Tuesday, May 05. 2020
What disclosure is required under the COVID-19 Order (Release No. 34-88465 (“COVID-19 Order”))?
In order for a registrant to take advantage of an extended filing deadline under the COVID-19 Order, that registrant must make certain prescribed disclosures in the Form 8-K (or Form 6-K, if applicable) and in the report, schedule, or form that is to be filed on a delayed basis.
In the Form 8-K (or Form 6-K), the registrant must disclose:
- that it is relying on the COVID-19 Order
- a brief description of the reasons why the subject report, schedule, or form cannot be filed in a timely manner
- the estimated date by which the report, schedule or form is expected to be filed
- a company-specific risk factor or factors explaining the impact, if material, of COVID-19 on the registrant’s business
If the reason the subject report cannot be filed in a timely fashion relates to the inability of any person (other than the registrant) to furnish any required opinion, report, or certification, the registrant must also attach as an exhibit to the Form 8-K or Form 6-K a statement signed by such person stating the specific reasons why that person cannot furnish the required item. This should be in relation to the original due date of such report.
All of these requirements and disclosures listed above are necessary to appropriately rely on the COVID-19 Order.
May a registrant continue to conduct takedowns using an already-effective registration statement while relying on the COVID-19 Order for a periodic report, including a Form 10-K?
This is permissible if the registrant determines that the prospectus used complies with Section 10(a) of the Securities Act of 1933. Registrants that fully comply with the conditions of the COVID-19 Order may delay the filing of periodic reports required under the Exchange Act. However, the COVID-19 Order does not delay or exempt compliance with requirements for Securities Act registration statements. Section 10(a)(3) mandates that when a prospectus is used more than nine months after the effective date of the registration statement, the information contained in that prospectus shall be as of a date not more than sixteen months prior to such use. This is so far as such information is known to the user of such prospectus or can be furnished by such user without unreasonable effort or expense. Shelf offerings pursuant to Rule 415 also require an undertaking to reflect in the prospectus any facts or events arising after the effective date of the registration statement. These facts or events, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement and therefore should be disclosed.
Section 10(a)(3) may permit registrants relying on the COVID-19 Order to conduct a takedown using a prospectus that contains information older than sixteen months in the event that updated information cannot be furnished without unreasonable effort or expense. However, registrants and their legal advisers will need to determine when it is appropriate to update the prospectus. Registrants are responsible for the accuracy and completeness of their disclosure.
With respect to an effective Form S-3, when must a registrant reassess its eligibility to remain on the form if it has relied on the COVID-19 Order to delay filing a Form 10-K that will serve as a Section 10(a)(3) update?
Securities Act Rule 401(b) stipulates that if an amendment to a registration statement and prospectus is filed for the purpose of meeting the requirements of Section 10(a)(3) of the Act, the form and contents of such an amendment must conform to the applicable rules and forms as in effect on the filing date of such amendment. A registrant is therefore required to reassess its Form S-3 eligibility when it files the Form 10-K that serves as a Section 10(a)(3) update. When a registrant properly relies on the COVID-19 Order, the due date for filing the Form 10-K is extended. At the time of filing the Form 10-K, the registrant must meet all of the requirements of Form S-3, including that the registrant has filed all the material required to be filed pursuant to Section 13, 14 or 15(d) for a period of at least twelve calendar months immediately preceding the Section 10(a)(3) update to remain on Form S-3. The Form 10-K will be considered timely if all the conditions of the COVID-19 Order are met with respect to the filing. Refer to the SEC’s press release on this topic.
Is a registrant relying on the COVID-19 Order to delay a required filing eligible to file a new Form S-3 registration statement between the original due date of a filing and the extended due date? Will the staff accelerate the effectiveness of registration statements that do not contain all required information?
Between the original due date of a required filing and the due date as extended by the COVID-19 Order, a registrant may file a new Form S-3 registration statement even if the registrant has not filed the required periodic report prior to the submission of the new registration statement. The staff will consider the registrant to be current and timely in its Exchange Act reporting if the Form 8-K disclosing reliance on the COVID-19 Order is properly furnished. The registrant will no longer be considered current and timely (and will lose eligibility to file new registration statements on Form S-3) if it fails to file the required report by the due date as extended by the COVID-19 Order.
Registrants relying on the COVID-19 Order should note that the staff will be unlikely to accelerate the effective date of a Form S-3 until such time as any information required to be included in the Form S-3 is filed. Registrants with compelling and well-documented facts may contact the staff to discuss their specific capital raising needs.