by Cydney Posner

The SEC has posted two new CDIs interpreting provisions of the FAST Act.  Both relate to Section 71003, which allows EGCs to omit from their registration statements certain historical financial statements.  (See this PubCo post.)

Interim Financial Statements. Under Section 71003 of the FAST Act,  EGCs may omit from their pre-IPO registration statements financial information for historical periods otherwise required by Reg S-X so long as the omitted financial information “relates to” a historical period that the issuer reasonably believes will not be required to be included at the time of the contemplated offering and, prior to distribution of the prelim, the registration statement is amended to include all financial information required by Reg S-X at the date of the amendment.  In the CDI, the staff maintains that interim financial information “relates to” both the interim period and to any longer period (either interim or annual) into which the financial information has been or will be included.  Accordingly, an EGC may not omit interim financial statements from its filing or submission if financial information for that period will be included in financial statements covering a longer interim or annual period required at the time of the offering, even though the shorter period will not be presented separately at that time.

The staff provides the following example:

Where a calendar year-end EGC that submits or files a registration statement in December 2015 and reasonably expects to commence its offering in April 2016, annual financial statements for 2015 and 2014 will be required, but 2013 annual financial statements may be omitted from the December filing. However, the issuer may not omit its nine-month 2014 and 2015 interim financial statements because those statements include financial information that relates to annual financial statements that will be required at the time of the offering in April 2016.

Other Entities.  Because Section 71003 of the FAST Act is not limited to financial statements of the issuer, an EGC may omit from its filing or submission financial statements of other entities if the EGC reasonably believes that those financial statements will not be required at the time of the offering.

The staff provides the following example:

An EGC has previously acquired a business the financial statements of which are required by Rule 3-05 of Reg S-X.  The EGC then updates its registration statement to include its 2015 annual financial statements prior to the offering. After that update, the operations of the acquired business will have been part of the EGC’s financial statements for a sufficient length of time to obviate the need for presentation of separate financial statements. (See Section 2030.4 of the Corp Fin Financial Reporting Manual.)  Accordingly, the EGC may omit the financial statements of the acquired business because the EGC reasonably believes that they will not be required at the time of the offering.



Posted by Cydney Posner