US SEC: companies already using new IPO on-ramp

Wed Apr 11, 2012 7:33pm EDT

* SEC says two companies already sent confidential docs

* Agency resorts to paper collection system for now

* Some sections of the new law go into effect right away

* Others require SEC to write new rules, seek comment

By Sarah N. Lynch

WASHINGTON, April 11 (Reuters) - Two companies have rushed to take advantage of a new law signed by President Barack Obama last week that aims to help streamline the initial public offering process by scaling back certain regulatory requirements.

Officials at the U.S. Securities and Exchange Commission said on Wednesday that the agency has already received two confidential draft registration statements.

They are the first time anyone has taken advantage of a provision in the law that lets companies keep such IPO-related filings private until just 21 days before they launch a road show and start soliciting interest from investors.

Both filings came in last Thursday, the same day Obama signed the bill into law.

Because the SEC has not yet set up a secure electronic filing system to protect confidentiality, it cannot use its standard electronic "Edgar" system and for now is forced to receive the documents either on a computer disk, or on paper.

"Although a world without Edgar is hard for many of us to imagine, we are up and running without Edgar in this process and we're back to paper," said Shelley Parratt, a deputy director in the SEC's Corporation Finance Division.

Parratt was among the SEC staff to speak about the bill in a one-hour briefing sponsored by the Practising Law Institute. "We prefer electronic. We are trying to avoid paper to the extent that we can."

The enactment of the start-ups bill, dubbed the JOBS Act, puts a whole new workload on the SEC even as the agency struggles to finalize many of the most substantive rules required by the 2010 Dodd-Frank Wall Street oversight law.

The JOBS Act aims to help make it easier and more affordable for smaller companies to go public when they are ready, and also to allow them to stay private longer if they feel the need to raise more capital before taking the plunge with an IPO.

SEC staff explained on Wednesday that some aspects of the bill take effect immediately, while others will not go into effect until the SEC is able to write the required rules to implement them.

Even with the self-executing provisions, however, the SEC still needs to be in a position to make sure everything runs smoothly.

"We had already been working flat out when the JOBS Act came up," said Meredith Cross, the director of corporation finance at the SEC. "Everyone has rallied. Now that Congress has passed the act, we are hard at work to get it implemented and make it a success."

Provisions already in effect include the so-called "IPO onramp" which allows smaller companies with annual revenues below $1 billion a five-year period to be exempt from certain regulations.

Other sections of the bill, however, require rulemaking first. One such section would establish a new regulatory framework to permit crowdfunding - a new capital-raising strategy in which investors can buy small takes in a private start-up over the Internet.

Also requiring rules is a provision that would lift a general advertising ban for private offerings as long as the offerings are made to certain accredited, more sophisticated investors.

The law gives the SEC 90 days to complete those rules.

On Wednesday, even before any rule proposals have been written, the SEC started soliciting comments from the public in advance just as the agency did when it faced the daunting task of writing nearly 100 new rules for Dodd-Frank.

The SEC also said it plans to publicly post meetings that agency officials have with any lobbyists or other interested players on the JOBS Act rules.

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