SEC Will Allow All Companies to Submit Draft Registration Statements on a Non Public Basis

The Securities and Exchange Commission, (SEC) has announced that the Division of Corporation Finance (CorpFin) will now permit all companies to submit draft registration statements relating to initial public offerings for review on a non-public basis.

This process will be available for IPOs as well as most offerings made in the first year after a company has entered the public reporting system. CorpFin said this change will take effect on July 10, 2017.

Bill Hinman, Director of the Division of Corporate Finance, stated;

“This is an important step in our efforts to foster capital formation, provide investment opportunities, and protect investors. This process makes it easier for more companies to enter and participate in our public company disclosure-based system.”

The SEC said that permitting all companies to submit registration statements for non-public review, similar to the benefit used by emerging growth companies (EGC) under the JOBS Act, will provide companies with more flexibility to plan their offering.

The non-public review process after the IPO reduces the potential for lengthy exposure to market fluctuations that can adversely affect the offering process and harm existing public shareholders. By requiring a public filing period prior to the launch of marketing, the process incorporates a feature of the EGC review process that provides an opportunity for the public to evaluate those offerings.

“By expanding a popular JOBS Act benefit to all companies, we hope that the next American success story will look to our public markets when they need access to affordable capital,” said Chairman Jay Clayton. “We are striving for efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation, and a stronger U.S. economy.”

The SEC maintains certain statutory authority to alter certain rules. There is hope within the crowdfunding sector the Commission will use this authority to improve on certain aspects of investment crowdfunding.

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