On March 3, 2025, the Securities and Exchange Commission’s (SEC) Division of Corporation Finance announced significant enhancements to its confidential filing process for draft registration statements. These changes aim to facilitate capital formation while maintaining robust investor protections.

Evolution of Confidential Submissions

The concept of confidential submissions was introduced under the Jumpstart Our Business Startups (JOBS) Act of 2012, allowing emerging growth companies (EGCs) to submit draft registration statements for initial public offerings (IPOs) without immediate public disclosure. This process enabled companies to address SEC comments and refine their filings away from public scrutiny, mitigating potential market or competitive disadvantages associated with premature information release.

In 2017, the SEC expanded this accommodation to all issuers for IPOs and certain follow-on offerings within the first year after an IPO. This expansion allowed companies to defer public disclosure and potential market scrutiny during the SEC review process. However, limitations remained, particularly regarding the timeframe for confidential submissions and the types of transactions eligible for this process.

Key Enhancements to the Confidential Review Process

1. Removal of Time Constraints for Follow-On Offerings

Previously, the SEC limited the submission of draft registration statements under the Securities Act for nonpublic review to one year after an issuer’s IPO or initial Exchange Act Section 12(b) registration statement. Under the new policy, companies can now confidentially submit draft registration statements for follow-on offerings at any time, regardless of how much time has passed since their IPO or initial registration. This change provides companies with greater flexibility in planning subsequent capital raises without the pressure of a specific timeframe.

2. Inclusion of Shelf Registration Statements and Mergers & Acquisitions (M&A)

The SEC has broadened the scope of confidential submissions to include shelf registration statements on Forms S-3 and F-3, as well as registration statements on Forms S-4 and F-4 for business combinations and exchange offers. This expansion significantly increases the number of registration statements eligible for confidential review, allowing companies to strategize and execute complex transactions with greater discretion.

3. Expansion to Section 12(g) Registrations

The SEC will now accept for nonpublic review draft registration statements related to the registration of a class of securities under Section 12(g) of the Exchange Act using Forms 10, 20-F, or 40-F. This development adds Section 12(g) registrations to the list of documents eligible for confidential submission, providing more companies with the opportunity to benefit from the nonpublic review process.

4. Accommodation for De-SPAC Transactions

Special Purpose Acquisition Companies (SPACs) engaging in de-SPAC transactions, where the SPAC is the surviving entity, can now submit draft registration statements for nonpublic review, provided the target company also qualifies for confidential submission. This change facilitates a smoother transition for companies going public via the SPAC route, offering them the same confidentiality benefits as traditional IPOs.

5. Omission of Underwriter Information in Initial Submissions

Companies are now permitted to omit the names of underwriters from their initial draft registration statements. This allows issuers to commence the SEC review process earlier, even if underwriting arrangements are not yet finalized. Underwriter details must be included in subsequent submissions and public filings, ensuring transparency before the offering becomes effective.

Implications for Issuers

These enhancements are expected to provide issuers, particularly those without well-known seasoned issuer (WKSI) status, with increased flexibility in exploring and planning public offerings. By allowing confidential submissions beyond the previous 12-month limitation, companies can better strategize their capital-raising activities without immediate public exposure.

The inclusion of shelf offerings and M&A transactions under the confidential review process enables issuers to manage complex transactions more discreetly, reducing potential market speculation and volatility. Additionally, the ability to omit underwriter information in initial submissions provides companies with more time to finalize their underwriting syndicates without delaying the SEC review process.

Furthermore, the expansion to Section 12(g) registrations is particularly beneficial for foreign private issuers and companies transitioning to public status through registration of a class of securities. This inclusion allows these companies to benefit from the confidential review process while navigating the regulatory landscape.

Broader Market Impact

The SEC’s decision to broaden the confidential filing options aligns with global market trends. Other jurisdictions, such as Hong Kong and the European Union, have implemented similar measures to provide issuers with more flexibility in the public offering process. By adopting these enhancements, the SEC aims to maintain the competitiveness of U.S. capital markets and attract a diverse range of issuers.

For investors, the enhanced confidential review process maintains transparency and investor protection. While the initial stages of the review process are nonpublic, final registration statements and key information will still be disclosed before the offering becomes effective. This balance between confidentiality and transparency ensures that investors have access to critical information while protecting issuers from premature market reactions.

Practical Considerations for Companies

Companies considering the confidential review process should be aware of the procedural requirements and timelines associated with nonpublic submissions. Engaging experienced legal counsel and financial advisors is essential to navigating the SEC’s review process and addressing comments efficiently.

Additionally, issuers should carefully evaluate the timing of their confidential submissions and the strategic advantages of withholding certain information, such as underwriter details, until later stages of the review process. By leveraging the enhanced confidential filing options, companies can optimize their capital-raising strategies and minimize potential market disruptions.

Conclusion

The SEC’s expanded confidential filing options represent a significant shift toward accommodating the diverse needs of issuers in the capital markets. By broadening the scope of transactions eligible for nonpublic review and removing previous time constraints, the SEC aims to promote capital formation while maintaining essential investor protections. These changes offer companies greater flexibility and control over their public offering processes, aligning regulatory practices with the evolving dynamics of the financial markets. As the regulatory landscape continues to evolve, issuers should stay informed about SEC policies and leverage these enhancements to achieve their capital-raising objectives effectively.