1 Securities Act Release No. 7189, International Series Release No. 820 (June 27, 1995) and Securities Act Release No. 7190, International Series Release No. 821 (June 27, 1995).
August 2, 1995
TO: INTERNATIONAL COMMITTEE No. 21-95
SEC RULES COMMITTEE No. 90-95
RE: SEC PROPOSES REVISIONS TO REGULATION S AND RELATED RULES
UNDER THE 1933 ACT
______________________________________________________________________________
The Securities and Exchange Commission recently issued for public comment two
releases relating to the use of Regulation S under the Securities Act of 1933.1 The
Commissions releases are briefly summarized below.
Streamlining Disclosure and Requiring Quarterly Reporting
The Commission proposed amendments to several rules under the Securities Act that
would reduce the need for companies to issue unregistered securities in reliance on Regulation
S. The amendments would streamline certain requirements applicable to registered offerings of
securities under the Securities Act. The Commission proposed, among other things, (i)
eliminating the requirement to provide audited financial statements for pending business
acquisitions in Securities Act registration statements and (ii) waiving the requirement to
provide certain audited financial statements for a consummated business acquisition if those
financial statements are not readily available. The Commission also proposed requiring in
annual and quarterly reports disclosure of unregistered sales of common equity securities
during the previous fiscal quarter, whether the sales are pursuant to a private placement, a
Regulation S offering or otherwise.
Amendments to Regulation S
The Commission stated its views regarding the availability of Regulation S with respect
to certain transactions and several problematic practices that have developed involving
unregistered sales of equity securities of domestic reporting companies purportedly in reliance
on Regulation S. The Commission also requested comment regarding whether Regulation S
should be amended to impose additional restrictions on its use to impede attempts to use the
Regulation to evade the registration requirements of the Securities Act. The Commission
requested comment on, among other things, (i) extending the restricted period for certain
offerings of securities under Regulation S from 40 days to one year, (ii) limiting the use of one
of Regulation Ss safe harbors by domestic issuers offering common stock to offerings sold at
market price or with a specified minimal discount, (iii) requiring selling restrictions that limit
purchasers ability during the restricted period to sell short or otherwise take a short position
with respect to or otherwise hedge the risk of holding common equity securities, and (iv)
prohibiting the payment for common equity securities with certain types of non-recourse or
other types of promissory notes where the expectation of repayment derives solely from the
proceeds of resale of the securities.
Comments on the proposals must be provided to the Commission by September 8, 1995.
Accordingly, please provide me with any comments you have on the proposals no later than
August 22, 1995. You can reach me by phone at (202) 326-5821 or by fax at (202) 326-5827.
Dorothy M. Donohue
Assistant Counsel
Attachment