\
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\29\ The amendments also rescind Regulation S-B, since all of
its substantive requirements will now be contained in Regulation S-K
or new Article 8 of Regulation S-X.
---------------------------------------------------------------------------
Permit smaller reporting companies to elect to comply with
scaled financial and non-financial disclosure on an item-by-item or ``a
la carte'' basis. As adopted, eligible companies may elect to follow
scaled financial statement requirements or to provide the larger
company financial statement presentation on a quarterly basis, rather
than require companies to elect the full fiscal year's financial
presentation in the first quarterly report of the fiscal year, as was
proposed;
Eliminate our current ``SB'' forms but allow a phase-out
period for small business issuers transitioning to smaller reporting
company status;
Combine elements relating to the accelerated filer
definition with qualifying standards for the smaller reporting company
determination and transition provisions to promote uniformity and
consistency with current regulations and, therefore, simplify
regulation;
Permit all foreign companies to qualify as ``smaller
reporting companies'' if they otherwise qualify and choose to file on
domestic company forms and provide financial statements prepared in
accordance with U.S. Generally Accepted Accounting Principles (``U.S.
GAAP''); and
Eliminate the transitional small business issuer format.
II. Description of Proposed Amendments
We proposed an eligibility standard for our scaled disclosure
requirements for ``smaller reporting companies'' to replace the ``small
business issuer'' definition found in Item 10 of Regulation S-B.\30\
Under the proposals, the new definition of ``smaller reporting
company'' would have established eligibility for companies with less
than $75 million in public common equity float. We provided an
alternative revenue test for those companies unable to calculate public
common equity float, basing eligibility on whether the company had
annual revenues of less than $50 million in its last fiscal year. In
contrast, our previous eligibility requirements for ``small business
issuer'' status required that companies have both less than $25 million
in public common equity float and less than $25 million in annual
revenues.
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\30\ 17 CFR 228.10.
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Under the proposals, which we are adopting in modified form, each
company would determine its eligibility based on whether the company
is: (1) A reporting company already filing periodic and annual reports;
\31\ (2) a non-reporting company filing a registration statement under
either the Securities Act or Exchange Act; or (3) a reporting or non-
reporting company that had no public float, such as if it had no public
common equity outstanding or no market price for its common equity
existed. A reporting company determining its eligibility as a smaller
reporting company would calculate its public float as of the last
business day of its most recently completed second fiscal quarter. Non-
reporting companies filing a registration statement would calculate
their public float as of a date within 30 days of the date of the
filing of the registration statement.
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\31\ A reporting company is required to file reports under
Section 13(a) and 15(d) of the Exchange Act. 15 U.S.C. 78m and 15
U.S.C. 78o.
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Under the proposals, investment companies and asset-backed issuers
would be excluded from eligibility for smaller reporting company
status, as was the case under the definition of ``small business
issuer'' in Regulation S-B.\32\ As proposed, foreign companies could
qualify as smaller reporting companies and provide scaled disclosure if
they elected to use domestic company forms and provide financial
statements prepared in accordance with U.S. GAAP. Removing the
exclusion of foreign companies would make scaled treatment available to
additional smaller companies.\33\
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\32\ Item 10(a)(1)(iii) of Regulation S-B, 17 CFR
228.10(a)(1)(iii).
\33\ Item 10(a)(1)(ii) of Regulation S-B only permits U.S. or
Canadian issuers to qualify as ``small business issuers.''
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We proposed that smaller reporting companies be required to exit
the scaled disclosure system the fiscal year after their public float
rose above $75 million as of the last business day of their second
fiscal quarter.\34\ Smaller reporting companies attempting to establish
eligibility to enter the scaled disclosure system again would be
required to determine that their public float fell below $50 million as
of the last business day of their second fiscal quarter, and would be
able to use scaled disclosure again in the next fiscal year following
the determination, starting
[[Page 937]]
with the first Form 10-Q of the next fiscal year.
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\34\ The entering and exiting rules in the smaller reporting
company system are modeled after the method of determining
accelerated filer status set forth in Rule 12b-2. 17 CFR 240.12b-2.
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An objective of our proposals was to simplify and improve our
disclosure and reporting rules for smaller companies by moving the
Regulation S-B disclosure requirements for smaller companies into
Regulation S-K, as recommended by the SEC Advisory Committee on Smaller
Public Companies. As a result of our rulemaking, we identified 13 item
requirements in Regulation S-B that provided scaled disclosure for
smaller companies.\35\ We reasoned that consolidation of the Regulation
S-K and S-B disclosure requirements would provide a more unified set of
rules that would be easier to use. To accomplish this, we proposed to
move item requirements in Regulation S-B containing substantive scaled
non-financial disclosure requirements into Regulation S-K by adding a
new paragraph to the items of Regulation S-K that would contain
separate disclosure standards for smaller reporting companies. We did
not propose any major substantive changes to the items we were moving
from Regulation S-B into Regulation S-K, but sought comment from the
public on substantive changes they would recommend.
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\35\ See note 26 above.
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One of the item requirements in Regulation S-B providing scaled
disclosure requirements did not have a similar disclosure item
requirement in Regulation S-K. Consequently, our specific proposals
included adding a new Item 310 in Regulation S-K for financial
statements. Item 310 of Regulation S-K would have set forth the
alternative requirements on form and content of financial statements
for smaller companies that formerly appeared in Item 310 of Regulation
S-B.
The proposals also allowed a smaller reporting company to choose,
on an item-by-item basis or ``a la carte'' basis, to comply with either
the scaled disclosure and financial reporting requirements made
available in Regulation S-K for smaller reporting companies or the
requirements for other companies in Regulation S-K, when the
requirements for other companies were more rigorous.
The proposal, like the amendments we are adopting, would rescind
all of our forms designated with the letters ``SB.'' Smaller reporting
companies would be eligible to file on Form S-1, rather than on Form
SB-1 or SB-2 as before, to offer securities to the public. This would
provide a smaller reporting company the ability to incorporate by
reference its previously filed Exchange Act reports if the company
meets the requirements set forth under General Instruction VII of Form
S-1.\36\
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\36\ General Instruction VII of Form S-1 sets forth the
eligibility criteria to qualify for incorporation by reference. The
registrant must be required to file reports pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 and must
have filed all reports and materials during the preceding 12 months.
The company must have filed an annual report for its most recently
completed fiscal year. Section D of the instruction disqualifies
companies that, in the past three years, were any of the following:
(a) A blank check company as defined in Rule 419(a)(2);
(b) A shell company, other than a business combination related
shell company, each as defined in Rule 405; or
(c) A registrant for any offering of penny stock as defined in
Rule 3a51-1 under the Exchange Act.
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Finally, the proposals, like the amendments we are adopting, would
eliminate the ``transitional small business issuer format'' associated
with Form SB-1 and annual reports on Form 10-KSB.\37\ A small business
issuer using the transitional format followed disclosure based on Model
A or B found in Regulation A. These two disclosure models were intended
to ease transition from non-reporting to reporting status for small
business issuers preparing disclosure on initial registration
statements and annual reports. In our Proposing Release we noted,
however, that the number of companies registering on Form SB-1 and
following the disclosure format within Form 10-KSB had significantly
declined over time.\38\
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\37\ See Proposing Release Release No. 33-8819, pp. 40-41 (July
5, 2007) [72 FR 39680].
\38\ For example, during the past five years, the Commission has
received only 56 Form SB-1 registration statements. For years 2000
through 2005, two small business issuers out of 56 filed a Form 10-
KSB using the transitional disclosure format.
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We received 21 comment letters on the proposals,\39\ including six
from public accounting firms. We also received comment letters from
professional and trade associations, a law firm, an associate professor
of finance, two small business owners, and the Small Business
Administration's Office of Advocacy. In general, the comment letters
strongly supported our efforts to simplify our scaled disclosure
requirements for smaller reporting companies and expand eligibility for
them.
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\39\ The public comments we received are available for
inspection in our Public Reference Room at 100 F Street, NE,
Washington, DC 20549 in File No. S7-15-07, or may be viewed at
https://www.sec.gov/comments/s7-15-07/s71507.shtml.
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III. Discussion of Amendments We Are Adopting
After considering the public comments, we are adopting the
amendments substantially as we proposed them, with the modifications
discussed below.
A. Moving Scaled Disclosure Item Requirements From Regulation S-B Into
Regulation S-K
Many of the comment letters supported moving our scaled disclosure
requirements from Regulation S-B into Regulation S-K.\40\ In general,
the comments in these letters viewed moving the requirements as having
a positive impact by reducing complexity and promoting more streamlined
regulation. One letter noted that combining the two disclosure systems
would allow smaller reporting companies to more easily evaluate the
extent of the differences between the requirements for smaller
reporting companies and larger companies and consider which requirement
better meets the needs of their investors.\41\
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\40\ See, e.g., Letter from the American Bar Association,
Section of Business Law (ABA).
\41\ See Letter from PricewaterhouseCoopers LLP.
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A few comment letters opposed moving the scaled disclosure
requirements into Regulation S-K, indicating that having all of the
smaller company rules in one place was convenient for smaller
companies.\42\ These comment letters expressed concern that the
migration into Regulation S-K would increase legal and accounting costs
for smaller companies and make the rules more complex for smaller
companies to understand. A few comment letters suggested providing the
scaled smaller reporting company disclosure requirements in a separate
section of Regulation S-K.\43\
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\42\ See, e.g., Letters from the Chamber of Commerce and New
York State Society of Certified Public Accountants (NYSSCPA).
\43\ See, e.g., Letter from KPMG.
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We are adopting our proposal to move our Regulation S-B scaled
disclosure requirements into Regulation S-K. After considering the
comments, we believe combining the two disclosure systems and setting
out the smaller reporting company scaled item requirements in separate
paragraphs within Regulation S-K is appropriate. We believe our
amendments eliminate redundancies and provide a more streamlined
disclosure system for smaller reporting companies. In response to the
concern that moving the item requirements will create complexity for
smaller companies, we are including an index of
[[Page 938]]
scaled disclosure requirements in the definition of smaller reporting
company at the beginning of Regulation S-K \44\ to highlight items of
the Regulation that contain the scaled disclosure requirements specific
to smaller reporting companies.
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\44\ See new Item 10(f) of Regulation S-K (Index of Scaled
Disclosure Available to Smaller Reporting Companies).
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Regulation S-B has 12 non-financial item requirements that provide
scaled disclosure options to smaller reporting companies. Under this
rulemaking, these 12 item requirements are being moved to separate
paragraphs within Regulation S-K. In some cases, smaller reporting
companies are not required to provide disclosures required of larger
companies. For example, while larger companies are required to provide
disclosure under Item 305 on quantitative and qualitative disclosures
about market risk, smaller companies are not currently required to do
so under the same item requirement in Regulation S-B. In cases like
this, we include a paragraph in the relevant item of Regulation S-K
indicating that smaller reporting companies are not required to respond
to the item.
In addition to the Regulation S-B and S-K differences, the forms
themselves may contain different disclosure requirements for smaller
reporting companies. Currently, Forms 10-SB, 10-KSB and 10-QSB do not
require risk factor disclosure from small business issuers. The
amendments carry this difference in disclosure requirements over to
Forms 10, 10-K and 10-Q by adding instructions indicating that smaller
reporting companies are not required to provide risk factor disclosure
in these Exchange Act forms.
B. Moving Smaller Reporting Company Financial Statement Requirements
From Item 310 of Regulation S-B Into New Article 8 of Regulation S-X;
Additional Regulation S-X Changes
Several comment letters recommended moving the rules on form and
content of financial statements for smaller reporting companies now in
Item 310 of Regulation S-B into Regulation S-X, rather than into a new
Item 310 of Regulation S-K, as proposed. Several comment letters also
agreed with the Advisory Committee recommendation to require smaller
reporting companies to provide two years of comparative audited balance
sheet data in annual financial statements under these rules, rather
than one year, as is currently required under Regulation S-B.\45\ The
comment letters are persuasive that we should adopt these
recommendations as part of our rule amendments. Accordingly, we are
moving the financial statement rules for smaller reporting companies
into a new Article 8 of Regulation S-X \46\ and will require two years
of comparative audited balance sheet data of smaller reporting
companies. Comparative balance sheets will provide a much more
meaningful presentation for investors without a significant additional
burden on smaller reporting companies, since the earlier year data
should be readily available for the purposes of preparing the other
financial statements.\47\ We also are making technical and language
changes to the rules on form and content of financial statements for
smaller public companies to facilitate their placement in Article 8 of
Regulation S-X rather than in Regulation S-B or Regulation S-K.
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\45\ We had specifically asked for comments on this
recommendation in the Proposing Release. See Proposing Release
Release No. 33-8819, p. 26 [72 FR 39676].
\46\ To be codified at 17 CFR 210.8-01--.8-08.
\47\ Although the earlier year data would be readily available,
auditors must undertake appropriate audit procedures related to the
prior fiscal year.
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We also are adopting technical amendments to Rule 3-05(b)(2)(iv) of
Regulation S-X that were tied conceptually to the small business issuer
threshold in Regulation S-B that we are replacing with the definition
of smaller reporting company in Regulation S-K. Rule 3-05 of Regulation
S-X requires the inclusion of financial statements of businesses
acquired or to be acquired, so-called ``target companies,'' in
registration statements and Form 8-K reports. The number of years of
audited financial statements to be included for a target company is
determined using the conditions specified in the definition of
significant subsidiary in Rule 1-02(w) of Regulation S-X. If the net
revenues reported by the target company for the latest fiscal year are
less than $25 million and three years of financial statements would
otherwise be required, the earliest of the three fiscal years may be
omitted pursuant to Rule 3-05(b)(2)(iv) of Regulation S-X.
Several comment letters noted that in light of the $50 million in
revenues threshold proposed for determining a company's qualification
as a smaller reporting company if a company is unable to calculate
public float, the Commission should consider revising this rule to
raise to $50 million the $25 million threshold currently used to limit
to two the periods required for audited financial statements of an
acquired business.\48\ The $25 million threshold was based on the $25
million in revenues standard in Regulation S-B that we are
rescinding.\49\ We are amending this standard to increase the threshold
to $50 million in revenues, as suggested by the commenters.
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\48\ See, e.g., Letter from Center for Audit Quality (CAQ).
\49\ In 1996, the Commission adopted revisions to rules that
streamlined requirements with respect to financial statements of
significant business acquisitions in filings made under the
Securities Act and the Exchange Act. The $25 million threshold limit
was intended to be consistent with criteria for small business
issuers. Release No. 33-7355, p. 36 (Oct. 10, 1996).
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C. Adopting Scaled Disclosure Item Requirements in Regulation S-K
1. Overview
The following is a list of item requirements we are amending in
Regulation S-K to include the substance of the scaled standards for
smaller reporting companies now in the same item number of Regulation
S-B. The adopted amendments are substantially as described in the
Proposing Release, but with the changes discussed below:
Item 101 (Description of Business). We are adding a new paragraph
(h) to this item to set forth the alternative disclosure standards for
smaller companies that appeared in Item 101 of Regulation S-B.
Generally, the different requirements for smaller reporting companies
under Item 101 involve providing a less detailed description of the
company's business. For example, the Regulation S-K standard for Item
101 requires financial information about segments, which the standard
for smaller reporting companies does not require.\50\ In addition,
smaller reporting companies will be required to provide and disclose
business development activities for only three years, instead of the
five-year disclosure required of larger companies by Item 101 of
Regulation S-K.
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\50\ Application of U.S. GAAP (FAS 131) may, however, require
segment information in the notes to the financial statements. 17 CFR
229.101(b).
---------------------------------------------------------------------------
We also are implementing additional minor revisions that replace
the reference to Canadian issuers. Since we are making the smaller
reporting company standards available to foreign issuers generally, we
are requiring that these issuers provide disclosure on enforceability
of civil liability against foreign persons. Previously, Item 101 of
Regulation S-B had required this disclosure from Canadian issuers only
because those were the only foreign issuers eligible for Regulation S-B
disclosure standards. The item requirement applicable to smaller
reporting companies also will no longer
[[Page 939]]
refer to the foreign private issuer requirement to disclose whether the
report will include a reconciliation of financial information with U.S.
generally accepted accounting principles, because smaller reporting
companies must provide financial statements prepared in accordance with
U.S. GAAP.
Item 201 (Market Price of and Dividends on Registrant's Common
Equity and Related Stockholder Matters). We are revising Instruction 6
to paragraph (e) of this Regulation S-K item requirement to reflect
that smaller reporting companies (instead of ``small business
issuers'') are not required to provide a performance graph.
Item 301 (Selected Financial Data); Item 302 (Supplementary
Financial Information). We are adding a new paragraph (c) to each item
requirement, providing that smaller reporting companies are not
required to present the information required by these item
requirements.
Item 303 (Management's Discussion and Analysis of Financial
Condition and Results of Operations). As provided in new paragraph (d),
this item sets forth the scaled requirements.\51\ For example, under
this item requirement, smaller reporting companies will:
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\51\ As discussed below, we are also adding references to two
Industry Guides to this item.
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Provide only two years of analysis if the company is
presenting only two years of financial statements, instead of the three
years of analysis required of larger companies that are required to
provide three years of financial statements; and
Not be required to provide tabular disclosure of
contractual obligations.
Item 305 (Quantitative and Qualitative Disclosures about Market
Risk). New paragraph (e) in this item specifies that smaller reporting
companies are not required to disclose Item 305 information.
Item 402 (Executive Compensation). New paragraphs (l) through (r)
set forth the alternative standards for smaller reporting companies for
disclosure of compensation of executives and directors that were in
Item 402 of Regulation S-B.\52\ Smaller reporting companies will:
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\52\ As proposed, the scaled disclosure for this item would have
been in new paragraph (l), but in order to clarify the requirements,
the adopted Item restates the requirements for smaller reporting
companies in several paragraphs.
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Provide executive compensation disclosure for only three
named executive officers (specifically including the principal
executive officer but not the principal financial officer), rather than
the five required of larger companies;
Provide the Summary Compensation Table disclosure for only
two years, rather than the three years required of larger companies;
Not be required to provide a Compensation Discussion and
Analysis;
Provide only three of the seven tables \53\ required of
larger companies;
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\53\ These are the Summary Compensation Table, the Outstanding
Equity Awards at Fiscal Year End Table, and the Director
Compensation Table.
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Provide alternative narrative disclosures; and
Not be required to include footnote disclosure of the
grant date fair value of equity awards in the Director Compensation
Table.
Item 404 (Transactions with Related Persons, Promoters and Certain
Control Persons). We are making changes to the introductory text of
paragraph (c)(1), and adding paragraph (d) before the instructions to
this item to change the calculation of total assets for smaller
reporting companies from 1% of their total assets based on the average
of total assets at year end for the last three completed fiscal years
to the last two completed fiscal years. We believe this standard is
more consistent with the two years of financial statements required of
smaller reporting companies. Under new Item 404(d) of Regulation S-K,
smaller reporting companies will: \54\
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\54\ See Section III.C.2, clarifying that to the extent the
smaller reporting company scaled disclosure requirement is more
rigorous than the same larger company item requirement, smaller
reporting companies will be required to comply with the more
rigorous smaller reporting company requirement.
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Not be required to disclose policies and procedures for
reviewing related person transactions, which is required of larger
companies;
Be required to provide disclosure regarding a transaction
where the amount exceeds the lesser of 1% of a smaller company's total
assets or $120,000;
Be required to provide additional specific information
about underwriting discounts and commissions, and corporate parents;
and
Be required to provide disclosure regarding promoters and
certain control persons.
Item 407 (Corporate Governance). New paragraph (g) to Item 407 of
Regulation S-K specifies that smaller reporting companies are:
Not required to provide Compensation Committee Interlock
and Insider Participation disclosure or a Compensation Committee
Report; and
Not required to provide an Audit Committee Report until
the first annual report after their initial registration statement is
filed with the Commission and becomes effective.
Item 503 (Prospectus Summary, Risk Factors, and Ratio of Earnings
to Fixed Charges). New paragraph (e) to this item specifies that
smaller reporting companies need not provide the information required
by paragraph (d) of Item 503 regarding the ratio of earnings to fixed
charges when a registrant issues debt, or the ratio of combined fixed
charges and preference dividends to earnings when a registrant issues
preference equity securities. In addition, we have added instructions
to the risk factor disclosure requirements set forth in Exchange Act
Forms 10, 10-K and 10-Q to indicate that smaller reporting companies
are not required to provide Item 503 risk factor disclosure in these
filings.\55\
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\55\ See Section III.A above. The Securities Offering Reform
final rule amendments stated that the risk factor disclosure
requirement did not apply to small business issuers filing on Form
10-KSB or Form 10-SB. The amendments we are adopting carry this
difference in disclosure requirements over to the Forms 10, 10-K and
10-Q for smaller reporting companies. See Securities Offering Reform
Release 33-8591 (July 19, 2005) [70 FR 44722, 44786-87].
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Item 504 (Use of Proceeds). We are revising Instruction 6 to this
item to clarify that new Article 8 of Regulation S-X, rather than the
other articles of Regulation S-X, will govern whether financial
statements of businesses proposed to be acquired must be included in
the filings of smaller reporting companies.
Item 601 (Exhibits). New paragraph (c) reflects that smaller
reporting companies need not provide Exhibit 12 (Statements re
Computation of Ratios).
Other Regulation S-K Items. We identified 24 item requirements in
Regulation S-B that were substantially similar or identical to the same
numbered item requirements in Regulation S-K. In these cases, we
determined it was appropriate to require that smaller reporting
companies follow the same item requirements as larger companies. In the
Proposing Release, we identified Item 512 (Undertakings) as a scaled
item requirement for smaller reporting companies; however, we now
believe no change is needed because it is clear which undertakings may
apply to a smaller reporting company's filings. We are, therefore, not
including a new paragraph (m) in Regulation S-K, as proposed.
In addition, as described below, we are amending Item 102
(Description of Property) of Regulation S-K to include references to
the Industry Guides \56\
[[Page 940]]
noted below and highlighting the requirements of Item 401 (Directors,
executive officers, promoters and control persons). To further maintain
consistency with references to other industry guides in the disclosure
item requirements, we also are adding instructions to Item 303
directing companies' attention to:
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\56\ The Industry Guides serve as expressions of the policies
and practices of the Division of Corporation Finance. They are of
assistance to issuers, their counsel and others preparing
registration statements and reports, as well as to the Commission's
staff. The Industry Guides are not rules, regulations, or statements
of the Commission. The Commission has neither approved nor
disapproved these interpretations. See Release 33-6384 (Mar. 16,
1982).
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Industry Guide 3--Statistical disclosure by bank holding
companies; and
Industry Guide 6--Disclosure concerning unpaid claims and
claim adjustment expenses of property-casualty insurance underwriters.
The Regulation S-B item requirement on the Description of Property
in Item 102 included detailed instructions specific to small business
issuers engaged in: (1) Significant mining operations; (2) oil and gas
producing activities; and (3) real estate activities. Under Item 102 of
Regulation S-B, mining companies are directed to the information called
for in Industry Guide 7; oil and gas producing issuers are directed to
the information called for in Industry Guide 2; and real estate
companies are directed to the information called for in Industry Guide
5. Regulation S-K, however, does not include any references to these
industry guides. Several commenters suggested that we revise Item 102
of Regulation S-K to include references to industry guides.\57\ We
agree, and are amending Item 102 of Regulation S-K to include
references to the following industry guides:
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\57\ See, e.g., Letters from KPMG and Grant Thornton.
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Industry Guide 2--Disclosure of oil and gas operations;
Industry Guide 4--Prospectus relating to interests in oil
and gas programs;
Industry Guide 5--Preparation of registration statements
relating to interests in real estate limited partnerships; and
Industry Guide 7--Description of property by issuers
engaged or to be engaged in significant mining operations.
Item 401 of Regulation S-K (Directors, executive officers,
promoters and control persons), differs from Regulation S-B in one
respect. Under Regulation S-B, the disclosure pertaining to Federal
bankruptcy laws or state insolvency laws related only to ``any
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time.'' \58\ Under
Regulation S-K, disclosure must be provided pertaining to any petitions
filed under the Federal bankruptcy laws or any state insolvency laws
filed by or against a director or officer of the company.\59\ We
believe it is appropriate to require disclosure about a personal
bankruptcy petition filed by or against a director or officer of a
smaller reporting company given that, in light of the generally smaller
level of operations of smaller reporting companies, it may be material
to an evaluation of the ability or integrity of any director or person
to be nominated to become a director or executive officer of the
smaller reporting company. Accordingly, smaller reporting companies now
will be required to comply with the slightly different disclosure
requirement of the Regulation S-K item.
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\58\ See Item 401(d)(1) of Regulation S-B. 17 CFR 228.401(d)(1).
Under Regulation S-B, issuers provide legal proceedings disclosure
about promoters and control persons for the past five years.
Regulation S-K requires disclosure on legal proceedings for control
persons and promoters for registrants that have not been subject to
the reporting requirements for Section 13(a) or 15(d) of the
Exchange Act for the twelve months immediately before the filing of
the registration statement, report or statement. 17 CFR 229.401(f)
and (g).
\59\ See Item 401(f)(1) of Regulation S-K. 17 CFR 229.401(f)(1).
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2. Electing Scaled Disclosure Standards on ``A La Carte'' Basis
Commenters generally supported the proposal to allow smaller
reporting companies to choose compliance with either the smaller
reporting company scaled disclosure requirements or the larger company
disclosure requirements in Regulation S-K on an item-by-item or ``a la
carte'' basis.\60\ One comment letter expressed the view that the
smaller reporting company disclosure requirements would serve as a
baseline that would allow companies to provide any additional
disclosure they deemed important to investors.\61\ Another set of
comments noted that the ``a la carte'' approach is already sanctioned
by disclosure rules generally.\62\ This letter explained that line-item
disclosure requirements generally permit providing more disclosure than
is required by the line items. Additionally, issuers are required to
disclose all material facts that are necessary to make the statements
included in the document not misleading, which may require disclosures
in excess of line item requirements.\63\
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\60\ See, e.g., Letter from Independent Community Bankers of
America (ICBA).
\61\ See Letter from Deloitte & Touche LLP (Deloitte).
\62\ See Letter from ABA.
\63\ The ABA cited the following in support of this statement:
Sections 11 and 12(a)(2) of the Securities Act and Rule 408 under
the Securities Act, and Rules 10b-5 and 12b-20 under the Exchange
Act.
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Some accounting firms commenting on the a la carte approach
requested that we address what one commenter referred to as the ``lock-
in'' aspect of the proposal. In the Proposing Release, we explained
that a smaller reporting company would have the option to take
advantage of the smaller reporting company requirements for one, some,
all or none of the item requirements, at its election, in any one
filing. We proposed to require, however, that a smaller reporting
company provide its financial statements on the basis of the scaled
financial statement requirements or the larger company financial
statement requirements for a single fiscal year, and not be permitted
to switch back and forth from one to another in different filings
within a single fiscal year.
One accounting firm noted that it was unclear how the a la carte
approach would work if issuers were required to elect in the first
quarterly report whether they would follow the scaled financial
statement requirements or the larger company Regulation S-X
requirements in that same fiscal year's annual report on Form 10-K.\64\
According to this letter, making a determination in this manner would
require a smaller reporting company that wants to preserve the option
of following the smaller reporting company requirements in its annual
report on Form 10-K to adhere to the smaller reporting company rules
and not provide any additional information in the first quarterly
report on Form 10-Q. Another accounting firm expressed the concern that
a smaller reporting company might elect to provide more than the
minimum disclosures only in periods when the additional disclosures
tended to be favorable.\65\ These comment letters agreed that the a la
carte approach would work if the Commission clarified that although the
smaller reporting company disclosure and financial statement
requirements would appear to establish the minimum disclosure
requirements, Rule 12b-20 under the Exchange Act \66\ would require
that a smaller reporting company provide any additional
[[Page 941]]
information beyond those minimum disclosure requirements, in order to
avoid a misleading presentation.\67\ The accounting firms suggested
that we encourage smaller reporting companies to provide consistent
disclosures in succeeding periods in order to respond to investor
expectations and allow period-to-period comparisons.
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\64\ See Letter from BDO Seidman, LLP (BDO).
\65\ See Letter from Ernst & Young LLP (E&Y).
\66\ 17 CFR 240.12b-20.
\67\ See Letters from E&Y and CAQ.
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The proposals would have required companies to make the
determination whether to report financial statement disclosure on a
scaled basis in the first quarter due after the fiscal year covering
the determination date. After reviewing the suggestions in several
comment letters, however, we believe it is appropriate to permit
smaller reporting companies to choose to comply with both the non-
financial and financial item requirements on an item-by-item basis when
these disclosures are provided consistently and when they are
consistent with the legal requirements under the federal securities
laws, including Securities Act Rule 408 and Exchange Act Rule 12b-20.
Additionally, we stress the importance of providing disclosure that
permits investors to make period-to-period comparisons, whether
quarterly or annually.
We continue to expect that our staff will evaluate item-by-item
compliance by smaller reporting companies with only the Regulation S-K
requirements applicable to smaller reporting companies, and not with
the requirements applicable to larger companies. This will be the case
even if the company whose filing is being reviewed chooses to comply
with the larger company requirements. Finally, as we noted in the
Proposing Release, the a la carte approach will have no effect on the
legal requirements and liabilities that apply to all disclosures made
by issuers.\68\
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\68\ Release No. 33-8819, n. 76 p. 33 [72 FR 39678].
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We are further clarifying that to the extent the smaller reporting
company scaled item requirement is more rigorous than the same larger
company item requirement, smaller reporting companies will be required
to comply with the more rigorous, smaller reporting company item
requirement. Also, we do not believe it is appropriate for a smaller
reporting company to comply with a larger reporting company Regulation
S-K item requirement if that requirement sets a higher threshold
obviating the need for the smaller reporting company to provide
disclosure. For example, unlike the larger company requirement under
Item 404 of Regulation S-K, smaller reporting companies are required to
disclose additional specific information about underwriting discounts
and commissions and corporate parents.\69\ In this case, a smaller
reporting company would be required to provide the additional Item 404
disclosure.
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\69\ See Instructions to Item 404(d) of Regulation S-K, 17 CFR
229.404(d).
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Currently, the smaller reporting company requirements under Item
404 of Regulation S-K \70\ present the only instance where the scaled
requirements could be more rigorous than the larger company standard.
This is because a smaller reporting company is required to provide
disclosure on a related person transaction since the beginning of the
company's last fiscal year if the amount involved in the transaction
exceeds the lesser of $120,000 or 1% of the average of the company's
total assets at year end for the last two completed fiscal years. In
contrast, a larger company reporting under the same Item 404 Regulation
S-K requirement is required to provide disclosure on a related person
transaction since the begi
