July 27, 2011

Short-Form Registration: SEC Removes References to Credit Ratings

Yesterday, the SEC unanimously voted to adopt rule changes that remove references to credit ratings from some of its rules and forms to implement Section 939A of Dodd-Frank. These changes help preserve the availability of shelf and short-form registration – Forms S-3 and F-3 – for companies widely followed in the market. To replace the credit ratings criteria, the SEC created four new tests, one of which must be satisfied to use short-form/shelf registration – and subsidiaries of WKSIs do qualify. The rules include a transition 3-year grandfather period. Here’s the SEC’s press release (the adopting release is not out yet).

Here’s an excerpt from a Davis Polk alert:

According to SEC Chairman Mary Schapiro, the SEC expects just about all issuers that currently rely on the existing test also to continue to qualify under the new criteria. While this may be the case, there are issuers of investment grade debt securities that do not meet the Form S-3 or Form F-3 public equity requirements and will not meet the new criteria adopted today. Once the grandfathering period is over, these issuers will lose access to Form S-3 or Form F-3 until they issue substantial amounts of registered debt. We expect, however, that most of these issuers will issue debt pursuant to Securities Act Rule 144A if they are not able to use Form S-3 or Form F-3, given the potential time delay in making registered offerings using a long form registration statement, and thus will likely never satisfy the new criteria adopted today.

SEC Re-Proposes Shelf Eligibility Requirements for Asset-Backed Securities

Yesterday, the SEC also issued this re-proposing release related to shelf-eligibility requirements for asset-backed securities. There is a 60-day comment period. Here’s the SEC’s press release.

The GAO’s Study on Securities Fraud Liability for Secondary Actors

Last week, as required by Section 929Z of Dodd-Frank, the GAO published this study on the impact of creating a private right of action against secondary actors who aid and abet violations of the federal securities laws.

– Broc Romanek