Federal Register, Volume 76, Number 149, August 3, 2011, Pages 46595-47054

Federal Register/Vol. 76, No. 149 /Wednesday, August 3, 2011 /Rules and Regulations

3 and Form F-3, other Commission
forms and rules relating to securities
offerings or issuer disclosures have
included requirements that likewise rely
on securities ratings.26 Among them are
Form F-9,27 Forms S-4 and F-4,28 and
Exchange Act Schedule 14A.29
2. The 2011 Proposing Release
In February 2011, we proposed to
revise the instructions to Form S-3 and
Form F-3 so that they would no longer
refer to security ratings by an NRSRO as
a transaction requirement to permit
issuers to register primary offerings of
non-convertible securities for cash.
Instead, we proposed that these forms
would be available to register primary
offerings of non-convertible securities if
the issuer has issued (as of a date within
60 days prior to the filing of the
registration statement) for cash at least
$1 billion in non-convertible securities,
other than common equity, in offerings
registered under the Securities Act, over
the prior three years. The proposals in
the 2011 Proposing Release were
substantially similar to amendments
that were proposed in 2008.30
3. Comments Received on the 2011
Proposing Release
We received 48 comment letters on
the 2011 Proposing Release.31 We
received nine comment letters from law
firms, nine comment letters from
associations or industry groups, 16
comment letters from utility companies,
one comment letter from an institutional
investor, two comment letters from
banks or bank holding companies and
11 comment letters from other
interested parties. The majority of the
comments focused on the proposals to
amend the eligibility criteria for Form
S-3 and Form F-3.
All of the commentators suggested
modifications to the proposals to amend
26 This release addresses rules and forms filed by
issuers, disclosures made by issuers and relevant
offering safe harbors under the Securities Act and
Schedule 14A under the Exchange Act. In separate
releases to be considered at a later date, the
Commission intends to adopt rules to address other
rules and forms that rely on an investment grade
ratings component.
27 See General Instruction I. of Form F-9.
28 See General Instruction B.1 of Form S-4 and
General Instruction B.1(a) of Form F-4.
29 See Note E and Item 13 of Schedule 14A.
30 See note 16 above.
31 The public comments we received on the 2011
Proposing Release are available on our Web site at
http://www.sec.gov/comments/s7-18-08/
s71808.shtml. In addition, to facilitate public input
on the Dodd-Frank Act, we provided a series of e-
mail links, organized by topic, on our Web site at
http://www.sec.gov/spotlight/
regreformcomments.shtml. The public comments
we received on Section 939A of the Dodd-Frank Act
are available on our Web site at http://www.sec.gov/

comments/df-title-ix/credit-rating-agencies/credit-
rating-agencies.shtml.

Form S-3 and Form F-3. Several
commentators believed that Congress
did not intend to change the pool of
issuers eligible to use Form S-3 and
Form F-3.32 Commentators generally
did not believe that the Form S-3 and
Form F-3 criteria needed to mirror the
standard for issuers to qualify as
WKSIs.33 In particular, commentators
noted that the proposed non-convertible
securities (other than common equity)
offering standard in the 2011 Proposing
Release was disproportionately higher
than the standard for primary offerings
on Form S-3 and Form F-3 by issuers
that have an aggregate market value of
$75 million or more for their voting and
non-voting common equity held by non-
affiliates.34 As a result, commentators
raised concerns that the proposals
would result in issuers who are
currently eligible to use Form S-3 or
Form F-3 losing that eligibility.35
In the 2011 Proposing Release, we
requested comment on whether we
should adopt rules that would keep the
pool of issuers currently eligible to use
Form S-3 and Form F-3 substantially
the same. Commentators suggested
several alternatives to the proposals in
the 2011 Proposing Release that may
preserve Form S-3 and Form F-3
eligibility for certain issuers. The
commentators generally believed that
the alternatives suggested would reserve
the use of Form S-3 and Form F-3 for
issuers that were widely followed in the
32 See letters from Securities Industry and
Financial Markets Association dated March 18,
1011 (SIFMA), SCANA Corporation dated March
28, 2011 (SCANA), Public Service Enterprise Group
dated March 28, 2011 (PSEG), Davis Polk &
Wardwell dated March 25, 2011 (Davis Polk),
Exelon Corporation dated March 28, 2011 (Exelon),
National Association of Real Estate Investment
Trusts dated March 28, 2011 (NAREIT), The
Financial Services Roundtable dated March 28,
2011 (Roundtable), Pepco Holdings, Inc. dated
March 28, 2011 (Pepco), Edison Electric Institute
dated March 28, 2011 (EEI) and Society of
Corporate Secretaries & Governance Professionals
dated April 1, 2011 (SCSGP).
33 See letters from SIFMA, Debevoise & Plimpton
LLP dated March 29, 2011 (Debevoise), Davis Polk,
Cleary, Exelon, NAREIT, SCSGP, McGuire Woods
LLP dated March 28, 2011 (McGuire Woods) and
UnionBanCal Corporation dated March 28, 2011
(UnionBanCal).
34 See letters from Davis Polk, Cleary, McGuire
Woods, Debevoise, UnionBanCal, NAREIT, SCSGP
and Exelon.
5 See letters from Boeing Capital Corporation
dated March 25, 2011 (BCC), EEI, Central Hudson
Gas & Electric Corporation dated March 16, 2011
(Central Hudson), PSEG, DTE Energy Company
dated March 28, 2011 (DTE), Alliant Energy
Corporation dated March 28, 2011 (Alliant), PNM
Resources, Inc. dated March 28, 2011 (PNM), The
Laclede Group, Inc. dated March 29, 2011 (Laclede),
Vectren Corporation dated April 5, 2011 (Vectren),
Sutherland Asbill & Brennan LLP dated March 28,
2011 (Sutherland), Roundtable, NAREIT, SCSGP

and American Council of Life Insurers dated May
11, 2011 (ACLI).

marketplace. Some of the alternatives
suggested by commentators include:
* Allowing either wholly or majority-
owned subsidiaries of WKSIs to use
Form S-3 or Form F-3; 36
* Basing the eligibility standard on
having $1 billion of non-convertible
securities other than common equity
outstanding; 37
* Lowering the $1 billion threshold
(commentators suggested various
thresholds with some as low as $250
million); 38
* Extending the measurement period
for the $1 billion threshold to five years
from three years; 39
* Allowing securities issued in
unregistered offerings of non-
convertible securities other than
common equity to be included in the
calculation of the $1 billion
threshold; 40
* Allowing non-convertible securities
other than common equity issued in
registered exchange offerings to be
included in the $1 billion calculation; 41
n Allowing U.S. dollar denominated
non-convertible securities other than
common equity issued in Regulation S
offerings to be included in the $1 billion
calculation; 42
* Adding an exception to allow
regulated operating subsidiaries of
utility companies to continue to use
Form S-3 and Form F-3; 43
* Adding an exception that would
allow insurance company issuers of
36 See letters from BCC, Exelon, EEI, SCSGP,
Southern, McGuire Woods, Dominion, Alliant,
Laclede, Debevoise, Madison Gas and Electric
Company dated March 29, 2011 (MGE),
UnionBanCal and Vectren.
37 See letters from SIFMA, BCC, Cleary, AEP,
SCANA, Oglethorpe, PSEG, EEI, DTE, UnionBanCal
and ACLI. The letter from Debevoise indicates that
they would support a debt outstanding test lower
than $1 billion, but they did not specify a threshold.
The letter from Sutherland supports using a non-
convertible security (other than common equity)
outstanding test with a $500 million threshold.
38 See letters from Davis Polk, Cleary Gottlieb
Steen & Hamilton LLP dated March 28, 2011
(Cleary), McGuire Woods, Debevoise, UnionBanCal,
NAREIT, SCSGP and Sutherland.
39 See letters from Cleary, McGuire Woods,
Dominion, PSEG and EEI.
40 See letters from Central Hudson, SIFMA, Davis
Polk, Exelon, NAREIT, McGuire Woods,
Oglethorpe, PSEG, Debevoise, UnionBanCal and
SCSGP.
41 See letters from SIFMA, Exelon, McGuire
Woods, Oglethorpe, PSEG, Debevoise and SCSGP.
42 See letter from Davis Polk.
43 See letters from Central Hudson, Entergy
Corporation dated March 21, 2011 (Entergy),
American Electric Power dated March 28, 2011
(AEP), SCANA, Pepco, Roundtable, The Southern
Company dated March 28, 2011 (Southern),
Dominion Resources, Inc. dated March 28, 2011
(Dominion), Wisconsin Energy Corporation dated
March 28, 2011 (Wisconsin Energy), Alliant, DTE,

EEI, Laclede, American Gas Association dated
March 28, 2011 (AGA) and Vectren.

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United States. Office of the Federal Register. Federal Register, Volume 76, Number 149, August 3, 2011, Pages 46595-47054. Washington D.C.. UNT Digital Library. http://digital.library.unt.edu/ark:/67531/metadc52326/. Accessed April 20, 2014.