Relief for Form ID Filers and Regulation Crowdfunding and Regulation A Issuers Related to Coronavirus Disease 2019 (COVID-19), 17747-17751 [2020-06721]
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Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations
each side of the 338° bearing from the airport,
extending from the 6.4-mile radius to 8.4
miles north of the Bend Municipal Airport.
no extraordinary circumstances exist
that warrant preparation of an
environmental assessment.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference,
Navigation (air).
Adoption of the Amendment
In consideration of the foregoing, the
Federal Aviation Administration
amends 14 CFR part 71 as follows:
PART 71—DESIGNATION OF CLASS A,
B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND
REPORTING POINTS
Authority: 49 U.S.C. 106(f), 106(g), 40103,
40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR,
1959–1963 Comp., p. 389.
[Amended]
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Paragraph 6004 Class E Airspace Areas
Designated as an Extension to a Class D or
Class E Surface Area.
*
*
*
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ANM OR E4 Bend, OR (NEW)
Bend Municipal Airport, OR
(Lat. 44°05′40″ N, long. 121°12′01″ W)
That airspace extending upward from the
surface within 1 mile each side of the 167°
bearing from the airport, extending from the
3.9-mile radius to 6.8 miles south of the Bend
Municipal Airport.
Paragraph 6005 Class E Airspace Areas
Extending Upward From 700 Feet or More
Above the Surface of the Earth.
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ANM OR E5 Bend, OR (AMENDED)
Bend Municipal Airport, OR
(Lat. 44°05′40″ N, long. 121°12′01″ W)
That airspace extending upward from 700
feet above the surface within a 6.4-mile
radius of the airport, and within 1.1 miles
each side of the 167° bearing from the airport,
extending from 6.4-mile radius to 8.8 miles
south of the airport, and within 3.8 miles
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17 CFR Parts 227, 230, and 232
Relief for Form ID Filers and
Regulation Crowdfunding and
Regulation A Issuers Related to
Coronavirus Disease 2019 (COVID–19)
16:11 Mar 30, 2020
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We are adopting temporary
final rules for Form ID filers and for
issuers subject to reporting obligations
pursuant to Regulation Crowdfunding
and Regulation A in order to address the
needs of companies directly or
indirectly affected by coronavirus
disease 2019 (COVID–19). The
temporary final rules provide temporary
relief from the Form ID notarization
process for certain filers and extend the
filing deadlines for specified reports and
forms due pursuant to Regulation
Crowdfunding and Regulation A for
certain issuers.
DATES: The amendment to 17 CFR
232.10 is effective from March 30, 2020
through September 30, 2020. The
amendments to 17 CFR 227.202 and 17
CFR 230.257 are effective from March
30, 2020 through July 15, 2020.
FOR FURTHER INFORMATION CONTACT:
Rosemary Filou, Chief Counsel and
Acting Deputy Director of the EDGAR
Business Office, at (202) 551–8900; or
Charlie Guidry, Special Counsel, Office
of Small Business Policy, Division of
Corporation Finance, at (202) 551–3460;
U.S. Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–3628.
SUPPLEMENTARY INFORMATION: We are
adopting amendments to 17 CFR 232.10
(‘‘Rule 10’’) of Regulation S–T,1 17 CFR
227.202 (‘‘Rule 202’’) of Regulation
Crowdfunding 2 under the Securities
Act of 1933 (the ‘‘Securities Act’’),3 and
SUMMARY:
ANM OR E2 Bend, OR (NEW)
Bend Municipal Airport, OR
(Lat. 44°05′40″ N, long. 121°12′01″ W)
That airspace extending upward from the
surface within a 3.9-mile radius of the Bend
Municipal Airport, excluding that airspace
within 1 mile of a point in space at lat.
44°02′51″ N, Long. 121°16′30″ W.
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SECURITIES AND EXCHANGE
COMMISSION
Securities and Exchange
Commission.
ACTION: Temporary final rule.
Paragraph 6002 Class E Airspace Areas
Designated as Surface Areas.
*
BILLING CODE 4910–13–P
AGENCY:
2. The incorporation by reference in
14 CFR 71.1 of FAA Order 7400.11D,
Airspace Designations and Reporting
Points, dated August 8, 2019, and
effective September 15, 2019, is
amended as follows:
■
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[FR Doc. 2020–06664 Filed 3–30–20; 8:45 am]
[Release No. 33–10768; 34–88492; 39–2531;
IC–33832]
1. The authority citation for 14 CFR
part 71 continues to read as follows:
■
§ 71.1
Issued in Seattle, Washington, on March
25, 2020.
Shawn M. Kozica,
Group Manager, Western Service Center,
Operations Support Group.
17 CFR 230.257 (‘‘Rule 257’’) of
Regulation A4 as temporary final rules.
I. Introduction
The current outbreak of coronavirus
disease 2019 (COVID–19) may present
challenges to entities and their
representatives in timely meeting
certain of their obligations under the
federal securities laws. In light of this,
we are adopting these temporary final
rules to address the needs of parties
seeking to file a Form ID to gain access
to the Commission’s Electronic Data
Gathering, Analysis and Retrieval
(EDGAR) system and companies directly
or indirectly affected by COVID–19 that
are subject to reporting obligations
pursuant to Regulation Crowdfunding or
Regulation A.
Section 36 of the Exchange Act of
1934 5 (the ‘‘Exchange Act’’) and Section
28 of the Securities Act 6 provide the
Commission with general exemptive
authority to conditionally or
unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
transactions, from any provision or
provisions of the Exchange Act and the
Securities Act, respectively, or of any
rule or regulation thereunder, to the
extent that such exemption is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors.
Section 6(c) of the Investment
Company Act of 1940 7 (the ‘‘Investment
Company Act’’) provides that the
Commission may conditionally or
unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
transactions, from any provision or
provisions of the Investment Company
Act, or any rule or regulation
thereunder, if and to the extent that
such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Investment Company Act. Section
304(d) of the Trust Indenture Act of
1939 8 (the ‘‘Trust Indenture Act’’)
authorizes the Commission to adopt
rules to exempt securities or
transactions from the provisions of the
Trust Indenture Act to the extent that
‘‘such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
4 17
CFR 230.251 through 230.263.
U.S.C. 78a et seq.
6 15 U.S.C. 77z–3.
7 15 U.S.C. 80a et seq.
8 15 U.S.C. 77aaa et seq.
5 15
1 17
CFR part 232.
CFR part 227.
3 15 U.S.C. 77a et seq.
2 17
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investors and the purposes fairly
intended by’’ the Trust Indenture Act.
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II. Temporary Relief From Form ID
Notarization Requirement
In order to use the Commission’s
EDGAR system to make filings, an
applicant must complete online the
Form ID 9 application, and, in accord
with Rule 10 of Regulation S–T, ‘‘file, by
uploading as a Portable Document
Format (PDF) attachment to the Form ID
filing, a notarized document, manually
signed by the applicant over the
applicant’s typed signature, that
includes the information required to be
included in the Form ID filing and
confirms the authenticity of the Form ID
filing.’’ 10
A number of filers have indicated that
they are having difficulty securing the
required notarization to gain access to
EDGAR because their employees are
teleworking or are otherwise no longer
in reasonable proximity of an
authorized notary public due to
circumstances relating to COVID–19.
They have expressed a need for
temporary relief from this notarization
requirement so that they can make their
required filings in a timely manner.
We believe it is in the public interest
and consistent with investor protection
to provide temporary relief from the
Form ID notarization process where
circumstances related to COVID–19
render it impracticable or impossible to
obtain a notarization in a timely fashion.
Consequently we are adopting as a
temporary final rule a new paragraph (c)
to Rule 10 of Regulation S–T that will
allow filers to gain access to the EDGAR
system on a temporary basis without
initially providing the required
notarization to the manually signed
document.
From March 26, 2020 through July 1,
2020, temporary paragraph (c) allows
the staff to create EDGAR accounts and
issue EDGAR access codes based on a
manually signed document without the
requisite notarization, provided that the
filer indicates on the face of the signed
document that it could not obtain the
required notarization due to
circumstances relating to COVID–19.
Filers seeking access to EDGAR in
reliance on the temporary final rule may
be asked to provide documents, on a
9 17 CFR 239.63; 17 CFR 249.446; 17 CFR 269.7;
and 17 CFR 274.402.
10 17 CFR 232.10(b). The requirement to upload
a notarized signed Form ID is also specified in the
EDGAR Filer Manual, incorporated into Regulation
S–T at 17 CFR 232.301 (‘‘Rule 301’’). All references
to notarized signatures in Volume I of the EDGAR
Filer Manual and the EDGAR Filer Management site
(Form ID) should be interpreted consistently with
temporary paragraph (c) during the period in which
the temporary final rule is in effect.
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supplemental basis, to support their
application to assist the staff in
validating the request. Once the codes
are issued, the filer may commence
filing. The filer is required to submit as
correspondence via EDGAR a PDF copy
of the notarized manually signed
document within 90 days of the
issuance of the codes under this
temporary provision. If it does not do so
within the stated timeframe, the
Commission staff may inactivate the
filer’s EDGAR access codes. In order to
provide an additional tool to counteract
potential abuse, we also are authorizing
the staff to inactivate codes issued
pursuant to this temporary rule when
the staff has reason to believe that a filer
who gained access under the temporary
final rule has made illegitimate filings
that are inconsistent with the protection
of investors. In exercising such
authority, the staff may request
additional information or
documentation from the filer.
III. Temporary Relief From Filing
Requirements for Issuers Subject to the
Reporting Obligations of Regulation
Crowdfunding or Regulation A
Disruptions as a result of COVID–19
could hamper the efforts of companies
and other persons with filing obligations
to meet their filing deadlines under
Regulation Crowdfunding or Regulation
A. At the same time, investors have an
interest in the timely availability of
required information about these
companies. While the Commission
believes that the temporary relief from
filing requirements provided by the
amendments to Rule 202 of Regulation
Crowdfunding 11 and Rule 257 of
Regulation A12 is both necessary in the
public interest and consistent with the
protection of investors, we remind
companies that are the subject of the
relief provided in these temporary final
rules to continue to evaluate their
obligations to make materially accurate
and complete disclosures in accordance
with the anti-fraud provisions of the
federal securities laws. For example, an
issuer relying on the temporary final
rules that is conducting a continuous
Regulation A offering is responsible for
ensuring that the offering materials
contain the information required to be
included therein. If the issuer is
satisfied that the offering materials still
contain the material information
required to be included therein, it
11 See Rule 202(c) of Regulation Crowdfunding.
17 CFR 227.202(c).
12 See Rule 257(f) of Regulation A. 17 CFR
230.257(f).
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should nevertheless disclose that it is
relying on this relief.
Pursuant to Section 28 of the
Securities Act, we are adopting
temporary final rules providing that an
issuer subject to the reporting
requirements of either Regulation
Crowdfunding or Regulation A is
exempt from any requirement to file
specified reports or forms with the
Commission, and would be considered
current in its reporting obligations
under Regulation Crowdfunding or
Regulation A, where the conditions
below are satisfied:
• The issuer is not able to meet a
filing deadline due to circumstances
related to COVID–19;
• The issuer promptly discloses on its
public website or, for Regulation
Crowdfunding issuers, through an
intermediary’s platform, or provides
direct notification to its investors, that
it is relying on the temporary final rules;
• The issuer files with the
Commission, no later than 45 days after
the original filing deadline of the report
or form, the report or form required to
be filed pursuant to either Regulation
Crowdfunding or Regulation A during
the period from and including March
26, 2020 to May 31, 2020; and
• In any such report or form, the
issuer discloses that it is relying on the
temporary final rules and states the
reasons why, in good faith, it could not
file such report or form on a timely
basis.
For Regulation Crowdfunding, the
relief applies to annual reports on Form
C–AR, progress updates on Form C–U,
and termination of reporting on Form
C–TR.13 For Regulation A, the relief
applies to post-qualification
amendments required at least every 12
months after the qualification date to
include updated financial statements,
annual reports on Form 1–K, semiannual reports on Form 1–SA, special
financial reports on Forms 1–K or 1–SA,
current reports on Form 1–U, and exit
reports on Form 1–Z.14
The Commission intends to monitor
the current situation and may, if
necessary, extend the time period
during which this relief applies, with
any additional conditions the
Commission deems appropriate and/or
issue other relief.
13 This relief does not apply to Form C or Form
C/A.
14 This relief does not apply to a Form 1–A that
has not been qualified.
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IV. Economic Analysis
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A. Temporary Relief From Form ID
Notarization Requirement
The Commission is temporarily
providing Form ID filers affected by
COVID–19 with a 90-day deferral of the
requirement to upload a PDF attachment
to the electronic Form ID filing with a
copy of a notarized document, manually
signed by the applicant over the
applicant’s typed signature, that
includes the information required to be
included in the Form ID filing. Under
current filing requirements, the
notarized signature is intended to
confirm the authenticity of the identity
of the Form ID filer. During calendar
year 2019, we estimate that 34,512 Form
ID filings were accepted by EDGAR.
The deferral of the requirement to
provide a notarized copy is expected to
benefit affected Form ID filers that
newly require EDGAR access for
electronic filings, particularly natural
persons and small business filers, and
that cannot secure the required
notarization due to circumstances
relating to COVID–19 (e.g., because their
employees are teleworking or are
otherwise no longer in reasonable
proximity of an authorized notary
public). In the absence of the
amendments, such filers might incur
high additional costs to obtain the
required notarization from a notary
public in order to receive EDGAR access
expediently or may not be able to
receive EDGAR access on a timely basis
to satisfy filing requirements. By
providing affected filers with a way to
access EDGAR expediently, the
amendments would increase timeliness
in the availability of such filers’
electronic filings and disclosures, which
may also benefit investors in affected
filers that rely on the information in the
electronic filings.15
To the extent that the amendments
marginally increase the risk of an
applicant that is not the claimed filer
gaining access to the EDGAR system and
using that access in an improper way
(such as making misleading filings),
investors may experience costs as a
result of relying on such filings. We
expect several factors and provisions of
the temporary final rules to mitigate
these costs. First, the amendment
15 Under these temporary final rules and other
filer relief provided by the Commission (see Order
Under Section 36 of the Securities Exchange Act of
1934 Modifying Exemptions from the Reporting and
Proxy Delivery Requirements for Public Companies,
Release No. 34–88465 (March 25, 2020)), some filers
affected by COVID–19 are provided an extension of
the deadline to make certain required periodic
filings. However, such relief does not extend, for
example, to filings of beneficial ownership
disclosures or filings of Form D.
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requires filers to submit a notarized
copy within 90 days rather than waiving
the requirement altogether. This
provision is expected to benefit
investors by reducing the likelihood that
an applicant that is not the claimed
EDGAR filer that avails itself of relief
from the notarization-based
authentication requirement retains
indefinite access to the EDGAR system.
Second, we are authorizing the staff to
inactivate codes issued pursuant to this
temporary rule where the staff has
reason to believe that such action is
necessary for the protection of investors,
which may further reduce the risk of a
new applicant gaining access to the
EDGAR system and using that access in
an improper way. In exercising such
authority, the staff may request
additional information or
documentation from the filer in order to
determine whether continued use of the
codes is consistent with the protection
of investors. Third, irrespective of the
manner in which EDGAR access is
obtained, anti-fraud liability under
federal securities laws would continue
to apply and may serve to mitigate
potential risk to investors.
Overall, we expect this temporary
amendment to have modest economic
effects, including modest effects on
efficiency, competition, and capital
formation. We expect the proposed
amendments to marginally increase
efficiency for new filers seeking EDGAR
access and facing disruptions in access
to the services of a notary public. To the
extent that small filers may face
relatively greater hurdles, these
amendments may have a marginally
positive effect on competition and
facilitate such filers’ access to capital
that may require an electronic filing.
We have considered reasonable
alternatives to this amendment. As an
alternative, we could have temporarily
waived rather than deferred the
notarization requirement for Form ID.
The benefits of such an alternative
compared to the final rule would be
additional cost savings for affected
filers. The cost of such an alternative
compared to the final rule would be a
potentially greater risk to investors in
the case of a bad actor obtaining access
to EDGAR and using that access in an
improper way. As another alternative,
we considered a different time-frame for
the temporary deferral of the
notarization requirement for Form ID
filers than 90 days. Compared to the
final rule, a shorter (longer) deferral
would result in less (more) flexibility for
filers affected by COVID–19 seeking to
access the EDGAR system and unable to
meet the notarization requirement
without incurring significant costs
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while at the same time lower (greater)
marginal risk of continued EDGAR
access by an applicant other than the
claimed filer.
B. Temporary Relief From Filing
Requirements for Issuers Subject to the
Reporting Obligations of Regulation
Crowdfunding and Regulation A
Regulation Crowdfunding and
Regulation A permit offers and sales of
securities without registration under the
Securities Act, subject to certain
limitations and conditions, including
compliance with ongoing reporting
requirements. Based on staff analysis,
between June 19, 2015 16 and December
31, 2019, we estimate that 382
Regulation A offering statements were
qualified by the Commission, excluding
withdrawn offerings. We estimate that
2,003 Regulation Crowdfunding
offerings were filed on Form C between
May 16, 2016 and December 31, 2019,
excluding withdrawn offerings.17
We lack the data to estimate the
number of investors in Regulation A or
Regulation Crowdfunding offerings that
could be affected if issuers rely on the
relief provided by the temporary final
rules, because information on the
number of investors is generally not
required to be disclosed in periodic or
current reports required under
Regulation A or in periodic reports or
progress updates required under
Regulation Crowdfunding.18
We are mindful of the costs and
benefits of the temporary final rules.19
We believe the temporary final rules
will benefit issuers that have an
obligation to file specified reports with
the Commission pursuant to either
Regulation Crowdfunding or Regulation
A and have been adversely affected by
COVID–19 by permitting them to take
additional time to meet their reporting
obligations. We expect the relief
provided by the temporary final rules
will benefit issuers that, absent the
16 June 19, 2015 was the effective date of certain
amendments to Regulation A. See Amendments for
Small and Additional Issues Exemptions Under the
Securities Act (Regulation A), Rel. Nos. 33–9741;
34–74578; 39–2501 (Mar. 25, 2015) [80 FR 21806
(Apr. 20, 2015)].
17 These figures overstate the number of issuers
with obligations to file annual reports under
Regulation Crowdfunding, because they do not
exclude issuers that have failed to raise the target
amount or have exited the reporting regime.
18 Regulation A issuers that file Form 1–Z to
suspend reporting are required to disclose the
number of shareholders of record.
19 Section 2(b) of the Securities Act [15 U.S.C.
77b(b)] requires the Commission, when engaging in
rulemaking where it is required to consider or
determine whether an action is necessary or
appropriate in the public interest, to consider, in
addition to the protection of investors, whether the
action will promote efficiency, competition, and
capital formation.
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relief, would not be able to avail
themselves of the exemption from
registration under Regulation
Crowdfunding or Regulation A because
the timely filing of required reports is a
condition to the exemptions. In the
absence of this relief, issuers could
incur prohibitively high costs in an
attempt to meet filing deadlines given
the disruptions as a result of COVID–19.
The requirements for an issuer to
promptly disclose that it is relying on
Rule 202(c) of Regulation Crowdfunding
or Rule 257(f) of Regulation A and to
disclose in the subsequently filed report
that it relied on such rule and state the
reasons why, in good faith, it could not
file a report or form on a timely basis
may impose minimal additional costs
on issuers availing themselves of this
relief. However, we believe that these
minimal costs are justified in light of the
significant negative implications of not
being able to rely on the exemption, the
prohibitively high costs an issuer may
incur in attempting to file in a timely
manner, and the value to investors of
the information about the issuer’s
reporting status and reasons for not
filing a timely report.
We also acknowledge that there may
be costs imposed on investors,
intermediaries, and other market
participants due to delayed access to
information about offerings conducted
in reliance on Regulation A and
Regulation Crowdfunding. Generally,
reporting requirements strengthen
investor protection and decrease the
extent of information asymmetries
between issuers and investors. Ongoing
reporting provides investors with
periodically updated information,
allowing them to assess investment
opportunities based on the information
provided and their level of risk
tolerance, resulting in better informed
investment decisions and improved
allocative efficiency. Given that the
temporary final rules allow for delayed
reporting for a limited time period and
only under specified conditions, we do
not believe such costs will be
significant.
The temporary final rules will not
substantially affect competition or
capital formation. We acknowledge the
possibility that the temporary final rules
may have a minor impact on efficiency.
On the one hand, as noted above, the
delay in reporting could marginally
affect allocative efficiency to the extent
that it allows information asymmetries
between investors and issuers to persist
for the length of time of the delay. On
the other hand, we expect efficiency
gains to the extent that the temporary
final rules allow issuers to continue to
rely on either of the exemptions from
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registration that would not be available
if one of the required reports that is a
condition to the exemptions was not
filed in a timely manner, or to the extent
the issuers are able to avoid paying a
premium to service providers in an
attempt to file in a timely manner by
delaying reporting during the specified
relief period.
As an alternative to the relief
specified in the temporary final rules,
we could have considered a longer or
shorter relief period. While a shorter
period would have reduced the costs to
investors of asymmetric information, it
would also reduce the benefits of the
temporary final rules to issuers.
Similarly, a longer period would
increase the costs to investors. We
believe that the delay provided by the
temporary final rules is appropriate
given the potential impact COVID–19
could have on the efforts of companies
to meet filing deadlines pursuant to
Regulation Crowdfunding and
Regulation A. As another alternative, we
could have provided the specified relief
but not required issuers to provide
disclosure about reliance on the relief,
or only required issuers to do so in cases
of ongoing offerings. While these
alternatives could have lowered issuer
costs compared to the temporary final
rules, the cost savings would likely be
modest given the limited nature of the
notice and the flexibility afforded to
issuers with regard to how to provide
disclosure. Further, under these
alternatives, investors, including
investors in securities issued in a past
offering (particularly, in cases of traded
Regulation A securities), would not
have the benefit of timely information
about an issuer’s reliance on the
temporary final rules.
IV. Procedural and Other Matters
The Administrative Procedure Act
(‘‘APA’’) generally requires an agency to
publish notice of a rulemaking in the
Federal Register and provide an
opportunity for public comment. This
requirement does not apply, however, if
the agency ‘‘for good cause finds . . .
that notice and public procedure are
impracticable, unnecessary, or contrary
to the public interest.’’ 20 The APA also
generally requires that an agency
publish an adopted rule in the Federal
Register at least 30 days before it
becomes effective. This requirement
does not apply, however, if the agency
finds good cause for making the rule
effective sooner.21
Given the temporary nature of the
relief contemplated by the temporary
20 5
21 5
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U.S.C. 553(b)(3)(B).
U.S.C. 553(d)(3).
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final rules and the significant and
immediate impact of COVID–19 on
affected issuers, as discussed above, the
Commission finds that good cause exists
to dispense with notice and comment as
impracticable and unnecessary, and to
act immediately to amend Rule 10 of
Regulation S–T, Rule 202 of Regulation
Crowdfunding, and Rule 257 of
Regulation A.22 Further, the temporary
final rules will not materially affect the
burden or cost estimates associated with
existing collections of information for
Form ID or under Regulation
Crowdfunding and Regulation A for
purposes of the Paperwork Reduction
Act of 1995.23
Pursuant to the Congressional Review
Act,24 the Office of Information and
Regulatory Affairs has designated these
amendments as not ‘‘a major rule,’’ as
defined by 5 U.S.C. 804(2).
V. Statutory Basis
We are adopting amendments to Rule
202 of Regulation Crowdfunding and
Rule 257 of Regulation A under the
authority set forth in the Securities Act
(15 U.S.C. 77a et seq.), particularly,
Section 28 thereof. We are adopting the
amendment to Regulation S–T under the
authority in Sections 6, 7, 8, 10, 19(a),
and 28 of the Securities Act; Sections 3,
12, 13, 14, 15, 15B, 23, 35A, and 36 of
the Exchange Act; Sections 304(d) and
319 of the Trust Indenture Act; and
Sections 6(c), 8, 30, 31, and 38 of the
Investment Company Act.
List of Subjects
17 CFR Part 227
Crowdfunding, Funding portals,
Intermediaries, Reporting and
recordkeeping requirements, Securities.
17 CFR Part 230
Reporting and recordkeeping
requirements, Securities.
17 CFR Part 232
Incorporation by reference, Reporting
and recordkeeping requirements,
Securities.
22 This finding also satisfies the requirements of
5 U.S.C. 808(2), allowing the temporary final rules
to become effective notwithstanding the
requirement of 5 U.S.C. 801 (if a federal agency
finds that notice and public comment are
impractical, unnecessary or contrary to the public
interest, a rule shall take effect at such time as the
federal agency promulgating the rule determines).
The temporary final rules also do not require
analysis under the Regulatory Flexibility Act. See
5 U.S.C. 604(a) (requiring a final regulatory
flexibility analysis only for rules required by the
APA or other law to undergo notice and comment).
23 44 U.S.C. 3501 et seq.
24 5 U.S.C. 801 et seq.
E:\FR\FM\31MRR1.SGM
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Federal Register / Vol. 85, No. 62 / Tuesday, March 31, 2020 / Rules and Regulations
In accordance with the foregoing, title
17, chapter II of the Code of Federal
Regulations is amended as follows:
PART 227—REGULATION
CROWDFUNDING, GENERAL RULES
AND REGULATIONS
1. The authority citation for part 227
continues to read as follows:
■
Authority: 15 U.S.C. 77d, 77d–1, 77s, 77z–
3, 78c, 78o, 78q, 78w, 78mm, and Pub. L.
112–106, secs. 301–305, 126 Stat. 306 (2012).
2. Amend § 227.202 by adding
paragraph (c) to read as follows:
■
§ 227.202
Ongoing reporting requirements.
*
*
*
*
*
(c) Temporary relief from certain
reporting requirements is provided as
follows:
(1) An issuer that is not able to meet
a filing deadline for any report or form
required to be filed by this section or
§ 227.203(a)(3) or (b) during the period
from and including March 26, 2020, to
May 31, 2020, due to circumstances
relating to coronavirus disease 2019
(COVID–19) shall be deemed to have
satisfied the filing deadline for such
report or form if:
(i) The issuer promptly discloses on
its public website or through an
intermediary’s platform, or provides
direct notification to its investors, that
it is relying on this paragraph (c); and
(ii) The issuer files such report or
form with the Commission no later than
45 days after the original filing deadline
of the report or form.
(2) In any report or form filed
pursuant to paragraph (c)(1)(ii) of this
section, the issuer must disclose that it
is relying on this paragraph (c) and state
the reasons why, in good faith, it could
not file such report or form on a timely
basis.
PART 230—GENERAL RULES AND
REGULATIONS, SECURITIES ACT OF
1933
3. The general authority citation for
part 230 continues to read as follows:
■
Authority: 15 U.S.C. 77b, 77b note, 77c,
77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss,
78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note,
78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a–
28, 80a–29, 80a–30, and 80a–37, and Pub. L.
112–106, sec. 201(a), sec. 401, 126 Stat. 313
(2012), unless otherwise noted.
*
*
*
*
*
4. Amend § 230.257 by adding
paragraph (f) to read as follows:
jbell on DSKJLSW7X2PROD with RULES
■
§ 230.257 Periodic and current reporting;
exit report.
*
*
*
*
*
(f) Temporary relief from ongoing
reporting requirements. (1) An issuer
VerDate Sep<11>2014
16:11 Mar 30, 2020
Jkt 250001
that is not able to meet a filing deadline
for any report or form required to be
filed by § 230.252(f)(2)(i) or paragraphs
(a) through (c) of this section during the
period from and including March 26,
2020, to May 31, 2020, due to
circumstances relating to coronavirus
disease 2019 (COVID–19) shall be
deemed to have satisfied the filing
deadline for such report or form if:
(i) The issuer promptly discloses on
its public website or provides direct
notification to its investors that it is
relying on this paragraph (f); and
(ii) The issuer files such report or
form with the Commission no later than
45 days after the original filing deadline
of the report or form.
(2) In any report or form filed
pursuant to paragraph (f)(1)(ii) of this
section, the issuer must disclose that it
is relying on this paragraph (f) and state
the reasons why, in good faith, it could
not file such report or form on a timely
basis.
PART 232—REGULATION S–T—
GENERAL RULES AND REGULATIONS
FOR ELECTRONIC FILINGS
5. The general authority citation for
part 232 continues to read as follows:
■
Authority: 15 U.S.C. 77c, 77f, 77g, 77h,
77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m,
78n, 78o(d), 78w(a), 78ll, 80a–6(c), 80a–8,
80a–29, 80a–30, 80a–37, 7201 et seq.; and 18
U.S.C. 1350, unless otherwise noted.
*
*
*
*
*
6. Amend § 232.10 by adding
paragraph (c) to read as follows:
■
§ 232.10
Application of part 232.
*
*
*
*
*
(c) Temporary relief from Form ID
notarization requirement is provided as
follows:
(1) An applicant subject to the
notarization requirement under
paragraph (b) of this section who is
unable to obtain the notarization due to
circumstances relating to coronavirus
disease 2019 (COVID–19) may upload
the manually signed PDF copy of the
attachment to the Form ID filing without
the notarization provided that the
applicant indicates on the face of the
signed document that the applicant
could not provide the required
notarization due to circumstances
relating to coronavirus disease 2019
(COVID–19).
(2) Commission staff will issue codes
necessary to file on the EDGAR system
in the cases described in paragraph
(c)(1) from March 26, 2020, to July 1,
2020, to allow filers to proceed with
required electronic filings. The required
notarized document must be submitted
as correspondence via EDGAR within 90
PO 00000
Frm 00031
Fmt 4700
Sfmt 4700
17751
days of EDGAR codes issuance; if it is
not, the Commission staff is authorized
to inactivate the filer’s EDGAR codes.
(3) The Commission or its staff may
inactivate or terminate codes issued
under this paragraph (c) if the staff has
reason to believe that such action is
necessary for the protection of investors.
*
*
*
*
*
By the Commission.
Dated: March 26, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–06721 Filed 3–30–20; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket Number USCG–2020–0195]
RIN 1625–AAOO
Safety Zone; Mamala Bay, Honolulu,
HI—Voluntary First Amendment Zone
Coast Guard, DHS.
Temporary final rule.
AGENCY:
ACTION:
The Coast Guard is
establishing a temporary safety zone for
navigable waters within Mamala Bay,
Honolulu Hawaii. The safety zone is
needed to protect personnel and vessels
who may want to exercise their First
Amendment in the vicinity of Honolulu
Harbor and Honolulu Channel. Entrance
into the safety zone does not require
notification to the COTP or the COTP’s
designated representative; however
persons or vessels operating within the
safety zone shall travel at the minimum
speed necessary to maintain a safe
course. Addtionally, each person in the
safety zone must comply with all lawful
orders or directions given to them by the
COTP or the COTP’s designated
representative. Vessels wishing to enter
the safety zone will not be allowed to
cross an active security zone and should
make alternative arrangements if
necessary.
DATES: This rule is effective without
actual notice from March 31, 2020
through 11:59 p.m. April 17, 2020. For
the purposes of enforcement, actual
notice will be used from March 20, 2020
through March 31, 2020.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type USCG–2020–
0195 in the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
SUMMARY:
E:\FR\FM\31MRR1.SGM
31MRR1
]]>Agencies
[Federal Register Volume 85, Number 62 (Tuesday, March 31, 2020)]
[Rules and Regulations]
[Pages 17747-17751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06721]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 227, 230, and 232
[Release No. 33-10768; 34-88492; 39-2531; IC-33832]
Relief for Form ID Filers and Regulation Crowdfunding and
Regulation A Issuers Related to Coronavirus Disease 2019 (COVID-19)
AGENCY: Securities and Exchange Commission.
ACTION: Temporary final rule.
-----------------------------------------------------------------------
SUMMARY: We are adopting temporary final rules for Form ID filers and
for issuers subject to reporting obligations pursuant to Regulation
Crowdfunding and Regulation A in order to address the needs of
companies directly or indirectly affected by coronavirus disease 2019
(COVID-19). The temporary final rules provide temporary relief from the
Form ID notarization process for certain filers and extend the filing
deadlines for specified reports and forms due pursuant to Regulation
Crowdfunding and Regulation A for certain issuers.
DATES: The amendment to 17 CFR 232.10 is effective from March 30, 2020
through September 30, 2020. The amendments to 17 CFR 227.202 and 17 CFR
230.257 are effective from March 30, 2020 through July 15, 2020.
FOR FURTHER INFORMATION CONTACT: Rosemary Filou, Chief Counsel and
Acting Deputy Director of the EDGAR Business Office, at (202) 551-8900;
or Charlie Guidry, Special Counsel, Office of Small Business Policy,
Division of Corporation Finance, at (202) 551-3460; U.S. Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549-3628.
SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR 232.10
(``Rule 10'') of Regulation S-T,\1\ 17 CFR 227.202 (``Rule 202'') of
Regulation Crowdfunding \2\ under the Securities Act of 1933 (the
``Securities Act''),\3\ and 17 CFR 230.257 (``Rule 257'') of Regulation
A\4\ as temporary final rules.
---------------------------------------------------------------------------
\1\ 17 CFR part 232.
\2\ 17 CFR part 227.
\3\ 15 U.S.C. 77a et seq.
\4\ 17 CFR 230.251 through 230.263.
---------------------------------------------------------------------------
I. Introduction
The current outbreak of coronavirus disease 2019 (COVID-19) may
present challenges to entities and their representatives in timely
meeting certain of their obligations under the federal securities laws.
In light of this, we are adopting these temporary final rules to
address the needs of parties seeking to file a Form ID to gain access
to the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system and companies directly or indirectly affected by COVID-
19 that are subject to reporting obligations pursuant to Regulation
Crowdfunding or Regulation A.
Section 36 of the Exchange Act of 1934 \5\ (the ``Exchange Act'')
and Section 28 of the Securities Act \6\ provide the Commission with
general exemptive authority to conditionally or unconditionally exempt
any person, security, or transaction, or any class or classes of
persons, securities, or transactions, from any provision or provisions
of the Exchange Act and the Securities Act, respectively, or of any
rule or regulation thereunder, to the extent that such exemption is
necessary or appropriate in the public interest, and is consistent with
the protection of investors.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78a et seq.
\6\ 15 U.S.C. 77z-3.
---------------------------------------------------------------------------
Section 6(c) of the Investment Company Act of 1940 \7\ (the
``Investment Company Act'') provides that the Commission may
conditionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision or provisions of the Investment
Company Act, or any rule or regulation thereunder, if and to the extent
that such exemption is necessary or appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Investment Company Act.
Section 304(d) of the Trust Indenture Act of 1939 \8\ (the ``Trust
Indenture Act'') authorizes the Commission to adopt rules to exempt
securities or transactions from the provisions of the Trust Indenture
Act to the extent that ``such exemption is necessary or appropriate in
the public interest and consistent with the protection of
[[Page 17748]]
investors and the purposes fairly intended by'' the Trust Indenture
Act.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 80a et seq.
\8\ 15 U.S.C. 77aaa et seq.
---------------------------------------------------------------------------
II. Temporary Relief From Form ID Notarization Requirement
In order to use the Commission's EDGAR system to make filings, an
applicant must complete online the Form ID \9\ application, and, in
accord with Rule 10 of Regulation S-T, ``file, by uploading as a
Portable Document Format (PDF) attachment to the Form ID filing, a
notarized document, manually signed by the applicant over the
applicant's typed signature, that includes the information required to
be included in the Form ID filing and confirms the authenticity of the
Form ID filing.'' \10\
---------------------------------------------------------------------------
\9\ 17 CFR 239.63; 17 CFR 249.446; 17 CFR 269.7; and 17 CFR
274.402.
\10\ 17 CFR 232.10(b). The requirement to upload a notarized
signed Form ID is also specified in the EDGAR Filer Manual,
incorporated into Regulation S-T at 17 CFR 232.301 (``Rule 301'').
All references to notarized signatures in Volume I of the EDGAR
Filer Manual and the EDGAR Filer Management site (Form ID) should be
interpreted consistently with temporary paragraph (c) during the
period in which the temporary final rule is in effect.
---------------------------------------------------------------------------
A number of filers have indicated that they are having difficulty
securing the required notarization to gain access to EDGAR because
their employees are teleworking or are otherwise no longer in
reasonable proximity of an authorized notary public due to
circumstances relating to COVID-19. They have expressed a need for
temporary relief from this notarization requirement so that they can
make their required filings in a timely manner.
We believe it is in the public interest and consistent with
investor protection to provide temporary relief from the Form ID
notarization process where circumstances related to COVID-19 render it
impracticable or impossible to obtain a notarization in a timely
fashion. Consequently we are adopting as a temporary final rule a new
paragraph (c) to Rule 10 of Regulation S-T that will allow filers to
gain access to the EDGAR system on a temporary basis without initially
providing the required notarization to the manually signed document.
From March 26, 2020 through July 1, 2020, temporary paragraph (c)
allows the staff to create EDGAR accounts and issue EDGAR access codes
based on a manually signed document without the requisite notarization,
provided that the filer indicates on the face of the signed document
that it could not obtain the required notarization due to circumstances
relating to COVID-19. Filers seeking access to EDGAR in reliance on the
temporary final rule may be asked to provide documents, on a
supplemental basis, to support their application to assist the staff in
validating the request. Once the codes are issued, the filer may
commence filing. The filer is required to submit as correspondence via
EDGAR a PDF copy of the notarized manually signed document within 90
days of the issuance of the codes under this temporary provision. If it
does not do so within the stated timeframe, the Commission staff may
inactivate the filer's EDGAR access codes. In order to provide an
additional tool to counteract potential abuse, we also are authorizing
the staff to inactivate codes issued pursuant to this temporary rule
when the staff has reason to believe that a filer who gained access
under the temporary final rule has made illegitimate filings that are
inconsistent with the protection of investors. In exercising such
authority, the staff may request additional information or
documentation from the filer.
III. Temporary Relief From Filing Requirements for Issuers Subject to
the Reporting Obligations of Regulation Crowdfunding or Regulation A
Disruptions as a result of COVID-19 could hamper the efforts of
companies and other persons with filing obligations to meet their
filing deadlines under Regulation Crowdfunding or Regulation A. At the
same time, investors have an interest in the timely availability of
required information about these companies. While the Commission
believes that the temporary relief from filing requirements provided by
the amendments to Rule 202 of Regulation Crowdfunding \11\ and Rule 257
of Regulation A\12\ is both necessary in the public interest and
consistent with the protection of investors, we remind companies that
are the subject of the relief provided in these temporary final rules
to continue to evaluate their obligations to make materially accurate
and complete disclosures in accordance with the anti-fraud provisions
of the federal securities laws. For example, an issuer relying on the
temporary final rules that is conducting a continuous Regulation A
offering is responsible for ensuring that the offering materials
contain the information required to be included therein. If the issuer
is satisfied that the offering materials still contain the material
information required to be included therein, it should nevertheless
disclose that it is relying on this relief.
---------------------------------------------------------------------------
\11\ See Rule 202(c) of Regulation Crowdfunding. 17 CFR
227.202(c).
\12\ See Rule 257(f) of Regulation A. 17 CFR 230.257(f).
---------------------------------------------------------------------------
Pursuant to Section 28 of the Securities Act, we are adopting
temporary final rules providing that an issuer subject to the reporting
requirements of either Regulation Crowdfunding or Regulation A is
exempt from any requirement to file specified reports or forms with the
Commission, and would be considered current in its reporting
obligations under Regulation Crowdfunding or Regulation A, where the
conditions below are satisfied:
The issuer is not able to meet a filing deadline due to
circumstances related to COVID-19;
The issuer promptly discloses on its public website or,
for Regulation Crowdfunding issuers, through an intermediary's
platform, or provides direct notification to its investors, that it is
relying on the temporary final rules;
The issuer files with the Commission, no later than 45
days after the original filing deadline of the report or form, the
report or form required to be filed pursuant to either Regulation
Crowdfunding or Regulation A during the period from and including March
26, 2020 to May 31, 2020; and
In any such report or form, the issuer discloses that it
is relying on the temporary final rules and states the reasons why, in
good faith, it could not file such report or form on a timely basis.
For Regulation Crowdfunding, the relief applies to annual reports
on Form C-AR, progress updates on Form C-U, and termination of
reporting on Form C-TR.\13\ For Regulation A, the relief applies to
post-qualification amendments required at least every 12 months after
the qualification date to include updated financial statements, annual
reports on Form 1-K, semi-annual reports on Form 1-SA, special
financial reports on Forms 1-K or 1-SA, current reports on Form 1-U,
and exit reports on Form 1-Z.\14\
---------------------------------------------------------------------------
\13\ This relief does not apply to Form C or Form C/A.
\14\ This relief does not apply to a Form 1-A that has not been
qualified.
---------------------------------------------------------------------------
The Commission intends to monitor the current situation and may, if
necessary, extend the time period during which this relief applies,
with any additional conditions the Commission deems appropriate and/or
issue other relief.
[[Page 17749]]
IV. Economic Analysis
A. Temporary Relief From Form ID Notarization Requirement
The Commission is temporarily providing Form ID filers affected by
COVID-19 with a 90-day deferral of the requirement to upload a PDF
attachment to the electronic Form ID filing with a copy of a notarized
document, manually signed by the applicant over the applicant's typed
signature, that includes the information required to be included in the
Form ID filing. Under current filing requirements, the notarized
signature is intended to confirm the authenticity of the identity of
the Form ID filer. During calendar year 2019, we estimate that 34,512
Form ID filings were accepted by EDGAR.
The deferral of the requirement to provide a notarized copy is
expected to benefit affected Form ID filers that newly require EDGAR
access for electronic filings, particularly natural persons and small
business filers, and that cannot secure the required notarization due
to circumstances relating to COVID-19 (e.g., because their employees
are teleworking or are otherwise no longer in reasonable proximity of
an authorized notary public). In the absence of the amendments, such
filers might incur high additional costs to obtain the required
notarization from a notary public in order to receive EDGAR access
expediently or may not be able to receive EDGAR access on a timely
basis to satisfy filing requirements. By providing affected filers with
a way to access EDGAR expediently, the amendments would increase
timeliness in the availability of such filers' electronic filings and
disclosures, which may also benefit investors in affected filers that
rely on the information in the electronic filings.\15\
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\15\ Under these temporary final rules and other filer relief
provided by the Commission (see Order Under Section 36 of the
Securities Exchange Act of 1934 Modifying Exemptions from the
Reporting and Proxy Delivery Requirements for Public Companies,
Release No. 34-88465 (March 25, 2020)), some filers affected by
COVID-19 are provided an extension of the deadline to make certain
required periodic filings. However, such relief does not extend, for
example, to filings of beneficial ownership disclosures or filings
of Form D.
---------------------------------------------------------------------------
To the extent that the amendments marginally increase the risk of
an applicant that is not the claimed filer gaining access to the EDGAR
system and using that access in an improper way (such as making
misleading filings), investors may experience costs as a result of
relying on such filings. We expect several factors and provisions of
the temporary final rules to mitigate these costs. First, the amendment
requires filers to submit a notarized copy within 90 days rather than
waiving the requirement altogether. This provision is expected to
benefit investors by reducing the likelihood that an applicant that is
not the claimed EDGAR filer that avails itself of relief from the
notarization-based authentication requirement retains indefinite access
to the EDGAR system. Second, we are authorizing the staff to inactivate
codes issued pursuant to this temporary rule where the staff has reason
to believe that such action is necessary for the protection of
investors, which may further reduce the risk of a new applicant gaining
access to the EDGAR system and using that access in an improper way. In
exercising such authority, the staff may request additional information
or documentation from the filer in order to determine whether continued
use of the codes is consistent with the protection of investors. Third,
irrespective of the manner in which EDGAR access is obtained, anti-
fraud liability under federal securities laws would continue to apply
and may serve to mitigate potential risk to investors.
Overall, we expect this temporary amendment to have modest economic
effects, including modest effects on efficiency, competition, and
capital formation. We expect the proposed amendments to marginally
increase efficiency for new filers seeking EDGAR access and facing
disruptions in access to the services of a notary public. To the extent
that small filers may face relatively greater hurdles, these amendments
may have a marginally positive effect on competition and facilitate
such filers' access to capital that may require an electronic filing.
We have considered reasonable alternatives to this amendment. As an
alternative, we could have temporarily waived rather than deferred the
notarization requirement for Form ID. The benefits of such an
alternative compared to the final rule would be additional cost savings
for affected filers. The cost of such an alternative compared to the
final rule would be a potentially greater risk to investors in the case
of a bad actor obtaining access to EDGAR and using that access in an
improper way. As another alternative, we considered a different time-
frame for the temporary deferral of the notarization requirement for
Form ID filers than 90 days. Compared to the final rule, a shorter
(longer) deferral would result in less (more) flexibility for filers
affected by COVID-19 seeking to access the EDGAR system and unable to
meet the notarization requirement without incurring significant costs
while at the same time lower (greater) marginal risk of continued EDGAR
access by an applicant other than the claimed filer.
B. Temporary Relief From Filing Requirements for Issuers Subject to the
Reporting Obligations of Regulation Crowdfunding and Regulation A
Regulation Crowdfunding and Regulation A permit offers and sales of
securities without registration under the Securities Act, subject to
certain limitations and conditions, including compliance with ongoing
reporting requirements. Based on staff analysis, between June 19, 2015
\16\ and December 31, 2019, we estimate that 382 Regulation A offering
statements were qualified by the Commission, excluding withdrawn
offerings. We estimate that 2,003 Regulation Crowdfunding offerings
were filed on Form C between May 16, 2016 and December 31, 2019,
excluding withdrawn offerings.\17\
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\16\ June 19, 2015 was the effective date of certain amendments
to Regulation A. See Amendments for Small and Additional Issues
Exemptions Under the Securities Act (Regulation A), Rel. Nos. 33-
9741; 34-74578; 39-2501 (Mar. 25, 2015) [80 FR 21806 (Apr. 20,
2015)].
\17\ These figures overstate the number of issuers with
obligations to file annual reports under Regulation Crowdfunding,
because they do not exclude issuers that have failed to raise the
target amount or have exited the reporting regime.
---------------------------------------------------------------------------
We lack the data to estimate the number of investors in Regulation
A or Regulation Crowdfunding offerings that could be affected if
issuers rely on the relief provided by the temporary final rules,
because information on the number of investors is generally not
required to be disclosed in periodic or current reports required under
Regulation A or in periodic reports or progress updates required under
Regulation Crowdfunding.\18\
---------------------------------------------------------------------------
\18\ Regulation A issuers that file Form 1-Z to suspend
reporting are required to disclose the number of shareholders of
record.
---------------------------------------------------------------------------
We are mindful of the costs and benefits of the temporary final
rules.\19\ We believe the temporary final rules will benefit issuers
that have an obligation to file specified reports with the Commission
pursuant to either Regulation Crowdfunding or Regulation A and have
been adversely affected by COVID-19 by permitting them to take
additional time to meet their reporting obligations. We expect the
relief provided by the temporary final rules will benefit issuers that,
absent the
[[Page 17750]]
relief, would not be able to avail themselves of the exemption from
registration under Regulation Crowdfunding or Regulation A because the
timely filing of required reports is a condition to the exemptions. In
the absence of this relief, issuers could incur prohibitively high
costs in an attempt to meet filing deadlines given the disruptions as a
result of COVID-19.
---------------------------------------------------------------------------
\19\ Section 2(b) of the Securities Act [15 U.S.C. 77b(b)]
requires the Commission, when engaging in rulemaking where it is
required to consider or determine whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation.
---------------------------------------------------------------------------
The requirements for an issuer to promptly disclose that it is
relying on Rule 202(c) of Regulation Crowdfunding or Rule 257(f) of
Regulation A and to disclose in the subsequently filed report that it
relied on such rule and state the reasons why, in good faith, it could
not file a report or form on a timely basis may impose minimal
additional costs on issuers availing themselves of this relief.
However, we believe that these minimal costs are justified in light of
the significant negative implications of not being able to rely on the
exemption, the prohibitively high costs an issuer may incur in
attempting to file in a timely manner, and the value to investors of
the information about the issuer's reporting status and reasons for not
filing a timely report.
We also acknowledge that there may be costs imposed on investors,
intermediaries, and other market participants due to delayed access to
information about offerings conducted in reliance on Regulation A and
Regulation Crowdfunding. Generally, reporting requirements strengthen
investor protection and decrease the extent of information asymmetries
between issuers and investors. Ongoing reporting provides investors
with periodically updated information, allowing them to assess
investment opportunities based on the information provided and their
level of risk tolerance, resulting in better informed investment
decisions and improved allocative efficiency. Given that the temporary
final rules allow for delayed reporting for a limited time period and
only under specified conditions, we do not believe such costs will be
significant.
The temporary final rules will not substantially affect competition
or capital formation. We acknowledge the possibility that the temporary
final rules may have a minor impact on efficiency. On the one hand, as
noted above, the delay in reporting could marginally affect allocative
efficiency to the extent that it allows information asymmetries between
investors and issuers to persist for the length of time of the delay.
On the other hand, we expect efficiency gains to the extent that the
temporary final rules allow issuers to continue to rely on either of
the exemptions from registration that would not be available if one of
the required reports that is a condition to the exemptions was not
filed in a timely manner, or to the extent the issuers are able to
avoid paying a premium to service providers in an attempt to file in a
timely manner by delaying reporting during the specified relief period.
As an alternative to the relief specified in the temporary final
rules, we could have considered a longer or shorter relief period.
While a shorter period would have reduced the costs to investors of
asymmetric information, it would also reduce the benefits of the
temporary final rules to issuers. Similarly, a longer period would
increase the costs to investors. We believe that the delay provided by
the temporary final rules is appropriate given the potential impact
COVID-19 could have on the efforts of companies to meet filing
deadlines pursuant to Regulation Crowdfunding and Regulation A. As
another alternative, we could have provided the specified relief but
not required issuers to provide disclosure about reliance on the
relief, or only required issuers to do so in cases of ongoing
offerings. While these alternatives could have lowered issuer costs
compared to the temporary final rules, the cost savings would likely be
modest given the limited nature of the notice and the flexibility
afforded to issuers with regard to how to provide disclosure. Further,
under these alternatives, investors, including investors in securities
issued in a past offering (particularly, in cases of traded Regulation
A securities), would not have the benefit of timely information about
an issuer's reliance on the temporary final rules.
IV. Procedural and Other Matters
The Administrative Procedure Act (``APA'') generally requires an
agency to publish notice of a rulemaking in the Federal Register and
provide an opportunity for public comment. This requirement does not
apply, however, if the agency ``for good cause finds . . . that notice
and public procedure are impracticable, unnecessary, or contrary to the
public interest.'' \20\ The APA also generally requires that an agency
publish an adopted rule in the Federal Register at least 30 days before
it becomes effective. This requirement does not apply, however, if the
agency finds good cause for making the rule effective sooner.\21\
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\20\ 5 U.S.C. 553(b)(3)(B).
\21\ 5 U.S.C. 553(d)(3).
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Given the temporary nature of the relief contemplated by the
temporary final rules and the significant and immediate impact of
COVID-19 on affected issuers, as discussed above, the Commission finds
that good cause exists to dispense with notice and comment as
impracticable and unnecessary, and to act immediately to amend Rule 10
of Regulation S-T, Rule 202 of Regulation Crowdfunding, and Rule 257 of
Regulation A.\22\ Further, the temporary final rules will not
materially affect the burden or cost estimates associated with existing
collections of information for Form ID or under Regulation Crowdfunding
and Regulation A for purposes of the Paperwork Reduction Act of
1995.\23\
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\22\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the temporary final rules to become effective
notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency
finds that notice and public comment are impractical, unnecessary or
contrary to the public interest, a rule shall take effect at such
time as the federal agency promulgating the rule determines). The
temporary final rules also do not require analysis under the
Regulatory Flexibility Act. See 5 U.S.C. 604(a) (requiring a final
regulatory flexibility analysis only for rules required by the APA
or other law to undergo notice and comment).
\23\ 44 U.S.C. 3501 et seq.
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Pursuant to the Congressional Review Act,\24\ the Office of
Information and Regulatory Affairs has designated these amendments as
not ``a major rule,'' as defined by 5 U.S.C. 804(2).
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\24\ 5 U.S.C. 801 et seq.
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V. Statutory Basis
We are adopting amendments to Rule 202 of Regulation Crowdfunding
and Rule 257 of Regulation A under the authority set forth in the
Securities Act (15 U.S.C. 77a et seq.), particularly, Section 28
thereof. We are adopting the amendment to Regulation S-T under the
authority in Sections 6, 7, 8, 10, 19(a), and 28 of the Securities Act;
Sections 3, 12, 13, 14, 15, 15B, 23, 35A, and 36 of the Exchange Act;
Sections 304(d) and 319 of the Trust Indenture Act; and Sections 6(c),
8, 30, 31, and 38 of the Investment Company Act.
List of Subjects
17 CFR Part 227
Crowdfunding, Funding portals, Intermediaries, Reporting and
recordkeeping requirements, Securities.
17 CFR Part 230
Reporting and recordkeeping requirements, Securities.
17 CFR Part 232
Incorporation by reference, Reporting and recordkeeping
requirements, Securities.
[[Page 17751]]
In accordance with the foregoing, title 17, chapter II of the Code
of Federal Regulations is amended as follows:
PART 227--REGULATION CROWDFUNDING, GENERAL RULES AND REGULATIONS
0
1. The authority citation for part 227 continues to read as follows:
Authority: 15 U.S.C. 77d, 77d-1, 77s, 77z-3, 78c, 78o, 78q,
78w, 78mm, and Pub. L. 112-106, secs. 301-305, 126 Stat. 306 (2012).
0
2. Amend Sec. 227.202 by adding paragraph (c) to read as follows:
Sec. 227.202 Ongoing reporting requirements.
* * * * *
(c) Temporary relief from certain reporting requirements is
provided as follows:
(1) An issuer that is not able to meet a filing deadline for any
report or form required to be filed by this section or Sec.
227.203(a)(3) or (b) during the period from and including March 26,
2020, to May 31, 2020, due to circumstances relating to coronavirus
disease 2019 (COVID-19) shall be deemed to have satisfied the filing
deadline for such report or form if:
(i) The issuer promptly discloses on its public website or through
an intermediary's platform, or provides direct notification to its
investors, that it is relying on this paragraph (c); and
(ii) The issuer files such report or form with the Commission no
later than 45 days after the original filing deadline of the report or
form.
(2) In any report or form filed pursuant to paragraph (c)(1)(ii) of
this section, the issuer must disclose that it is relying on this
paragraph (c) and state the reasons why, in good faith, it could not
file such report or form on a timely basis.
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
0
3. The general authority citation for part 230 continues to read as
follows:
Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h,
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126
Stat. 313 (2012), unless otherwise noted.
* * * * *
0
4. Amend Sec. 230.257 by adding paragraph (f) to read as follows:
Sec. 230.257 Periodic and current reporting; exit report.
* * * * *
(f) Temporary relief from ongoing reporting requirements. (1) An
issuer that is not able to meet a filing deadline for any report or
form required to be filed by Sec. 230.252(f)(2)(i) or paragraphs (a)
through (c) of this section during the period from and including March
26, 2020, to May 31, 2020, due to circumstances relating to coronavirus
disease 2019 (COVID-19) shall be deemed to have satisfied the filing
deadline for such report or form if:
(i) The issuer promptly discloses on its public website or provides
direct notification to its investors that it is relying on this
paragraph (f); and
(ii) The issuer files such report or form with the Commission no
later than 45 days after the original filing deadline of the report or
form.
(2) In any report or form filed pursuant to paragraph (f)(1)(ii) of
this section, the issuer must disclose that it is relying on this
paragraph (f) and state the reasons why, in good faith, it could not
file such report or form on a timely basis.
PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
0
5. The general authority citation for part 232 continues to read as
follows:
Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *
0
6. Amend Sec. 232.10 by adding paragraph (c) to read as follows:
Sec. 232.10 Application of part 232.
* * * * *
(c) Temporary relief from Form ID notarization requirement is
provided as follows:
(1) An applicant subject to the notarization requirement under
paragraph (b) of this section who is unable to obtain the notarization
due to circumstances relating to coronavirus disease 2019 (COVID-19)
may upload the manually signed PDF copy of the attachment to the Form
ID filing without the notarization provided that the applicant
indicates on the face of the signed document that the applicant could
not provide the required notarization due to circumstances relating to
coronavirus disease 2019 (COVID-19).
(2) Commission staff will issue codes necessary to file on the
EDGAR system in the cases described in paragraph (c)(1) from March 26,
2020, to July 1, 2020, to allow filers to proceed with required
electronic filings. The required notarized document must be submitted
as correspondence via EDGAR within 90 days of EDGAR codes issuance; if
it is not, the Commission staff is authorized to inactivate the filer's
EDGAR codes.
(3) The Commission or its staff may inactivate or terminate codes
issued under this paragraph (c) if the staff has reason to believe that
such action is necessary for the protection of investors.
* * * * *
By the Commission.
Dated: March 26, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-06721 Filed 3-30-20; 8:45 am]
BILLING CODE 8011-01-P
