United States: "Don't Be Afraid To Ask." SEC Staff Ready To Respond To Rule 3-13 Waiver Requests From Registrants

At the PLI Securities Regulation Institute, Mark Kronforst, the SEC's Division of Corporation Finance ("Corp Fin") Chief Accountant, reminded registrants that the SEC is willing to consider and process Rule 3-13 waiver requests.  Rule 3-13 of Regulation S-X ("Rule 3-13") allows the SEC, upon the informal request of a registrant and where consistent with investor protection, to permit the omission of financial statements otherwise required by the SEC rules or their substitution by financial statements of a comparable character.

In July this year, SEC Chair Jay Clayton stated that under Rule 3-13, issuers can request modifications to their financial reporting requirements in certain circumstances where disclosures are burdensome to generate, but may not be material to the total mix of information available to investors. Chair Clayton encouraged companies to consider whether such modifications may be helpful in connection with their capital raising activities and assured them that SEC staff is placing a high priority on responding with timely guidance.

Echoing Mr. Clayton's earlier remarks in July, Mr. Kronforst stated that Rule 3-13 is about facilitating capital information, and allows companies to be granted relief where consistent with investor protection.  Mr. Kronforst said the SEC staff is encouraging companies with reporting problems to come to them and that, under a pilot program, the SEC staff usually responds within five days from the date of request.  He also noted that the Corp Fin Financial Reporting Manual (the "Manual") has been updated to include the names of particular SEC staff members who are experts within particular fields pertinent to Rule 3-13 waivers.  He said requests for relief need not be sent by certified mail or via Fedex, instead they should be submitted by email to the email address link provided in the Manual.  Finally, Mr. Kronforst reminded everyone that Rule 3-13 has two parts; just as the SEC can grant waivers, it can also ask for additional financial information that has not been provided, where necessary or appropriate and consistent with investor protection.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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