Form 1-Z: Exit Report
Under the final rules, all Regulation A issuers are required to file a notice under cover of Form 1-Z: Exit Report. Issuers conducting Tier 1 offerings will be required to file Part I of Form 1-Z that discloses information similar to the information previously required of issuers on Form 2-A.1069 Issuers conducting Tier 2 offerings will also be required to disclose the same information as issuers conducting Tier 1 offerings in Part I
1068 We have previously estimated that on average issuers file one current report on Form 8-K annually. Although we believe that the frequency of filing a Form 1-U will be considerably less than a Form 8-K, we are estimating that each issuer will be required to file one Form 1-U per year.
1069 See discussion in Section II.E.4.b. above.
of Form 1-Z, unless previously reported by the issuer on Form 1-K. Issuers conducting Tier 2 offerings will also be required to complete Part II of Form 1-Z in order to notify investors and the Commission that it will no longer file and provide annual reports pursuant to the requirements of Regulation A.1070 In Tier 2 offerings, an issuer’s obligations to file ongoing reports could be terminated at any time after completion of reporting for the fiscal year in which the offering statement was qualified, if the securities of each class to which the offering statement relates are held of record by fewer than 300 persons and offers and sales made in reliance on a qualified offering statement are not ongoing.1071 A manually signed copy of the Form 1-Z must be executed by the issuer and related signatories before or at the time of electronic filing, retained by the issuer for a period of five years and, if requested, produced to Commission.1072 We do not anticipate that the requirement to retain a manually signed copy of the Form 1-Z will affect an issuer’s compliance burden. We estimate that all of the issuers conducting
Tier 1 offerings (63 issuers, 250 total estimated issuers x 0.25) and 50 percent of issuers conducting Tier 2 offerings (94 issuers, 188 issuers with an ongoing reporting obligation x 0.50) will file a Form 1-Z in the second fiscal year after qualification of the offering statement (157 total issuers, 63 + 94). Although we believe that the vast majority of issuers subject to ongoing reporting under Regulation A will qualify for termination in the second fiscal year after qualification, we believe that only half or 50 percent of such issuers will actually choose to terminate their reporting obligations. An issuer may have many reasons for continuing its reporting obligations, such as a desire to facilitate
1070 See Rule 257(d).
1071 See Rule 252(f)(2).
1072 See Instruction to Form 1-Z and related discussion in Section II.E.4.b. above.
continued quotations in the over-the-counter (OTC) markets pursuant to revisions to Exchange Act Rule 15c2-11.1073
The Form 1-Z is similar to the Form 15 that issuers file to provide notice of termination of the registration of a class of securities under Exchange Act Section 12(g) or to provide notice of the suspension of the duty to file reports required by Exchange Act Sections 13(a) or 15(d).1074 Therefore, we estimate that compliance with the Form 1-Z will result in a similar burden as compliance with Form 15 that is, a burden of 1.50 hours per response. We estimate that 100% of the burden will be carried by the issuer internally. We estimate that compliance with Form 1-Z will result in a burden of 235.5 hours (157 issuers filing Form 1-Z x 1.50 hours/issuer) in the aggregate.
Form 8-A: Short Form Registration under the Exchange Act
Under the final rules, Regulation A issuers in Tier 2 offerings that elect to list securities offered pursuant to a qualified offering statement on a national securities exchange or that seek to register the class of securities offered pursuant to a qualified offering statement under the Exchange Act may do so by filing a Form 8-A (short form) registration statement with the Commission.1075 In such circumstances, an issuer will be required to comply with the form requirements of Form 8-A, which will generally allow issuers to incorporate by reference in the form information provided in the related
Form 1-A. While we do not know the exact number of issuers conducting Tier 2 offerings that will seek to register a class of securities under the Exchange Act at or near
1073 See discussion in Section II.E.2. above.
1074 We currently estimate the burden per response for preparing a Form 15 to be 1.50 hours. See
Form 15 at 1.
1075 See discussion in Section II.E.3. above.
the time of qualification of an offering statement, for purpose of this PRA analysis, we estimate 2 percent of all issuers filing a Form 1-A (or 5 issuers, 250 issuers x .02) will elect to register a class of securities under the Exchange Act and file a Form 8-A.
The final rules do not alter the burden hour per response of Form 8-A, but rather amend the existing Form 8-A to permit issuers in Tier 2 offerings to rely on the form.
Therefore, we estimate that compliance with the Form 8-A will not change as a result of the final rules, a burden of 3 hours per response.1076 We estimate that compliance with Form 8-A by issuers conducting a Tier 2 offering will result in a burden of 15 hours (5 issuers filing Form 8-A x 3 hours/issuer) in aggregate each year. We estimate that 100% of the burden will be carried by the issuer internally.
Form ID Filings
Under the final rules, an issuer will be required to file specified disclosures with the Commission on EDGAR.1077 We anticipate that many issuers relying on Regulation A for the first time will not have previously filed an electronic submission
with the Commission and so will need to file a Form ID. Form ID is the application form for access codes to permit filing on EDGAR. The final rules will not change the form itself, but we anticipate that the number of Form ID filings will increase due to an increase in issuers relying on Regulation A. For purposes of this PRA analysis, we estimate that 75 percent of the issuers who seek to offer and sell securities in reliance on amended Regulation A will not have previously filed an electronic submission with the Commission and will, therefore, be required to file a Form ID. As noted above, we
1076 17 CFR 249.208a.
1077 See Rules 252 and 257.
estimate that approximately 250 issuers per year will seek to offer and sell securities in reliance on Regulation A, which corresponds to approximately 188 additional Form ID filings. We estimate that 100% of the burden will be carried by the issuer internally. As a result, we estimate the additional annual burden will be approximately 28.20 hours (188 filings x 0.15 hours/filing).1078
Form F-X
Under the final rules, Canadian issuers are required to file a Form F-X, which furnishes to the Commission a written irrevocable consent and power of attorney at the time of filing the offering statement required by Rule 252. It is used to appoint an agent for service of process by Canadian issuers eligible to use Regulation A, issuers registering securities on Forms F-8 or F-10 under the Securities Act or filing periodic reports on Form 40-F under the Exchange Act, as well as in certain other circumstances.
The final rules will not change Form F-X itself, but will amend the rules to allow for the form to be filed electronically for offerings under Regulation A. Canadian companies are the only type of issuer that will be required to use this form under the final rules and we estimate that 100% of the burden will be carried by the issuer internally.
We estimate that approximately 2 percent of issuers utilizing amended Regulation A will be Canadian companies (or 5 responses, 250 issuers x 0.02) resulting in an annual burden of approximately 10 hours (2 hours per response x 5 responses).1079
1078 We currently estimate the burden associated with Form ID is 0.15 hours per response. See
Form ID at 1.
1079 In this regard, we note that no Canadian issuers filed a Form 1-A in 2013.
Collections of Information are Mandatory
The collections of information required under Rules 251 through 263 will be mandatory for all issuers seeking to rely on the Regulation A exemption. Responses on Form 1-A, Form 1-K, Form 1-SA, Form 1-U and Form 1-Z will not be kept confidential, although an issuer may request confidential treatment for non-publicly submitted offering materials, or any portion thereof, for which it believes an exemption from the FOIA exists.1080 It is anticipated that most material not subject to a confidential treatment request will be made public when the offering is qualified. A Form 1-A that is non-publicly submitted by an issuer and later abandoned before being publicly filed with the Commission and responses on Form ID will, however, remain non-public, absent a request for such information under the Freedom of Information Act.1081