Frequently Asked Questions About Shelf Offerings S 8 FAQShelf

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necessarily apply to registered investment companies

Understanding Shelf Offerings

and business development companies, which are
regulated under the Investment Company Act of 1940,

What is a shelf registration statement?
A shelf registration statement is a filing with the SEC to
register a public offering, usually where there is no
present intention to immediately sell all the securities
being registered. A shelf registration statement permits

as amended.
Source: Rule 415 of Regulation C of the Securities Act
of 1933 provides the basis for shelf registration.
What are the benefits of shelf registration statements?

multiple offerings based on the same registration. A
shelf registration can be used for sales of new securities







outstanding securities (“secondary offerings”) or a
combination of both.

An effective shelf registration statement enables an
issuer to quickly access the capital markets when
needed or when market conditions are optimal. The
primary advantages of a shelf registration are timing
and certainty.

With an effective shelf registration statement, when
the issuer wants to offer securities, it takes them “off the

Takedowns from an effective shelf

registration can be made without SEC staff review or
delay. See “What is a ‘takedown off the shelf’?”

These “shelf takedowns” usually are offered

with a base prospectus and a prospectus supplement.
See “What is a ‘base’ or a ‘core’ prospectus?” and “What is a
‘prospectus supplement’?”

When a specific offering is planned, a prospectus
supplement that describes the terms of the offering
normally must be filed with the SEC under Rule 424(b)
within two days of the supplement’s first use or the

In a shelf registration, securities usually are registered
for sale either on a continuous or delayed basis,
although a portion of the securities may be offered

See “What is the difference between a

determination of the offering price, whichever is earlier.
In most cases, the prospectus supplement is filed after
the takedown has already priced.

See “What is a

‘prospectus supplement’?”

‘delayed’ and a ‘continuous’ shelf offering?” It should be
noted that the rules described in these FAQs do not

In the case of a shelf registration statement on Form
S-3 or Form F-3, the registration statement incorporates

by reference the issuer’s reports filed under the

is a delayed primary offering typically conducted?”

Securities Exchange Act of 1934 (the “Exchange Act”)

Generally, only more “seasoned” issuers that are

after the shelf’s effective date. This enables the issuer to

“primarily eligible” to use Form S-3 or Form F-3 may

use a registration statement that became effective before

engage in delayed primary offerings. See “Can an issuer

the occurrence of material developments in its business,

use any registration statement form to conduct a shelf

without the need to file a post-effective amendment. See

offering?” and “What is ‘primarily eligible’?”

“What is ‘incorporation by reference’?”

Source: Rule 415(a)(1)(i) - (iv) lists the types of shelf

The advantage of this type of structure is that, once an

offerings that may be effected on a delayed basis. Rule

issuer has an effective shelf, there is no delay in waiting

415(a)(1)(ix) contains the requirements for continuous

for the SEC to possibly review the prospectus or the

offerings by any issuer that will commence promptly


and may continue for more than 30 days.

of the






amendment, the prospectus supplement does not have

415(a)(1)(x) contains the requirements for an immediate,

to be declared effective by the SEC staff. In addition,

continuous, or delayed primary offering by seasoned

the SEC staff historically has been less likely to review

primarily eligible issuers.

the initial filing of a shelf registration statement on
How is a delayed primary offering typically conducted?

Form S-3 or Form F-3 than other forms of registration
Accordingly, it is usually more time-

In a delayed primary offering, the issuer typically will

efficient and cost-efficient to register securities using a

file a “core” or “base” prospectus as part of the initial

shelf registration statement.

filing of the registration statement. See “What is a ‘base’


or a ‘core’ prospectus?” The actual terms and specifics of
What is a “takedown off the shelf”?

an offering will be filed after effectiveness, in either a

A “takedown” is an actual offering of securities from a

prospectus supplement (this is the most common

shelf registration statement that has already been


declared effective.

permitted, an Exchange Act report incorporated by






reference into the registration statement. See “What is
What is the difference between a “delayed” and a

‘incorporation by reference’?” and “What is a ‘prospectus

“continuous” shelf offering?

supplement’?” Issuers may engage in sales immediately

In a “continuous offering,” securities are offered

after effectiveness if the offering-specific information is

promptly after effectiveness (within two days) and will

included as a part of the registration statement in the

continue to be offered in the future.

base prospectus or in a prospectus supplement filed

The term

“continuous” only applies to offers of the securities, not

under Rule 424 after effectiveness.

to sales of the securities; sales can be made sporadically
What is a “base” or a “core” prospectus?

over the duration of the offering.
In a “delayed offering,” there is no present intention

A “base” (also known as a “core”) prospectus is filed in

to offer securities at the time of effectiveness. See “How

order to comply with the applicable disclosure
requirements to have a shelf registration statement


declared effective by the SEC staff, with more specific

available to the issuer, as permitted by Rule 409. See

information to follow after effectiveness in a prospectus

What is ‘primarily eligible’?“ and “What is a ‘Well-Known

supplement once the details about an offering are

Seasoned Issuer,’ or WKSI?” In addition, all offerings

known. See “What is a ‘prospectus supplement’?”

(other than mortgage-related or business combination
offerings) by WKSIs filing automatic shelf registrations

The base prospectus typically contains general

may, under Rule 430B, omit:

information, such as:

the types of securities to be offered;


a brief summary of the issuer’s business;


the use of proceeds; and


a plan of distribution.


information as to whether the offering is a
primary offering or a secondary offering on







combination of the two;

The base prospectus also may contain a description of


the plan of distribution;


a description of the securities registered, other

the risk factors of the offering and, in the case of debt

than the name or class of the securities (e.g.,

securities, may contain a ratio of earnings to fixed

“debt,” “common stock” or “preferred stock”);

charges. Although the base prospectus can incorporate


substantial amounts of information from the issuer’s

Exchange Act reports, additional information about the

majority-owned subsidiaries that may be

issuer may be provided if it is expected that the base

added later as issuers or guarantors).

prospectus will be used for “marketing purposes.”

In offerings by selling security holders of primarily

The shelf registration statement also will include (in

eligible issuers on Form S-3 or Form F-3, the identities

the so-called “Part II pages”) the estimated expenses of

of the selling security holders, all the information about

the registration, required exhibits, the undertakings

them required by Item 507 of Regulation S-K, and the

required by the SEC rules, and the issuer’s signature

amounts of securities to be registered on their behalf


the identity of other issuers (e.g., certain

may be added to the registration statement covering the

General Instructions of Form S-3, General

resale of these securities after effectiveness so long as:

Instructions of Form F-3, and Rule 430B.

What information can be omitted from the base

the registration is an automatically effective
shelf registration filed by a WKSI; or



A base prospectus for immediate, continuous or

all of the following conditions are satisfied:

the registration statement refers to the

delayed offerings on Form S-3 or Form F-3 by

unnamed selling security holders in a

“primarily eligible” issuers (including “well-known

generic manner by identifying the

seasoned issuers,” or “WKSIs”) may omit the pricing

initial offering transaction in which

and other information specified in Rule 430A and all

the securities were sold;

other information that is unknown or not reasonably




the initial offering of the securities is
completed; and




an Exchange Act report, including a current
report on Form 8-K, incorporated by reference



into the registration statement.


outstanding prior to the initial filing

If the information is included in an Exchange Act

date of the registration statement.

report, the issuer must file a prospectus supplement
under Rule 424 disclosing the Exchange Act report or

These rules acknowledge that privately placed

reports containing such information.

securities often are transferred after they are issued and
before a resale registration statement is filed. In such a

If the issuer includes the omitted information in a

case, the issuer may be unaware of the identities of the

prospectus supplement, under Rule 424(c), the base

new beneficial owners and the amount of securities they

prospectus need not be re-filed with the SEC with the

own. Filing post-effective amendments to add new or

prospectus supplement if the base prospectus has not

previously unidentified security holders can impose

changed since it was previously filed. However, many

delays, which these rules alleviate.

issuers choose to re-file the base prospectus together

The flexibility to identify selling security holders after

with the prospectus supplement to help ensure that

effectiveness is not available for PIPE transactions

investors have more convenient access to all of the

where the securities have not been issued in the private

relevant disclosure.

offering at the time the resale registration statement is

Source: Rule 430B, Rule 424, Form S-3 and Form F-3,

filed. In this case, the issuer will know the expected

and SEC Release No. 33-8591 (July 19, 2005), Section

initial identity of, and initial amount of securities held


by, the selling security holders. See “What is a ‘PIPE’
What is a “prospectus supplement”?

transaction and how can shelf registration statements be used
for such an offering?” In addition, issuers that are not

A prospectus supplement is a document that is

eligible to file a primary offering on Form S-3 or Form


F-3 are not permitted to identify selling security holders

(Depending upon the circumstances, the delivery may

after effectiveness, as the SEC believes that these issuers

take place with a physical document, an electronic copy,

are more prone to engage in transactions that involve

or via “access equals delivery” under SEC Rule 172.)

heightened disclosure and registration issues.

The prospectus supplement typically contains the terms





prospectus. See “What is a ‘base’ or a ‘core’ prospectus?”

may be subsequently included in the registration

The prospectus supplement also may include a

statement and the prospectus by:



of an offering that are not provided in the base

In the case of a WKSI, all of the omitted information



description of the risk factors and tax consequences of

a prospectus supplement;

the specific offering, as well as a description of the

a post-effective amendment; or

specific distribution arrangements and any planned use
of the proceeds that differs from the description in the
base prospectus.


Prospectus supplements are filed under Rule 424(b) of
Regulation C.

satisfy the disclosure requirements of the Form.


However, under Rule 430B and Rule

addition, the SEC’s 2005 securities offering reform

430C, prospectus supplements are deemed part of, and

package amended Form S-1 and Form F-1 to permit

included in, the registration statement containing the

reporting companies that are current in their reporting

base prospectus to which the prospectus supplement

obligations to incorporate by reference into their Form


S-1 or Form F-1 information from their previously filed

See “Does Section 11 liability attach to a


(but not future) Exchange Act reports.

In December

2015, Congress enacted the “FAST Act”; the FAST Act
Can an issuer amend a registration statement to

contains provisions that require the SEC to revise Form

convert a non-shelf offering to a shelf offering?








Yes, if the conversion occurs before the registration

incorporate by reference Exchange Act filings made

statement is declared effective. As in the case of a non-

after the effectiveness of the Form S-1.

shelf registration statement, additional securities also

There are a number of SEC rules and regulations that

may be added to the registration statement by a preeffective amendment.

restrict how incorporation by reference can be used.

See “Can a shelf registration

statement be converted into an unallocated shelf registration

regulations include Item 12(a) of Part I of Form S-3, Item


The SEC’s incorporation by reference

6(a) of Part I of Form F-3, Item 12(a) of Part I of Form




S-1, Item 5(a) of Part I of Form F-1, General Instruction

Interpretations, Securities Act Rules, Questions 212.04

G(4) of Form 10-K, and Rule 12b-23(b). Section 84001 of

(Jan. 26, 2009), available at

the FAST Act.

How can omitted information be included in the final

What is “incorporation by reference”?

A base prospectus that omits information required by

Incorporation by reference occurs when disclosure in

Form S-3 or Form F-3 as permitted by Rule 430B is a

one filed document is legally deemed to be included in

permitted prospectus that satisfies the requirements of

another document.

Section 10 of the Securities Act for purposes of Section

Incorporation by reference is central to the SEC’s




by the issuer and other offering participants to offer

The logic is that

securities registered under the shelf registration.

disclosure that is available to investors doesn’t

However, such a base prospectus is not a Section 10(a)

necessarily need to be repeated in each disclosure

final prospectus for purposes of Section 5(b)(2) of the

document. As a result, a Form S-3 or Form F-3 allows a

Securities Act (which relates to the delivery of a

company to incorporate by reference the disclosure

prospectus after a sale). To satisfy Section 10(a), the

from its current and future Exchange Act reports to

issuer must include the omitted information in:

developed in the early 1980s.


5(b)(1) of the Securities Act. As a result, it can be used



a prospectus supplement;


a post-effective amendment; or


where permitted, through its Exchange Act


audited financial statements, cannot have
failed to pay dividends or sinking fund
installments on preferred stock or defaulted on

reports that are incorporated by reference into

installments on indebtedness for borrowed

the registration statement and the prospectus

money or on material leases.

and identified in a prospectus supplement.

Source: General Instructions of Form S-3 and General

Primarily eligible issuers (including WKSIs) are

Instructions of Form F-3.

permitted to include all information about the issuer by
incorporation by reference to its Exchange Act reports,

What is “primarily eligible”?

including Current Reports on Form 8-K. See “What is

A company is “primarily eligible” to use Form S-3 or

‘primarily eligible’?” and “What is a ‘Well-Known Seasoned

Form F-3 to offer securities on its own behalf for cash on

Issuer,’ or ‘WKSI’?”

an unlimited basis if the aggregate market value of its

Source: Rule 430B, Form S-3 and Form F-3, and Rule

since the end of the last year covered by its

voting and non-voting common equity held by non-

See SEC Release No. 33-8591 (July 19, 2005),

affiliates (its “public float”) is at least $75 million.

Section V.B.1.b.i(B).

Until the SEC revised its shelf eligibility rules in July
2011, an issuer would also be eligible to use Form S-3 or
Form F-3 to register non-convertible investment grade

Shelf Eligibility

securities. These are securities that, at the time of sale,
What are the eligibility requirements for filing a shelf

were rated by at least one nationally recognized

registration statement?

statistical rating organization in one of its generic rating
categories that signify investment grade.

To be eligible to use Form S-3 or Form F-3, the issuer,

Under the eligibility requirements adopted in July

among other things:

2011, as an alternative to the $75 million public float

must have a class of securities registered under

requirement, issuers may satisfy any one of four criteria

the Exchange Act (or must be required to file

to use Forms S-3 or F-3 for offerings of non-convertible

reports under Section 15(d) of the Exchange

securities other than common equity:


must have been subject to the reporting

the issuer has issued (as of a date within 60
days prior to the filing of the registration

requirements of Section 12 or Section 15(d) of

statement) at least $1 billion in non-convertible

the Exchange Act for at least 12 calendar

securities, other than common equity, in

months immediately preceding the filing of the

primary offerings for cash registered under the

registration statement and have timely filed all

Securities Act, over the prior three years; or

required reports with the SEC during that

period; and

the issuer has outstanding (as of a date within
60 days prior to the filing of the registration


statement) at least $750 million of non-

over-the-counter market or the “pink sheets”);

convertible securities, other than common


equity, issued in primary offerings for cash



the equivalent of one-third of its public float

the issuer is a wholly-owned subsidiary of a

(the “one-third cap”).

WKSI (as discussed below); or

does not sell in a 12-month period more than

registered under the Securities Act; or

In order to benefit from these amendments, former

the issuer is a majority-owned operating

shell companies must also have timely filed their

partnership of a real estate investment trust

periodic reports for at least 12 calendar months and

(“REIT”) that qualifies as a WKSI.

filed all of the detailed information that would be

In addition, the SEC has permitted an issuer that has a

required under the Exchange Act in a registration

reasonable belief that it would have been qualified to

statement on Form 10 or Form 20-F. See “How is the

use Form S-3 or Form F-3 under the prior investment

market value threshold of ‘primarily eligible’ issuers and

grade rating criteria to continue to use these forms for a

‘well-known seasoned issuers’ calculated?” and “How is the

period of three years from the effective date of the

aggregate market value of all securities sold during any 12-


month period calculated for purposes of the one-third cap?”

An issuer taking advantage of this

provision must file a final prospectus for any such

Source: General Instruction I.B.6 of Form S-3 and General
Instruction I.B.5 of Form F-3.

offering on or prior to September 2, 2014.
Source: General Instruction I.B of Form S-3 and

What are the eligibility requirements for secondary-

General Instruction I.A. of Form F-3; SEC Release No.

only shelf registration statements?

33-9245 (July 27, 2011).

If the issuer’s public float is below $75 million, the
When can smaller public companies be primarily

issuer still may use Form S-3 or Form F-3 to register

eligible to register offerings of their securities on a shelf

secondary offerings if it meets the other eligibility

registration statement?

requirements of the Form. Secondary offerings are not

A company whose public float is less than $75 million

subject to the one-third cap.

may register primary offerings of its securities on Form

eligible’?” for an explanation of the one-third cap.)

S-3 or Form F-3 if it:

However, in some instances, registration of a secondary


offering may involve a significantly large percentage of

meets the other eligibility requirements of the

the issuer’s outstanding capital stock, causing the SEC

relevant Form;

to deem the offering a “disguised primary offering.”

is not and has not been a “shell company” for

See “What is a ‘disguised primary offering’?”

at least 12 calendar months prior to the filing of


the Form;

(See “What is ‘primarily

General Instructions I.B.3 of Form S-3 and

General Instruction I.B.3 of Form F-3.

has a class of common equity securities listed
on a national securities exchange (i.e., not the


What is a “Well-Known Seasoned Issuer,” or “WKSI”?

common equity held by non-affiliates is at least $75

A “well-known seasoned issuer” is an issuer that is

million), the subsidiary may register an offering of its

required to file reports with the SEC under Section 13(a)

common stock or other equity securities as a WKSI

or Section 15(d) of the Exchange Act and satisfies the

filing an automatic shelf registration statement.

following requirements:

What are the benefits of qualifying as a well-known

it must meet the registrant requirements of

seasoned issuer?

Form S-3 or Form F-3 (i.e., it must be a

Well-known seasoned issuers benefit from a more

“primarily eligible” issuer);

flexible automatic registration process.

it must, as of a date within 60 days of filing its

checks the applicable box on the cover of a registration

shelf registration statement, either:


statement (including a shelf registration statement) on

have a worldwide market value of its

Form S-3 or Form F-3 for either a primary or secondary

outstanding voting and non-voting

offering, or a combination of the two, the registration

common stock held by non-affiliates

statement will automatically be effective upon filing.

of $700 million or more; or

There will be no delay in effectiveness in order to

have issued in the last three years at

receive and respond to any SEC comments.

least $1 billion aggregate principal

Additional benefits include:

amount of non-convertible securities


in registered primary offerings for

it must not be an “ineligible issuer.”




subsidiaries as additional registrants after

WKSI in connection with:






its issuance of non-convertible investment

amendment that also will be automatically


effective upon filing;






unconditionally guaranteed by its parent; or

the ability to register additional classes of

A majority-owned subsidiary of a WKSI will itself be a


the ability to register unspecified amounts of
different types of securities;

cash; and



the ability to exclude additional information

its issuance of guarantees of non-convertible

from the base prospectus (see “What is a ‘base’

securities of its parent or of another majority-

or a ‘core’ prospectus?”), including:






securities are so guaranteed by the WKSI

whether the offering is a primary or
secondary offering;



a description of the securities, other

If the majority-owned subsidiary is itself a WKSI by

than the name or class of securities

reason of its issuance of $1 billion or more of non-

(i.e., “debt,” “common stock” and

convertible securities and also meets the test of a

“preferred stock”);

primarily eligible issuer (i.e., the market value of




the names of selling security holders


and the amounts of securities to be

depending on when the fifth anniversary of its IPO

offered by each; and


disclosure regarding the plan of



emerging growth company that has $700 million in

pay filing fees on a “pay-as-you-go”

public float can enjoy WKSI status for several months, if
it can time its offerings appropriately. For example, if



after the end of the relevant second quarter, an

basis at the time of each takedown;



does not apply until the beginning of the fiscal year

the ability to:


However, because the “large accelerated filer” status

distribution; and




an issuer with a December 31st fiscal year end becomes a


WKSI on January 2nd, when its market capitalization

relating to an offering before the

first exceeds $700 million, and the issuer maintains that

registration statement is filed.

market capitalization through the end of its second

Source: Rule 430B, Form S-3 and Form F-3, and Rule

quarter, it will lose its emerging growth company status


on January 1st of the following year.
Source: Section 2(a)(19) of the Securities Act of 1933

Can an emerging growth company be a WKSI?

provides the definition of emerging growth company

Under the 2012 Jumpstart Our Business Startups (JOBS)

(and the circumstances under which a company ceases

Act, an “emerging growth company” is defined as an

to be an emerging growth company).

issuer with total gross revenues of less than $1 billion
during its most recently completed fiscal year.


Can any issuer use a shelf registration statement?

emerging growth company will lose that status (among
It depends on the type of offering that will be

other circumstances): (a) following the fifth anniversary


of its first registered offering of common equity

Only issuers that are primarily eligible to use Form S-3

securities, (b) upon issuing more than $1 billion in non-

or Form F-3 (including smaller issuers subject to the

convertible debt securities within a three-year period

one-third cap) may sell on a delayed basis or conduct an

(whether in registered or unregistered offerings) or

“at-the-market” offering.

(c) upon becoming a “large accelerated filer” as defined

(See “What is ‘primarily

eligible’?” for an explanation of the one-third cap.) Any

under Rule 12b-2. (As to (c), an issuer becomes a large

issuer may engage in any other type of shelf offering.

accelerated filer at the end of a fiscal year if its public

See “Can an issuer use any registration statement form to

float was at least $700 million as of the last business day

conduct a shelf offering?” and “What is an ‘at-the-market’

of its most recently completed second fiscal quarter.) In


other words, due to (b) and (c), an issuer will lose its


emerging growth company status as a result of

Rule 415(a)(1)(x) generally requires that

becoming a WKSI. (See “What is a ‘Well-Known Seasoned

delayed primary offerings be conducted by issuers that

Issuer,’ or ‘WKSI’?” above.) Due to (a), an emerging

meet the eligibility requirements for primary offerings


on Form S-3 or Form F-3. See Rule 415(a)(1)(vii) and the

eligibility requirements of Form S-3 and Form F-3,

SEC’s Compliance and Disclosure Interpretations,

including a continuous offering. See “What is ‘primarily

Securities Act Rules regarding Rule 415.

Source: Rule 415, General Instructions of Form S-3,

Can an emerging growth company use a shelf

and General Instructions of Form F-3 provide shelf

registration statement?

eligibility requirements.

Yes, an emerging growth company may use a shelf
registration statement. For a limited period of time, it

How is the market value threshold of “primarily

may be both an emerging growth company and a WKSI.

eligible” issuers and “well-known seasoned issuers”

Smaller emerging growth companies may use a shelf


registration statement, subject to the one-third cap


described above. See “Can an emerging growth company

outstanding public float is computed by use of:

be a WKSI?” and “When can smaller public companies be



primarily eligible to register offerings of their securities on a






the price at which the common equity was last
sold; and

shelf registration statement?”


the average of the bid and asked prices of such

Can an issuer use any registration statement form to

common equity in the principal market for

conduct a shelf offering?

such common equity as of a particular date.
This calculation excludes common equity held by

No, issuers are restricted as to which form they may use

officers, directors and shareholders of the registrant

to conduct various shelf offerings.

who are deemed affiliates. The $75 million threshold

Only issuers that have timely filed their required

and WKSI status must be satisfied on any date within 60

periodic reports for the last 12 months may use a Form

days prior to the filing of the registration statement.

S-3 or Form F-3 to register securities. In the case of

Source: General Instructions I.B.1 and I.B.6 of Form

primary offerings by or on behalf of the issuer, if the

S-3, General Instructions I.B.I and I.B.5 of Form F-3.

issuer does not have a public float of at least $75 million
when it files the registration statement, the amount of

How is the aggregate market value of all securities sold

securities that may be sold in a 12-month period is

during any 12-month period calculated for purposes of

capped. See “What is ‘primarily eligible’?”

the one-third cap?

If an issuer has not been timely in its reporting for the

Companies whose public float does not exceed the $75

last 12 months, it may only register securities for resale

million market value threshold may use Form S-3 or

and shares underlying options on a Form S-1 or Form

Form F-3 to register primary offerings of their securities.

F-1 registration statement. An issuer with a public float

However, they may not sell more than the equivalent of

of less than $75 million also may use a Form S-1 or Form

one-third of their public float during any 12 consecutive

F-1 to register a primary offering of securities in excess


of the one-third cap imposed on these issuers by the


Under this test, the determination of the issuer’s

Because the calculation of the one-third limitation

public float will be made on any date in the 60 days

depends on the issuer’s public float at any point in time,

prior to the proposed sale. The aggregate market value

an issuer’s ability to use its shelf registration statement

of all securities sold during the 12-month period prior to

may increase or decrease during the life of the shelf.

the sale is calculated by using the price of all securities

Increases to an issuer’s public float will increase its

sold by the issuer under the applicable Form in the

“shelf capacity”; decreases to its public float will

previous 12 months, whether debt or equity, including

decrease its “shelf capacity.”

those to be sold in the proposed sale.

The one-third cap will be removed if a company’s

For securities convertible into or exercisable for equity

public float increases to $75 million after the effective

securities (“derivative securities”), issuers will calculate

date of the shelf registration statement. However, if the

the amount that they may sell in any 12-month period

public float of the company falls below $75 million at

by reference to the market value of the underlying

the time that its next annual report on Form 10-K (or

shares, as opposed to the market value of the derivative

Form 20-F) is filed, the cap will be reimposed.

securities. For example, if an issuer has nine million

Issuers that use Form S-3 or Form F-3 in reliance upon

shares outstanding, and its common stock trades at $10

these rules will need to set forth on the front cover of

per share, it may not offer in any 12-month period

the relevant prospectus supplement the amount of their

preferred stock that is convertible into more than three

public float and the amount of securities offered in

million of its common shares if the conversion price is

reliance on this rule.

also $10 per share. The one-third cap will not impact a

Although the one-third cap will limit actual sales,

holder’s ability to convert or exercise derivative

smaller reporting companies can register an amount of

securities once a derivative security has been properly

securities that exceeds this amount as of the filing date.

issued under the test, even if the issuer’s public float

Any unused amount may be “rolled over” into

decreases. A derivative security’s market value will be

subsequent shelf registration statements when the

included for purposes of calculating the one-third cap,

required filing fee of the new registration statement is

even if that derivative security is not exercisable for


more than one year.

Source: General Instruction I.B.6 of Form S-3, General

After all or any portion of the derivative securities are

Instruction I.B.5 of Form F-3, and Rule 401, SEC

exercised or converted, in order to determine the

Compliance and Disclosure Interpretations, Securities

amount of any securities that may be issued under the

Act Rules, Questions 116.24 (May 16, 2013).

one-third cap in addition to any of the derivative
securities that remain unexercised, the value of the

What is a “disguised primary offering”?

exercised or converted portion will be calculated by

When an issuer sells a disproportionately large (relative

multiplying the number of underlying shares issued by

to the issuer’s pre-transaction public float) amount of

the market price on the date of conversion.

securities in a secondary offering, the SEC takes the
view that the offering could in fact be a primary


offering, with the selling security holders acting as

What is an “ineligible issuer”?

“underwriters” that are selling their securities on the

An “ineligible issuer” will not qualify as a WKSI. See

issuer’s behalf. The SEC has pointed to several factors

“What is a ‘Well-Known Seasoned Issuer,’ or ‘WKSI’?” An

that should be assessed in making a determination as to

ineligible issuer is an issuer for which any of the

whether an offering is a primary offering or a secondary

following is true:

offering, including:


the issuer has not filed all reports required to


the amount of securities involved;

be filed during the preceding 12 months (or


how long the securities have been held;

any shorter period for which the issuer has


whether the investors are at market risk from

been required to file);

the time they purchased the securities;


the circumstances under which the securities

was, a “blank check company” or a shell

were acquired;

company or offered penny stock;

the relationship between the selling security






the issuer was the subject of a bankruptcy

within the past three years the issuer (or any

Exchange Act;

securities in excess of 33% of the issuer’s pre-transaction


misdemeanor under Section 15(b)(4)(b) of the

indicated that it will subject secondary offerings of



subsidiary) was convicted of any felony or

As a guidepost, and not a bright-line test, the SEC has



proceeding within the past three years;

whether it appears that a selling security
holder is acting as a conduit for the issuer.



commitment underwriting;

whether a selling security holder is in the
business of underwriting securities; and


the issuer is a limited partnership offering

holders and the issuer;

the issuer is, or during the past three years



within the past three years the issuer (or any

determination involves a case-by-case analysis of the

subsidiary) was the subject of any judicial or

facts and circumstances of each transaction.

administrative decree or order arising out of a





governmental anti-fraud action;


Interpretations, Securities Act Rules, Question 612.09

the issuer filed a registration statement that is

(Jan. 26, 2009), available at

the subject of any pending proceeding or

examination under Section 8 of the Securities



Act (which relates to misleading or incomplete

determining whether a secondary offering is a disguised

registration statements) or was the subject of

primary offering. See also “When a Primary is not a

any refusal order or stop order within the past

Primary” by Anna Pinedo and James Tanenbaum, first

three years; or





published in International Financial Law Review May



the issuer is the subject of any pending








proceeding under Section 8A of the Securities

dispositive: (1) who was responsible for the misconduct

Act in connection with an offering.

and the duration of the misconduct (including the level
of the employees involved and whether there were any

Source: Rule 405 of Regulation C.

“red flags” that were disregarded); (2) what remedial
Under what circumstances will the SEC grant a waiver

steps were taken by the issuer (including improvements

from ineligible issuer status?

in internal controls); and (3) what the impact of a denial

The SEC has the power under its rules to determine,

of the waiver request would be (including effects that

upon a showing of good cause, that it is not necessary

the issuer’s loss of WKSI status could have for the

under the circumstances for an issuer to be considered

market as a whole).

an ineligible issuer.

This authority was designed in

In April 2014, the SEC further clarified its guidance.

large measure for the benefit of financial holding

The April 2014 guidance indicates:

company issuers. These issuers often have one or more

• An issuer's burden to show good cause that a

subsidiaries, that, by virtue of their activities in the

waiver is justified would be significantly greater

securities business, often are subject to litigation or SEC

where there is a criminal conviction or a scienter-

actions relating to violations of the federal securities

based violation involving disclosure for which the

laws, and which often lead to settlements of the type

issuer or any of its subsidiaries was responsible.

contemplated by the ineligible issuer definition. This
• The SEC staff will consider the effects that the

provision enables issuers entering into such settlements







issuer’s loss of WKSI status could have for the


markets as a whole and the investing public, in

disqualifications at the time of the settlement.

light of the issuer’s significance to the markets and
In March 2014, the SEC’s Division of Corporate

its connectedness to other market participants;

Finance updated its prior guidance regarding requests

however, this guidance removes the March 2014

for waivers by WKSIs that would otherwise become

reference indicating that the SEC would consider

ineligible issuers under Rule 405. The revised guidance

“the issuer’s significance to the markets and its

outlines a more detailed framework that the SEC

connectedness to other market participants.”

generally will follow in considering whether to grant a
• Whether the issuer took appropriate remedial

waiver of ineligible issuer status.

According to this guidance, the SEC will consider the







nature of the violation or conviction, whether it
• Whether the misconduct was pervasive, and how

involved disclosure for which the issuer or its


subsidiaries was responsible or calls into question the






misconduct, for which a small number of non-

ability of the issuer to produce reliable disclosures, and

senior employees were responsible, would be more

whether the conduct involved a criminal conviction or

likely to result in a waiver.

scienter-based violation. The SEC will also consider the



• The impact on the issuer if the waiver request is

The SEC will also look to whether the

securities offered and sold under dividend
reinvestment and employee benefit plans;

impact on the issuer, and the resulting impairment


of its ability to raise capital, could also have an

securities underlying options, warrants, rights
and convertible securities;

adverse impact on the markets as a whole.
Source: Rule 405 of Regulation C and SEC Release No.


securities pledged as collateral;


depositary shares evidenced by American

33-8591 (July 19, 2005), Section III.D.3.b.; and Division of

Depositary Receipts;

Corporate Finance, Revised Statement on Well-Known


securities issued in business combinations;


mortgage related and other investment grade

Seasoned Issuer Waivers (April 2014), available at

asset-backed securities; and


offerings that commence promptly and are

Where can one find the determinations of the SEC as to

made on a continuous basis for more than 30

issuers that have been granted a waiver from ineligible


issuer status?
Can an issuer use a shelf registration statement for

The SEC posts to its website the waiver requests that are


granted, along with a copy of the initial request. See Division

Yes. All transactions registered on Form S-4 or Form

Exemptive Letters, Rule 405 – Determination regarding

F-4 are considered continuous offerings under Rule 415

ineligible issuer status, available at

(even though there is no Rule 415 box to check on the






cover of these Forms).

However, an automatically

effective shelf registration statement may not be used as
an acquisition shelf.
Common Uses for Shelf Registration


Form S-4’s adopting release (No. 33-6578,

April 23, 1985), states that all business combinations are
What types of offerings can be conducted on a shelf

considered Rule 415 offerings. See also SEC Compliance

registration statement?

and Disclosure Interpretations, Securities Act Rules,

Rule 415 lists eleven types of permitted shelf offerings,




resales by selling security holders;


immediate, delayed and continuous offerings







Can an issuer use a shelf registration statement for

by an issuer on Form S-3 or Form F-3,

future acquisitions?

including “at-the-market” offerings by the

Yes. An issuer can use a shelf registration statement for

issuer (see “What is an ‘at-the-market’ offering?”);

one or more acquisitions, even if the targets are
unknown at the time of filing.


An issuer also may

register securities for future issuance in connection with

In addition, if the issuer would be required to file

acquisitions on a delayed basis. These are known as

financial statements for a target under Regulation S-X

“acquisition shelves.”

due to the size of the acquisition, the issuer will have to
file a post-effective amendment to the Form S-4 or Form

Registering shares for future issuance in connection

F-4, rather than a prospectus supplement.

with acquisitions also allows the issuer flexibility to
complete numerous acquisitions that, individually,

Source: For more details concerning shelf acquisition

would not require registration, but may require

procedures, see the no-action letter Service Corporation

registration on a collective basis due to the SEC’s

International (October 31, 1985). Form limitations for

integration doctrine.

shelf acquisitions are derived from General Instruction
H to Form S-4, General Instruction III to Form S-1 and

An acquisition shelf must be filed on Form S-4, Form

General Instruction III to Form F-1.

F-4, Form S-1 or Form F-1. Form S-3 and Form F-3,
including the automatic shelf registration provisions for

What is an “at-the-market” offering?

WKSIs, are not available for registering securities to be

An at-the-market offering is an offering of securities

issued in business combination transactions because the

into an existing trading market for outstanding shares

securities must be offered for cash under those forms.

of the same class at other than a fixed price on, or

See “What is a ‘Well-Known Seasoned Issuer,’ or ‘WKSI’?”

through the facilities of, a national securities exchange,

Generally, an issuer would register a certain number

or to or through a market maker otherwise than on an

of securities for future issuance, and then use the base


prospectus when negotiating the acquisition. See “What
An example is an offering in which common stock is

is a ‘base’ or a ‘core’ prospectus?” The base prospectus

sold by an underwriter by means of ordinary brokerage

does not have to contain information about the specific

transactions (as opposed to a block transaction) on the

acquisition or the companies being acquired.

If an acquisition normally would require registration
Only primarily eligible issuers (i.e., issuers eligible to

by itself (for example, because there are a large number






register a primary offering on Form S-3 or Form F-3,


including issuers subject to the one-third cap) may

investors”), the issuer must update the Form S-4 or

register “at-the-market” offerings.

Form F-4 by post-effective amendment to reflect the

See “What is

‘primarily eligible’?” The SEC’s 2005 securities offering

acquisition prior to soliciting offerees; the issuer cannot

reform rule amendments (in Section V.B.1.b.iv(C))

use a prospectus supplement. See “What is a ‘prospectus

eliminated restrictions in Rule 415 that required

supplement’?” If a post-effective amendment is required,

involvement of underwriters and limited the amount of

no further acquisitions should be entered into based on

securities that could be sold in “at-the-market”

the registration statement before the post-effective

offerings. For additional information relating to at-the-

amendment is declared effective. See “When is a post-


effective amendment (as opposed to a prospectus supplement)


required to be filed?”










securities it is registering for “resale” prior to


the filing of the registration statement;

What is a “PIPE” transaction and how can shelf

that the company is eligible to use for a

registration statements be used for such an offering?

primary offering; and

The acronym “PIPE” stands for “private investment,


public equity.” A traditional PIPE transaction occurs


private transaction, and a condition to closing the

If these conditions are not met, the SEC’s position is

private transaction is the effectiveness of a shelf





in the prospectus, the investor(s) must be
identified as underwriter(s) as well as selling

when a company issues securities to investors in a


the registration statement must be on a form

that the company may register the securities for resale if


it is primarily eligible to use Form S-3 or Form F-3 and

transactions are different from “equity-line” offerings,

discloses in the prospectus issues relating to the

described below.

potential violation of Section 5 in connection with the
What is an “equity-line” offering?

private transaction.

Under an equity line of credit, the company enters into






an agency agreement with an investor, under which the

Interpretations, Securities Act Rules, Question 139.13

company has the right, during the term of the equity

and Question 139.14 (May 16, 2013 and November 26,

line and subject to certain conditions, to put its

2008, respectively), available at

securities to the investor.

Some equity lines of credit are completed using a shelf
registration statement and others are completed as

What is an “unallocated” shelf registration statement?

private placements with an obligation to register the

An unallocated shelf registration statement registers

resale of the securities sold under the equity line. In the

only a dollar amount of various classes of securities in

latter case, because of the delayed nature of the offering,

an offering, without identifying the specific dollar

and because the investor is not “at investment risk” for

amount registered for each class of securities. This is

the securities when the resale registration statement is

also known as a “kitchen sink” or “universal”

filed, the SEC considers this type of registration to be an

registration statement. Only issuers and their affiliates

indirect primary offering. In these situations, the SEC

that are primarily eligible to use Form S-3 or Form F-3

will allow the company to register the “resale” of the

may file an unallocated shelf registration statement.

securities before exercising the “put” only if the

In unallocated shelf registration statements, all that is

transactions satisfy the following conditions:

required to be disclosed is the types of securities that

the company must have “completed” the

may be sold. The specific type of security and amount

private transaction with respect to all of the

to be sold is disclosed at the time of a takedown in a
prospectus supplement.


See “Can a shelf registration

statement be converted into an unallocated shelf registration

effective” as to such new securities, as that term is used


in Trust Indenture Act Section 309(a)(1). In this case,

Source: SEC Release No. 33-6964 (October 22, 1992)

the indenture will be required to be filed as an exhibit to

adopted the unallocated shelf procedure. See also SEC

the registration statement at the time that the post-

Release No. 33-8591 (July 19, 2005), Section V.B.2.b.ii(A).

effective amendment becomes effective.
Source: SEC Release No. 33-6964 (October 22, 1992).

Can a shelf registration statement be converted into an

See also SEC Release No. 33-8591 (July 19, 2005), footnote

unallocated shelf registration statement?







Yes, a shelf registration statement that registers a

Interpretations, Securities Act Rules, Questions 212.18

specific type of security or dollar amounts allocated

and 19 (Jan. 26, 2009), available at

among specific classes of securities generally may be

amended by post-effective amendment to become an

ules-interps.htm; and SEC Compliance and Disclosure

unallocated shelf registration statement as long as no

Interpretations, Trust Indenture Act of 1939, Question

new classes of securities are added. In addition, WKSIs

201.02 (March 30, 2007), available at

may add new classes of securities by post-effective




See “What is an ‘unallocated’ shelf

registration statement?” and “What are the benefits of
May an issuer simultaneously engage in more than one

qualifying as a well-known seasoned issuer?”

“takedown” off an unallocated shelf registration

The Trust Indenture Act of 1939 prevents issuers from


issuing debt securities under a shelf registration
statement that were not included as one of the types of

Yes. For example, an issuer could simultaneously offer

securities described in the unallocated registration

shares of common stock and a class of debt securities

statement. Specifically, the Trust Indenture Act requires

from the same shelf registration statement. In addition,

the indenture covering those securities to be qualified

if the issuer filed a shelf registration statement on Form

when the registration statement becomes effective.

S-1 or Form F-1 and the base prospectus indicated that

Qualification cannot be accomplished via a post-

the issuer could use the prospectus to engage in

effective amendment.







However, a WKSI may add a







offerings, the issuer may engage in both at the same




time. See “Can an issuer use a shelf registration statement


for acquisitions?”

amendment that adds securities to a shelf registration
statement will be the time “when registration becomes


See, e.g., SEC Compliance and Disclosure

Interpretations, Securities Act Rules, Question 212.02

Note that a post-effective amendment can be on any form
then available to an issuer. Thus, an issuer with an allocated
shelf on Form S-1 could file a post-effective amendment on
Form S-3 to convert to an unallocated shelf registration
statement and to take advantage of forward incorporation by

(Jan. 26, 2009), available at


When is a post-effective amendment (as opposed to a

Filing Requirements for Shelf Registration

prospectus supplement) required to be filed?
Are there specific undertakings that an issuer must

The three instances when a post-effective amendment is

provide in connection with a shelf offering?

required instead of a prospectus supplement are when:

Yes. All issuers must include the undertakings set forth

there is a “fundamental change” (a greater
threshold than “material”) to the disclosure;

in Item 512(a)(1) of Regulation S-K. These undertakings

include the duty to update the prospectus under Section

disclosure in the registration statement must

10(a)(3) of the Securities Act to reflect fundamental

be updated for Securities Act Section 10(a)(3)

changes and changes in the plan of distribution. Issuers

purposes; and

also must undertake to deregister any unsold securities


at the end of the offering.

there is a change to the plan of distribution
(e.g., switching to an “at-the-market” offering
from a firm commitment offering).

The SEC amended Item 512(a) of Regulation S-K in
2005 to add new undertakings under which a registrant

However, the undertaking to file a post-effective

agrees that, consistent with new Rule 430B and Rule

amendment for those three instances will not apply if

430C, information in prospectus supplements is deemed

the registration statement is on Form S-3 or Form F-3,

part of and included in the applicable registration

and the required information is contained in an

statement as of specified dates (generally the earlier of

Exchange Act report (including a Current Report on

the date the prospectus supplement is first used or the

Form 8-K) that is incorporated by reference in the

date of the first contract of sale for securities in the

registration statement or is contained in a prospectus

offering described in the prospectus supplement). The

supplement filed under Rule 424(b).

new undertakings also include an agreement that, for

In a delayed primary shelf offering, the specific terms

liability purposes of the registrant and any underwriter,

of the offering (e.g., price, number of securities, etc.)

that date will be deemed the new effective date of the

usually are provided in a prospectus supplement filed

registration statement relating to the securities to which

under Rule 430A of Regulation C. Accordingly, a post-

that prospectus supplement relates.

effective amendment to the registration statement is not

Source: SEC Release No. 33-8591 (July 19, 2005),

needed. See “What is a ‘prospectus supplement’?”

Section V.B.1.b.vii; and SEC Division of Corporation




Source: See Item 512(a)(1) of Regulation S-K and SEC


Release No. 33-8591 (July 19, 2013), Section V.B.1.b.vii.

Questions and Answers (September 13, 2005), Question
3, available at

When must financial statements in a shelf registration

statement be updated?
The “going stale” rules under Regulation S-X are
applied as of the filing date of the shelf registration
statement and/or the effective date of the registration


statement. In addition, after nine months have passed

When must a shelf registration statement comply with

from the effective date of the registration statement, the

the financial statement requirements for subsidiary

audited balance sheet can be no more than 16 months

guarantors set forth in Rule 3-10 of Regulation S-X?

old. Financial statements typically are updated through

With respect to financial reporting requirements for

incorporation by reference of the issuer’s annual and

subsidiary guarantors, Rule 3-10 of Regulation S-X

quarterly reports filed under the Exchange Act.

relates to a variety of situations that involve a parent

Source: Section 10(a)(3) of the Securities Act and Rule







issuer/parent guarantor. Although Rule 3-10 is silent as
to its application in the case of a shelf registration

When must subsidiary guarantors be named in a shelf

statement, the SEC has provided informal guidance to

registration statement?

issuers and their auditors that a shelf registration

The federal securities laws treat subsidiary guarantees

statement must be in compliance with Rule 3-10 at the

as securities separate from the related debt securities.

time of effectiveness. The SEC’s position means that an

However, under a shelf registration statement, a

issuer contemplating the registration of guaranteed debt

separate prospectus and registration statement need not

would have several options:

be prepared for the subsidiary guarantees, and no

File Exchange Act reports with the footnote disclosure

additional SEC filing fees will apply.

required under Rule 3-10. This approach would require

An SEC practice rule prohibits additional subsidiary

the issuer to anticipate the likely subsidiary guarantors

guarantors for debt securities registered on a shelf

that would be named in an upcoming shelf registration

registration statement from being added to the effective

statement, and to prepare its footnote disclosure under


Rule 3-10 accordingly.



corporation is a WKSI.




See “What is a ‘Well-Known

File amended financial statements together with the shelf

Seasoned Issuer,’ or ‘WKSI’?” This means that, at the

filing. This approach could involve the filing of a Form

time of filing a shelf registration statement, the issuer

8-K that contained amended and restated financial

must identify each of the subsidiaries that will

statements that include the required footnote disclosure.

potentially guarantee any debt securities. Each of these

Parent companies with no independent assets or operations.

subsidiary guarantors must sign the registration

These companies could have the most flexibility. In lieu

statement, and be bound by the “undertakings” set

of financial statements with the required footnote

forth in the so-called “Part II pages” of the form.

disclosure, these companies could simply make the
Source: General Instruction I.D of Form S-3, General

following statement (if true) in the text of their

Instruction I.C of Form S-3, and SEC Release No.

“Description of Debt Securities”: “The parent company

33-8591 (July 19, 2005) at footnote 520 and related text.

has no independent assets or operations, the guarantees
will be full and unconditional and joint and several, and
any subsidiaries of the parent company other than the







statement of which this prospectus forms a part are

requirements after the filing of the shelf registration



See also Topic 9820 in the Division of

Corporation Finance Financial Reporting Manual,

If the situation changes at the time of a takedown (for
example, an offering involves different subsidiary

available at

guarantors than those contemplated by the existing

financial statements, or a parent corporation that


previously acted solely as a holding company acquires

Must a well-known seasoned issuer re-evaluate its

material assets or operations of its own), prior to

status as such?

effecting the offering, the issuer would need to file

Yes. A well-known seasoned issuer that has filed an

amended financials to be incorporated by reference in

automatic shelf registration statement must re-evaluate

the shelf registration statement, together with the

its WKSI status when it files each subsequent Form 10-K

required auditor’s consent letter filed as an exhibit.

in order to effect its Securities Act Section 10(a)(3)

Adding the amended information only to a prospectus

update. If it determines that it no longer qualifies as a

supplement would not be sufficient, as an issuer cannot

WKSI at the time it files its Form 10-K (or on the due

file an auditor’s consent as an exhibit to a prospectus

date of that annual report, if earlier), the issuer should



The financial reporting requirements described above






statement on the form that it is then eligible to use.

do not necessarily end at the time the shelf registration
statement is filed or a takedown completed.

An issuer that has an effective automatic shelf

This is

registration statement, but learns after the effective date

because each subsidiary guarantor becomes an SEC

that it has lost its status as a WKSI, may continue to use

registrant, required to file periodic reports for the first

that registration statement until the time of its Securities

year thereafter under Section 15(d) of the Exchange Act.

Act Section 10(a)(3) update.

As in the case of the Securities Act, separate reports are
not required for each subsidiary guarantor.








Rule 12h-5 under the Exchange Act provides that parent

Questions and Answers (November 30, 2005), Questions

company financials prepared in accordance with Rule

15 and 21, available at

3-10 of Regulation S-X will satisfy the requirement to

provide financial information as to the subsidiary


guarantors under the Exchange Act.


See also SEC Compliance and





Questions 198.03 and 198.06 (Jan. 26, 2009), available at

Under the SEC’s staff informal guidance since October

2007, this obligation would begin to apply following the


effectiveness of a shelf registration statement, even
though no securities with subsidiary guarantees are
actually outstanding. Accordingly, issuers registering
guaranteed debt need to be sensitive to the Rule 3-10


Is a legality opinion required to be pre-effectively filed

Frequent issuers using a medium-term note program

for a shelf registration statement relating to a delayed

registered on a shelf registration statement may find it


difficult or cumbersome to file an unqualified opinion

Yes. A registration statement under Rule 415 cannot be

by post-effective amendment or on a Form 8-K or 6-K

made effective without a legality opinion, even if no

for each shelf takedown. In 2011, the SEC issued Staff

takedown is currently contemplated, and even if the

Legal Bulletin No. 19, in which they provided for the

specific terms of the securities to be offered are not

filing of a “forward looking opinion” with the shelf

known at the time of filing.

registration statement for future takedowns, subject to
the requirements of the bulletin. For more information,

The issuer may file a signed opinion of counsel that

see “Frequently Asked Questions About Medium-Term

contains appropriate qualifications, subject to the

Note Programs — Effecting an MTN Offering – How do

understanding that an unqualified opinion will be filed

issuers satisfy their obligations to file legal opinions for

prior to the time any sales are made under the

an MTN offering?” at

registration statement.

Examples of acceptable assumptions that may be


made in the qualified opinion are:


the issuer’s board of directors will have taken




Interpretations, Securities Act Rules, Question 212.05

all actions, and passed all resolutions necessary

(Aug. 14, 2009), available at

to authorize the issuance and sale of the

securities; and


ules-interps.htm. See also the SEC’s Securities Offering

all regulatory approvals will have been

Reform Questions and Answers (November 30, 2005),


Question 20. Staff Legal Bulletin No. 19 may be found

If a WKSI amends its effective automatic registration

on the SEC’s website at:

statement to add a new class of securities, a legality

opinion (which may contain appropriate qualifications)
must be filed with the post-effective amendment.

When is a shelf offering exempt from FINRA filing
under the Corporate Financing Rule?

Once a takedown is planned, an unqualified opinion
must be filed either in a post-effective amendment (a


post-effective amendment solely to add exhibits is

(“FINRA”) Rule 5110, known as the Corporate

automatically effective upon filing per Rule 462(d)) or

Financing Rule, shelf offerings by an issuer that is

through incorporation by reference into the registration

eligible to use a Form S-3 or Form F-3 registration

statement by filing under cover of Form 8-K or Form

statement based on the eligibility requirements for those

6-K. See “What is ‘incorporation by reference’?” and “When

Forms that were in effect prior to October 21, 1992, are

should an indenture be qualified under the Trust Indenture

generally exempt from FINRA filing. The pre-October

Act in connection with a delayed offering of debt securities?”

21, 1992 eligibility requirements are (1) the issuer has a






public float of at least $150 million ($300 million for

If the terms of future debt offerings are not known at

issuers using Form F-3) and (2) the issuer has been a

the time of filing, the indenture that is filed pre-

reporting company under Section 13(a) or Section 15(d)


of the Exchange Act for at least 36 months.

description of the securities. The details of a particular






series to be offered (i.e., interest rate, term, etc.) may be

Shelf offerings also are generally exempt if the issuer

provided in a supplemental indenture at the time such

convertible debt with a term of issue of at least four

series is offered. A prospectus supplement may be used



to reflect the specific terms of the series in the

securities. A FINRA filing is required for each shelf

prospectus, and the supplemental indenture may be

takedown for an issuer that is unable to rely on these or

filed as an exhibit to a Form 8-K in the same manner as

another exemption under the Corporate Financing Rule.

specified for underwriting agreements, or in an









automatically effective, exhibits-only, post-effective

Please note that if the shelf registration statement

amendment under Rule 462(d).

involves an underwriter that is affiliated with the issuer,
the shelf filing will be subject to filing with FINRA

A WKSI that files an automatic shelf registration may

under FINRA’s conflict of interest rules, unless FINRA’s

determine after effectiveness to add a new class of debt

exemption from such a filing applies, as set forth in

securities or guarantees of debt securities. In addition

FINRA Rule 5121(a)(1). This rule requires, among other

to filing a post-effective amendment to register the new

things, prominent disclosure of the conflict of interest.

class of debt securities or guarantees, the issuer also
needs to qualify all appropriate indentures under the

Source: FINRA Rules 5110(b)(7) and 5121.

Trust Indenture Act.

Under the amended automatic

When should an indenture be qualified under the Trust

shelf registration procedure, the Trust Indenture Act

Indenture Act in connection with a delayed offering of

qualification requirement will be satisfied for those new

debt securities?


Under the Trust Indenture Act, the indenture must be

indentures in the registration statement at the time the

“qualified under the statute.” An indenture covering


securities to be issued in a shelf registration statement

automatically effective.

must be filed with the registration statement prior to

















effectiveness because the Trust Indenture Act does not

Interpretations, Securities Act Rules, Questions 212.18

provide for an indenture to be qualified by post-

and 19 (Jan. 26, 2009), available at

effective amendment. The shelf registration statement

must include a form, usually a Form T-1, and must


describe certain key provisions of the indenture.


Disclosure Interpretations, Trust Indenture Act of 1939,

Form T-1 sets forth information enabling the SEC to

Questions 103.01 and 109.01 (Mar. 30, 2007), available at

determine whether the designated trustee is eligible to

act under the standards of the Trust Indenture Act.







p.htm and SEC Release No. 33-8591 (July 19, 2005),

Limitations on Shelf Registration

footnote 527.
For how long can a shelf registration statement be

When is the trustee designated if the identity of the


trustee is not known at the time the registration

Prior to the 2005 securities offering reform rule

statement is filed?

amendments, offerings under Rule 415(a)(i), (viii), (ix)

At the time that an issuer files a shelf registration

and (x) were unlimited in time.

statement, it may not know who will serve as trustee.

A shelf registration

statement did not have an “expiration date.” However,

Accordingly, Section 305(b)(2) of the Trust Indenture

the amount of securities that could be registered was

Act permits the trustee to be designated on a delayed

limited to an amount that, at the time the registration

basis. In that case, for an issuer that is not a WKSI, the

statement became effective, was reasonably expected to

Form T-1 would be filed with the SEC just prior to the

be offered and sold within two years from the initial

applicable takedown.

effective date.
If an issuer has completed its use of a shelf registration

The 2005 amendments provide that offerings under

statement, and securities remain unsold, what should

Rule 415(a)(1)(x) and continuous offerings under Rule

be done?

415(a)(1)(ix) that are registered on Form S-3 or Form F-3

If securities remain unsold, the issuer can do one of two

are not subject to the two-year limitation on the amount

things. First, the issuer could deregister the securities

of securities that can be registered, but also provide that

by filing a post-effective amendment with the SEC. The

a shelf registration statement can only be used for three

post-effective amendment is simple. It should consist

years (subject to a limited extension) after its initial


effective date.

registration statements must be filed every three years,


a registration statement cover page; and


an additional page indicating that the offering

with unsold securities and fees paid under an
“expiring” registration statement rolled over to the new

has been terminated and listing the number or

registration statement where it relates to:

amount of securities remaining unsold.


In the alternative, if the remaining securities are not

offerings by WKSIs on an automatic shelf
registration; or

deregistered, the issuer may “carry forward” these

securities, and the related registration fee, to a later

offerings described in Rule 415(a)(1)(vii), (ix) or

Securities Act filing.

Under the current rules, new shelf

The three-year time limitation was adopted because

Item 512(a)(3) of Regulation S-K and SEC

the SEC believes that the precise contents of shelf

ability to “carry forward” shares to a later registration

registration statements may become difficult to identify

statement is based on Rule 429 of Regulation C. See also

over time (since many different documents may be

“For how long can a shelf offering be used?”

incorporated by reference) and that markets will benefit

Release 33-7943 (January 26, 2001), footnote 68.







Prior to the effectiveness of the new shelf registration

requirement. The two-year limitation on the amount of

statement, the issuer can amend it to include any

securities that may be registered continues to apply to

securities remaining unsold from the old registration








The SEC filing fees attributable to those

415(a)(i)(viii) and continuous offerings under Rule

securities may be rolled over to the new registration

415(a)(i) and (ix) that are not registered on Form S-3 or


Form F-3.

under the old registration statement prior to the end of
the three-year period may continue on the old

Some other types of shelf registration statements are

registration statement until the effective date of the new

not subject to the three-year limitation, including:

registration statement if they are permitted to be made

registration statements to be used only for

under the new registration statement.

secondary offerings by selling security holders;

For WKSIs, as long as the issuer remains a WKSI, the


In addition, continuous offerings begun

new shelf registration statement will be effective

acquisition shelf registration statements.

immediately upon filing.

Source: Rule 415(a)(2) and (5) and SEC Release No.

The issuer may elect to

include on the new registration statement any unsold

33-8591 (July 19, 2005), Section V.B.1.b.iv.

securities covered by the old registration statement and
SEC filing fees paid attributable to those securities.

When does the three-year period begin for shelf
registration statements?

Source: Rule 415(a)(5) and SEC Release No. 33-8591
(July 19, 2005), Section V.B.1.b.iv.A and Section

The three-year period begins on the initial effective


date of the shelf registration statement.
Source: Rule 415(a)(5).

Is an issuer prevented from engaging in private
transactions during the pendency of a shelf registration

How can an issuer avoid a blackout period between

because of the doctrine of integration?

effective shelf registration statements?

It depends.

In the case of shelf registration statements other than
automatic shelf registration statements filed by WKSIs,

The answer is “generally no” for delayed offerings by

as long as the new shelf registration statement is filed

the issuer, unless the issuer is currently engaged in a

within three years of the original effective date of the

“takedown.” The answer is “maybe” if the issuer is

old registration statement, the issuer may continue to

engaged in a continuous offering.

offer and sell securities from the old registration

If, at the time of the private offering, the issuer is

statement for up to 180 days thereafter until the new

engaged in a “takedown” or offering securities in a

registration statement is declared effective. The 180-day

continuous offering, the five-factor integration test of

extension does not apply to automatic shelf registration

Rule 502(a) must be considered.

statements, which are effective immediately upon filing.

The acquisition shelf procedures are a means by which
integration can be avoided when completing multiple


privately negotiated acquisitions. See “Can an issuer use

Liability Issues for Shelf Registration

a shelf registration statement for acquisitions?”





Does Section 11 liability attach to a “takedown”?

Interpretations, Securities Act Rules, Question 212.06

The SEC’s position has always been that Section 11

(Jan. 26, 2009), available at

liability under the Securities Act attaches to the

prospectus supplement and incorporated Exchange Act

ules-interps.htm and Securities Act Release No. 8828

reports, but some commentators disagreed. However,

(August 3, 2007) confirm that the analysis of whether an

Rule 430B and Rule 430C, adopted in 2005, codify the

existing shelf offering precludes an issuer from

SEC’s position (which was generally taken by the courts

engaging in a concurrent private offering depends upon

in the case of takedowns off a shelf) that the information

the facts and circumstances.

contained in a prospectus supplement required to be
filed under Rule 424, whether in connection with a

Is “free writing” permissible in connection with a

takedown or otherwise, will be deemed part of and

delayed offering?










included in the registration statement containing the


base prospectus to which the prospectus supplement


relates. See “What is a ‘prospectus supplement’?”

prospectuses.” Generally, under Rule 433, free writing

Source: SEC Release No. 33-6714 (May 27, 1987); SEC

is permitted after a registration statement containing a
statutory prospectus has been filed.

Release No. 33-7606A (November 13, 1998), Section

For shelf

V.A.1.e.; Rule 430B; Rule 430C; and SEC Release 33-8591

registrations, the statutory prospectus contained in the

(July 19, 2005), Section V.B.1.b.ii. For an example of case

registration statement may be the base prospectus. See

law supporting the application of Section 11 to

“What is a ‘base’ or a ‘core’ prospectus?” Under Rule 163,

prospectus supplements filed in connection with

WKSIs also may use free writing prospectuses before a

“takedowns,” see Shaw v. Digital Equipment Corp., 82

registration statement is filed.

F.3d 1194 (1st Cir. 1996).

Rule 163, Rule 433, and SEC Release No.

33-8591 (July 19, 2005), Section III. D.3.b. Section 2(a)(10)

As of what dates are prospectus supplements deemed

of the Securities Act permits an issuer to issue written

included in the related registration statement? As to

materials relating to an offering that do not satisfy the

misstatements in a registration statement, what is the

requirements of Section 10(a) of the Securities Act, as

new effective date of such registration statement for

long as the non-conforming writings are accompanied










For prospectus supplements filed other than in

requirements of Section 10(a).








information contained therein will be deemed part of
and included in the registration statement as of the date
the prospectus supplement is first used. For prospectus


supplements in connection with takedowns, it is the

pertains to resale transactions “solely on behalf” of

earlier of the date the supplement is first used or the

selling security holders).

date and time of the first contract of sale for the

For example, a registered underwritten offering that


includes shares issued by the issuer and selling security

For Section 11 liability purposes only for the issuer

holders is exempt from Regulation FD, but a registered

and any underwriter in connection with a takedown,

underwritten offering of only selling security holders’

Rule 430B establishes a new effective date for the shelf

shares is subject to Regulation FD. Accordingly, in the

registration statement, which will be the date the

former case, an issuer free writing prospectus can be

prospectus supplement filed in connection with the

used without raising any Regulation FD concerns.

takedown is deemed part of and included in the

However, in the latter case, the use of an issuer free

relevant registration statement as described above. This

writing prospectus must be evaluated in the context of

rule establishes a new starting date for the applicable

Regulation FD. In adopting Regulation FD, the SEC

statute of limitations in the Securities Act and also


eliminates what may have been an unwarranted

statements involving only secondary sales are often

disparate treatment of underwriters and issuers if an

effective and used for a very long period, an issuer

issuer’s liability was assessed as of the earlier initial

could be effectively exempt from Regulation FD if the

effective date of the registration statement.

exclusion for registered offerings covered them.

Source: Rule 430B, Rule 430C, and SEC Release No.






Source: Regulation FD, Section 100(b)(2)(iv); SEC

33-8591 (July 19, 2005), Section V.B.1.b.iii.

Release No. 33-8591 (July 19, 2005), Section XII, Item 61;
and SEC Release No. 33-7881 (August 15, 2000), footnote

Are shelf offerings subject to Regulation FD?
In some cases.


Rule 100(b)(2)(iv) of Regulation FD

exempts offerings registered under the Securities Act,

Are underwriters expected to perform the same standard

except offerings registered under Rule 415(a)(i)-(vi). In

of due diligence for a shelf offering?

the case of an offering under Rule 415(a)(i)-(vi), the

Rule 176 under the Securities Act sets forth several

issuance and delivery of the registration statement, the


prospectus and certain free writing prospectuses will

conduct constitutes a reasonable investigation or

not be deemed a violation of Regulation FD.

reasonable grounds for belief under Section 11(c) of the





In general, ongoing and continuous offerings on

Securities Act, which defines the circumstances in

behalf of selling security holders will not be exempt

which an underwriter’s due diligence defense is

from Regulation FD.


However, continuous and

ongoing offerings on behalf of selling security holders

These circumstances include:

that also involve a registered offering, whether or not


underwritten, by the issuer for capital formation
purposes, will be exempt (because Rule 415(a)(i)


the type of issuer;


reasonable reliance on officers, employees and
others whose duties should have given them
knowledge of particular facts; and











particular person had any responsibility for the
facts or documents at the time of the filing
from which it was incorporated.







underwriters’ due diligence obligations with respect to







requirements for underwriters have not been diluted
even though there has been a significant decrease in the
amount of time underwriters have to perform due
diligence (largely because issuers can incorporate by
reference prior disclosure), underwriters lack input into
filings incorporated by reference, and the cast of
underwriters often changes from one shelf offering to
the next.
The SEC’s historical commentary with respect to Rule
176 states that the implementation of the rule did not
alter the fundamental nature of underwriters’ due
diligence obligations and that competitive timing and
pressures are not to be considered when evaluating the
reasonableness of an underwriters’ investigation.
Source: Rule 176. See also In re WorldCom, Inc. Securities
Litigation, 346 F. Supp. 2d 628 (S.D.N.Y. 2004).
By Lloyd S. Harmetz, Partner,
and Bradley Berman, Of Counsel,
Morrison & Foerster LLP

© Morrison & Foerster LLP, 2016



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