1 Securities Exchange Act Release No. 37801, International Series Release No. 1020 (October 10, 1996) ("Release").
October 17, 1996
TO: INTERNATIONAL COMMITTEE No. 36-96
SEC RULES COMMITTEE No. 110-96
RE: SEC ADOPTS RULES REGARDING PERIODIC REPORTING OF
UNREGISTERED EQUITY SALES
______________________________________________________________________________
The Securities and Exchange Commission recently issued final rule amendments
relating to periodic reporting of exempt sales of equity securities.1 The amendments are
designed to address concerns that adequate and timely disclosure be made to shareholders and
the markets of unregistered offerings of equity securities, particularly those made in reliance on
Regulation S and Section 4(2) of the Securities Act. The Release is briefly summarized below.
The rule amendments require registrants to report quarterly all exempt sales of equity
securities other than sales made in reliance on Regulation S. (This information generally is
required to be reported on Form 10Q or Form 10K.) The rule amendments require reporting of
Regulation S sales on Form 8-K within 15 days of any such sale. The Commission reasoned that
quarterly reporting for most exempt equity sales will provide adequate and timely disclosure
because privately placed securities cannot be freely resold into the public markets until a
significant period of time after the sale. In contrast, disclosure is required more quickly for
Regulation S sales because of the shorter restricted period for resales in the U.S. of securities
sold in reliance on Regulation S. (The Release also restates the Commissions intention to
consider lengthening the restricted period for resales of Regulation S securities.)
The amendments require certain information to be disclosed about unregistered sales of
equity securities, including the title and amount of securities sold, the name of the underwriter,
the consideration received, and the exemption from registration claimed. In addition, the
amendments require issuers to identify the persons or classes of persons to whom the securities
were sold. The Institutes comment letter on the proposed amendments had pointed out that
while the title and amount of securities sold would alert investors to sales of securities that
might significantly dilute their securities holdings, it is not necessary for shareholders to also
know the identity of the purchasers of the securities. While the Commission did not eliminate
this disclosure requirement, the Release points out that companies will have the option to
describe the classes of persons to whom the securities were sold (e.g., accredited investors), as
opposed to the names of individual investors.
The amendments will be effective thirty days after publication in the Federal Register.
The Release explains that sales that occur prior to the effective date, but for which a report is
due after the effective date, must be reported.
Dorothy M. Donohue
Assistant Counsel
Attachment