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If you're sailing your business toward an initial public offering (IPO), be aware of the Aircraft Carrier on the horizon. Launched by the U.S. Securities & Exchange Commission (SEC), the Aircraft Carrier is more than 500 pages of regulatory proposals aimed at modernizing the U.S. Securities Act of 1933.
In an effort to streamline and accelerate the registration process for public offerings, the SEC has proposed that:
1. restrictions be relaxed on communications sent out around the time of an offering;
2. investors be provided with all necessary information before they invest;
3. periodic reports be filed sooner and include more information (such as risk factors and additional relevant events); and
4. the five current registration forms be replaced with three.
What does this mean for your future IPO? Some of the recommendations may actually help entrepreneurs take their companies public. The relaxation in quiet-period restrictions, for example, and clearer guidelines on what can and can't be said will benefit entrepreneurs.
However, "on balance, from the perspective of a small company, the Aircraft Carrier proposals do more harm than good," contends Tod Ackerly, securities partner at the Washington, DC, law firm of Covington & Burling. The proposals "significantly increase the burden and potential liability of complying with the ongoing reporting requirements once a company is publicly held."
"The Aircraft Carrier [affects] the way people have been doing business for decades, so [there has been a lot of] public commentary," says the SEC's spokesman John Heine. In the wake of such input, Heine predicts the SEC staff will either "recommend adopting the proposals as a final rule or recommend that the proposals be amended for further public comment . . . there are too many variables to predict when it will be decided."
While Wall Street is reportedly bucking the changes (the investment community likes things the way they are), observers predict the SEC will reconsider, rewrite and resubmit the proposals with substantial changes.
Paul DeCeglie (MrWritePDC@aol.com) is a former staff reporter for Journal of Commerce and American Banker.
Covington & Burling, (202) 662-5296
U.S. Securities & Exchange Commission, (202) 942-0020