FAST Relief for EGCs and Others: JOBS Act 2.0

A just-enacted 500-page transportation bill (the FAST Act) contains provisions nicknamed JOBS Act 2.0 (after the popular JOBS Act of 2012), which liberalized aspects of federal securities to encourage capital formation.

JOBS Act 2.0 implements the following further relief for reporting companies and investors in private companies:

• Effective immediately, reduces from 21 to 15 the number of days between public release by an emerging growth company of a confidential Securities Act draft registration statement submission and commencement of a road show.
• Continues to treat as an EGC an issuer that submits a DRS or files a registration statement and subsequently ceases to qualify until the earlier of the closing of the issuer’s IPO or the first anniversary of the date on which it ceased to qualify.
• Permits an EGC to exclude from a DRS or registration statement any financial statements that the EGC reasonably believes will not be required to be included at the time the registration statement is effective, as long as the EGC includes all required financial statements in the registration statement before distributing a preliminary prospectus. Depending on the timing of effectiveness relative to an EGC’s fiscal year, this change could significantly reduce the amount of work needed to prepare a DRS. This section of the FAST Act becomes effective Jan. 3, 2016.
• Permits “forward incorporation by reference” into registration statements on Form S-1 by smaller reporting companies, making it easier for  them to maintain effectiveness of their Form S-1 registration statements. SEC action required to implement this revision to Form S-1 must be taken by Jan. 18, 2016.
• Codifies, effective immediately, the so-called Section 4(a)(1 1/2) exemption for private resales of restricted securities to accredited investors.

The FAST Act also requires the SEC by June 1, 2016, to:

• Revise Regulation S-K — the combined reporting standards applicable to virtually all domestic SEC reporting companies to reduce cost and burdens on EGCs, smaller reporting companies and other smaller issuers, and to eliminate duplicative, overlapping, outdated or otherwise unnecessary provisions for which no further study (as described below) is necessary.
• Permit the annual report on Form 10-K to include a summary page, as long as each item on the summary page includes a cross-reference (by electronic link or otherwise) to the related discussion in the annual report.

The SEC is also required to conduct a “modernization” study of Regulation S-K in consultation with the Investor Advisory Committee and Advisory Committee on Small and Emerging Companies, to issue a corresponding report to Congress not later than Nov. 28, 2016, and to implement the recommendations of that report by Nov. 23, 2017.