Federal Register, Volume 76, Number 149, August 3, 2011, Pages 46595-47054 Page: 46,614

46614 Federal Register/Vol. 76, No. 149/Wednesday, August 3, 2011 /Rules and Regulations
Current Proposed Current Increase/ Increase/(De-
annual annual burdenrren (Decrease) Proposed Current pro-craser- Proposed pro-
responses responses hours in burden burden hours fessional costs fessional costs fessional costs
responses responses hours hours
(A) (B) (C) (D) (E) = C + D (F) (G) = F + G
Form S-1 ......... 768 764 186,687 (972) 185,715 $224,024,000 ($1,166,792) $222,857,208
Form S-3 ......... 2,065 2,069 243,927 472 244,399 292,711,500 566,996 293,278,496
Form F-1 ......... 42 41 18,975 (452) 18,523 22,757,400 (541,843) 22,215,557
Form F-3 ......... 106 107 4,426 42 4,468 5,310,600 50,100 5,360,700
Form F-10 ....... 75 81 469 36 505 562,500 45,000 607,500
Total .......... ..................................... (874) ..................... ........... (1,046,539) ........................

IV. Cost-Benefit Analysis
A. Amendments
As discussed above, we are adopting
rule amendments in light of Section
939A of the Dodd-Frank Act to
eliminate references to credit ratings in
our rules in order to reduce reliance on
credit ratings.124 Today's amendments
seek to replace rule and form
requirements of the Securities Act and
the Exchange Act that rely on security
ratings by NRSROs with alternative
requirements that do not rely on ratings.
The Commission is revising the
transaction eligibility requirements of
Forms S-3 and F-3 and other rules and
forms that refer to these eligibility
requirements. Currently, these forms
allow issuers who do not meet the
forms' other transaction eligibility
requirements to register primary
offerings of non-convertible securities
for cash if such securities are rated
investment grade by an NRSRO. The
eligibility standard of having an
investment grade rating has been used
to indicate whether an issuer is widely
followed in the marketplace. The
revised rules would replace this
transaction eligibility requirement with
a requirement that, for primary offerings
of non-convertible securities, other than
common equity, for cash, an issuer is
eligible if:
(i) The issuer has issued (as of a date
within 60 days prior to the filing of the
registration statement) at least $1 billion
in non-convertible securities, other than
common equity, in primary offerings for
cash, not exchange, registered under the
Securities Act, over the prior three
years; or
(ii) 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-convertible
securities, other than common equity,
issued in primary offerings for cash, not
124 See note 18 above and related text.

exchange, registered under the
Securities Act; or
(iii) The issuer is a wholly-owned
subsidiary of a WKSI as defined in Rule
405 under the Securities Act; or
(iv) The issuer is a majority-owned
operating partnership of a REIT that
qualifies as a WKSI; or
(v) The issuer discloses in the
registration statement that it has a
reasonable belief that it would have
been eligible to register the securities
offerings proposed to be registered
under such registration statement
pursuant to General Instruction I.B.2 of
Form S-3 or Form F-3 in existence
prior to the new rules, discloses the
basis for such belief, and files the final
prospectus for any such offering on or
before the date that is three years from
the effective date of the amendments.
We are making conforming revisions to
Form S-4, Form F-4 and Schedule 14A.
We are also revising Rules 138, 139, and
168 under the Securities Act, which
address certain communications by
analysts and issuers, to be consistent
with the revisions to Form S-3 and
Form F-3. We are also removing Rule
134(a)(17) so that disclosure of credit
ratings information is no longer covered
by the safe harbor that deems certain
communications not to be a prospectus
or a free writing prospectus. Finally, we
are rescinding Form F-9.
We are sensitive to the costs and
benefits imposed by our rules. The
discussion below focuses on the costs
and benefits of the amendments we are
making to implement the Dodd-Frank
Act within our discretion under that
Act, rather than the costs and benefits
of the Dodd-Frank Act itself. The two
types of costs and benefits may not be
entirely separable to the extent that our
discretion is exercised to realize the
benefits intended by the Dodd-Frank
B. Benefits
As we stated in the 2011 Proposing
Release, we believe that having issued

$1 billion of registered non-convertible
securities over the prior three years
would generally correspond with a wide
following in the marketplace.125 As
described above, the amendments we
are adopting today would allow
additional issuers to remain eligible to
use Form S-3 and Form F-3 based on
a variety of criteria. The amendments
would replace the investment grade
criteria for eligibility to register offerings
of non-convertible securities on Form
S-3 or Form F-3. The criteria we are
adopting today reserves the use of Form
S-3 and Form F-3 for widely followed
issuers while allowing a greater number
of issuers to remain eligible to use those
forms while also allowing some widely
followed issuers to become newly
eligible to use the forms.
Issuers will no longer be required to
purchase ratings services in order to be
eligible for registering a transaction on
Form S-3 or Form F-3 and will benefit
from not having to incur the associated
costs of obtaining a credit rating to the
extent that they decide not to obtain a
credit rating for other uses. As a result,
these rules could lessen the bargaining
power rating agencies have with issuers
(to the extent such bargaining power
was artificially enhanced by the prior
requirements of such forms), potentially
lowering the cost of obtaining ratings. In
addition, the removal of a provision in
our forms requiring the use of a credit
rating to establish eligibility for a type
of registration generally reserved for
widely followed issuers obviates a
market externality that may have
constituted a barrier to entry to potential
competitors seeking to develop
alternative methods of communicating
creditworthiness to investors.
Accordingly, removing any perceived
imprimatur that may have resulted from
the reference to credit ratings in Form
S-3 and Form F-3 may increase
125 See 2011 Proposing Release, supra note 15, at
note 52.

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United States. Office of the Federal Register. Federal Register, Volume 76, Number 149, August 3, 2011, Pages 46595-47054, periodical, August 3, 2011; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc52326/m1/28/ocr/: accessed July 21, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.