SEC Registration Statements have two principal parts:
- Part I is the prospectus, the legal offering or "selling" document. Your company - the "issuer" of the securities - must describe in the prospectus the important facts about its business operations, financial condition, and management. Everyone who buys the new issue, as well as anyone who is made an offer to purchase the securities, must have access to the prospectus.
- Part II contains additional information that the company does not have to deliver to investors. Anyone can see this information by requesting it from one of the SEC's public reference rooms or by looking it up on the SEC Web site.
The Basic Registration Form - Form S-1
All companies can use Form S-1 to register their securities offerings. You should not prepare a registration statement as a fill-in-the-blank form, like a tax return. It should be similar to a brochure, providing readable information. If you file this form, your company must describe each of the following in the prospectus:
- its business;
- its properties;
- its competition;
- the identity of its officers and directors and their compensation;
- material transactions between the company and its officers and directors;
- material legal proceedings involving the company or its officers and directors;
- the plan for distributing the securities; and the intended use of the proceeds of the offering.
Information about how to describe these items is set out in SEC rules. Registration statements also must include financial statements audited by an independent certified public accountant.
In addition to the information expressly required by the form, your company must also provide any other information that is necessary to make your disclosure complete and not misleading. You also must clearly describe any risks prominently in the prospectus, usually at the beginning. Examples of these risk factors are:
- lack of business operating history;
- adverse economic conditions in a particular industry;
- lack of a market for the securities offered; and
- dependence upon key personnel.
Alternative Registration Forms for Small Business Issuers
If your company qualifies as a "small business issuer," it can choose to file its registration statement using one of the simplified small business forms. A small business issuer is a United States or Canadian issuer:
- that had less than $25 million in revenues in its last fiscal year, and
- whose outstanding publicly-held stock is worth no more than $25 million.
Form SB-1 - To Raise $10 Million or Less: Small business issuers offering up to $10 million worth of securities in any 12-month period may use Form SB1. This form allows you to provide information in a question and answer format, similar to that used in Regulation A offerings, a type of exempt offering discussed on page 19. Unlike Regulation A filings, Form SB-1 requires audited financial statements.
Form SB-2 - To Raise Capital in Any Amount: If your company is a "small business issuer," it may register an unlimited dollar amount of securities using Form SB-2, and may use this form again and again so long as it satisfies the "small business issuer" definition. One advantage of Form SB-2 is that all its disclosure requirements are in Regulation S-B, a set of rules written in simple, non-legalistic terminology. Form SB-2 also permits the company to:
- Provide audited financial statements, prepared according to generally accepted accounting principles, for two fiscal years. In contrast, Form S-1 requires the issuer to provide audited financial statements, prepared according to more detailed SEC regulations, for three fiscal years; and
- Include less extensive narrative disclosure than Form S-1 requires, particularly in the description of your business, and executive compensation.
Staff Review of Registration Statements
SEC staff examines registration statements for compliance with disclosure requirements. If a filing appears incomplete or inaccurate, the staff usually informs the company by letter. The company may file correcting or clarifying amendments. Once the company has satisfied the disclosure requirements, the staff declares the registration statement effective. The company may then begin to sell its securities. The SEC can refuse or suspend the effectiveness of any registration statement if it concludes that the document is misleading, inaccurate, or incomplete.
Information courtesy of the Securities and Exchange Commission.
