SEC Plan Would Ease Limits on Securities Sales
A Securities and Exchange Commission advisory panel on Wednesday unveiled a proposal to ease regulatory restrictions on public companies raising capital through the sale of their securities.
The proposal would reduce the costs incurred by companies seeking investments from the public, improve investor protection and streamline the SEC’s securities registration process.
Chiefly, it would change the current process under the so-called shelf registration system from one in which each transaction or proposed securities sale is registered. Instead, the SEC would register the company.
In that way, the company would be registering all of its equities and could also choose to register all debt securities for future sale.
This would allow easy access to the market when a company needs to raise capital and eliminate uncertainties caused by a waiting period, as is currently the case when the SEC’s permission is sought to sell securities.
The proposed system would also ease the need to seek capital from offshore sources or through private placements to skip the SEC’s registration requirements.
Once a company was registered and complied with disclosure requirements, all sales of its securities included in its registration would be freely tradable. Protection to investors under the current registration system would remain unchanged.
The proposed system would not apply to initial public offerings, large restructurings and certain complex securities.
SEC Commissioner Steven Wallman, chairman of the advisory committee on capital formation, said the proposal converts the current “stop-and-go” system into a continuous “pay-as-you-go” process.
To test whether the proposal is workable, Wallman said, the panel, which includes academics and business leaders, recommended that the SEC adopt a voluntary pilot program open to larger and more seasoned public companies.
Companies with at least two years of reporting history with the SEC and listed on an exchange or Nasdaq may also become part of the program.
SEC Chairman Arthur Levitt said the commission will study the proposal and initiate public dialogue on the matter.
Some of the proposal’s features:
* Most routine sales and resales of a company’s securities could be done rapidly without any additional SEC review before the sale, on the condition the company files all corporate information required with the agency.
* Filing fees would be paid when a company sold its securities, not when it filed a registration statement, as currently required.
* Issuers routinely selling securities would be allowed to issue shorter prospectuses in plain English explaining the nature of the transaction and the targeted investors, as long as other disclosure documents were filed with the SEC.
