Link to Key Takeaways Key Takeaways
- The SEC’s proposed rules would eliminate the $75 million public float requirement to register an unlimited amount of securities on Form S-3 and allow companies to use Form S-3 immediately upon registering a class of securities under the Exchange Act, significantly broadening access to expedited capital raising for smaller public companies.
- Two new issuer categories, Eligible Listed Issuers (ELI) and Seasoned Eligible Listed Issuers (SELI), would replace the existing WKSI framework.
- The proposal would preempt state blue sky registration requirements for all registered offerings by redefining “qualified purchaser” under Section 18(b)(3) of the Securities Act, providing significant cost savings for non-listed REITs and BDCs.
- Comments are due by July 27, 2026.
On May 19, the Securities and Exchange Commission (SEC) proposed a sweeping set of reforms designed to modernize and simplify the framework governing registered securities offerings by public companies. The proposal, if adopted, would represent one of the most significant overhauls of the capital formation process in decades, touching on shelf registration, eligibility requirements and communications rules, among other areas. The current system ties offering flexibility to registrant categories (such as “well-known seasoned issuer” or “WKSI” status) that depend on public float thresholds and reporting history, limiting access to efficient capital-raising tools for smaller companies. The proposed rules aim to expand access to capital raising by allowing a broader spectrum of public companies to conduct shelf offerings. In particular, the expansion of shelf registration eligibility would allow more companies (including many smaller reporting companies) to access capital markets on an expedited basis. This could reduce reliance on more costly and time-consuming traditional registered offerings and enhance companies’ ability to respond quickly to favorable market conditions.
In a statement accompanying the proposal, SEC Chairman Paul Atkins stated that the proposals “aim to extend that success to more companies – particularly small and mid-sized companies – and incentivize them to go and stay public.” Chairman Atkins also noted that the proposals “are among the first important steps toward transforming the SEC’s regulatory framework for public companies.”
Below is a summary of certain key elements of the proposed rules.
Link to How Would the Proposed Rules Expand Form S-3 Eligibility? How Would the Proposed Rules Expand Form S-3 Eligibility?
A core feature of the proposal is the significant expansion of eligibility for shelf registration on Form S-3. The proposed rules would eliminate all of Form S-3’s transaction requirements, including the $75 million public float requirement to register an unlimited amount of securities, and would amend the registrant requirements, including the requirement to have been an Exchange Act reporting company for at least 12 months, allowing companies to be eligible to use Form S-3 immediately upon registering a class of securities under the Exchange Act. Issuers would still have to be current and timely with their Exchange Act reporting obligations to use Form S-3. Additionally, Form S-3 cannot be used by certain “ineligible issuers,” foreign private issuers (FPIs), and other prohibited issuers.
Ineligible issuers include the following three categories of issuers, proposed to be called BSP issuers, which are or during the past three years have been:
- Blank check companies
- Shell companies (excluding SPACs)
- Penny stock issuers
Further, ineligible issuers also include issuers that in the past three years (or any subsidiary of such issuer) have been convicted of certain felonies or misdemeanors, are subject to certain judicial or administrative orders, have pending proceedings or examinations or stop orders under section 8 of the Securities Act related to filed registration statements or pending proceedings under section 8A of the Securities Act related to offerings. Additionally, FPIs would be explicitly prohibited from the use of Form S-3 (and also Form S-1) and required to use Form F-3, which is not currently proposed to be similarly revised, irrespective of whether the FPIs file domestic Exchange Act reports.
Link to What Late Filing Relief Is Available Under the Proposed Rules? What Late Filing Relief Is Available Under the Proposed Rules?
Further, the proposed rules provide relief for certain untimely filings. Specifically, an issuer can remain S-3 eligible despite an untimely filing having been made during the applicable lookback period if the filing was made within seven calendar days of the filing’s original due date and the issuer has made only one untimely filing during the relevant lookback period.
Link to What Are the New Issuer Categories Replacing WKSI Status? (ELI and SELI Explained) What Are the New Issuer Categories Replacing WKSI Status? (ELI and SELI Explained)
The proposed rules would create new categories of domestic issuers to replace the current three categories (unseasoned issuers, seasoned issuers and WKSIs). First, Eligible Listed Issuers (ELI), would be issuers that meet the Form S-3 proposed registrant requirements (as discussed above) and have at least one class of common equity securities listed on a national securities exchange. Next, Seasoned Eligible Listed Issuers (SELI) would be ELIs that have been subject to Exchange Act reporting requirements for at least 12 calendar months. With these new categories, there would be three new tiers of issuers: Form S-3 eligible issuers, ELIs and SELIs. The determination dates for determining issuer status are consistent with those currently applied to WKSIs. Under the proposed rules, only SELIs would be eligible for automatic shelf registrations. The SEC estimates that approximately 74% of Exchange Act reporting issuers in 2024 would have qualified as SELIs, compared to approximately 36% that qualified as WKSIs.
Additionally, the proposed rules would redistribute the registration and communication benefits that WKSIs currently enjoy across the three tiers as follows:
- All Form S-3 eligible issuers would be able to rely on Rule 139 (research report exemption), Rule 430B(b) (omitting selling security holder identities in resale registration statements), and Rule 433 (prospectus not required to accompany or precede a free writing prospectus).
- ELIs would be able to rely on Rule 163 and 163A (pre-filing communications), Rule 164 (post-filing free writing prospectuses), Rule 413 (registering additional securities via post-effective amendment), Rule 430B(a) (omitting certain information from base prospectus), and Rules 456(b)/457(r) (pay-as-you-go filing fees).
- SELIs would be the only domestic issuers with eligibility to file automatic shelf registration statements under Rule 462.
Link to How Would the SEC’s Proposal Preempt State Blue Sky Laws for Registered Offerings? How Would the SEC’s Proposal Preempt State Blue Sky Laws for Registered Offerings?
The proposed rules define “qualified purchaser” under Section 18(b)(3) of the Securities Act to include any person to whom securities are offered or sold pursuant to a registered offering. This definition would make all securities offered in registered offerings “covered securities,” thus effectively preempting state securities law registration and qualification requirements for all registered offerings, including those of unlisted securities, which are not currently preempted. This would significantly reduce registration and blue sky compliance costs for non-listed real estate investment trusts (REITs) and business development companies (BDCs).
States would still retain powers under Section 18(c) of the Securities Act, which include having jurisdiction to investigate and bring enforcement actions for fraudulent, deceitful or unlawful conduct of brokers and dealers, requiring issuers to make certain notice filings and pay fees and having the power to suspend the offering or sale of securities in the state.
Link to What Changes Does the SEC Propose for Form S-1 Incorporation by Reference? What Changes Does the SEC Propose for Form S-1 Incorporation by Reference?
The proposed rules would expand incorporation by reference on Form S-1 by eliminating the requirement that an issuer must have filed a Form 10-K for its most recently completed fiscal year to use backwards incorporation by reference. It would also extend forward incorporation by reference to all issuers meeting Form S-1’s eligibility requirements, rather than limiting it to smaller reporting companies. These proposed rules are intended to reduce repetitive disclosures in Form S‑1 filings, preparation costs, the chance of inconsistencies between filings and the need for repeated updates to keep registration statements current. However, companies wanting to conduct at-the-market (“ATM”) or delayed shelf offerings would still need to qualify to use Form S‑3.
Link to How Would ATM Offering Eligibility Change Under the Proposed Rules? How Would ATM Offering Eligibility Change Under the Proposed Rules?
Given the expanded access to Form S-3, the proposed rules would limit eligibility to conduct ATM offerings by amending the definition of “trading market” to include only securities listed and traded on a national securities exchange or on markets designated by the SEC. The SEC notes that offerings that qualify for the OTCQX Best Market tier or OTCQB Venture Market tier of the OTC Link ATS would likely fall under the category of markets designated by the SEC.
Link to What Other Amendments Are Included in the Proposal? What Other Amendments Are Included in the Proposal?
Other amendments included in the proposed rules are as follows:
- BDCs and Closed-End Funds: The proposal would extend similar modifications to the registration and offering process for affected funds under the Securities Act, broadening their access to shelf offerings and enhanced registration and communication benefits in parity with operating companies. ELI-affected funds would qualify for Short-Form N-2 eligibility, and SELI-affected funds would qualify for automatic shelf registration. Unlisted affected funds would continue to rely on the existing Rule 486 framework.
- Registered Non-Variable Annuity Advertising: The proposed rules amend Rule 482 to permit broad-based advertising for registered non-variable annuities (including registered index-linked annuities and market value adjustment annuities), providing a consistent advertising framework for all registered non-variable annuities similar to what variable annuity issuers use today.
- Delaying Amendment Reform: The proposed rules would revise Rule 473 so that the effectiveness of a registration statement would be deemed delayed by default, unless the issuer affirmatively includes a legend stating the registration statement will become effective under section 8(a) of the Securities Act. This eliminates the risk of being prematurely subject to section 15(d) reporting obligations due to inadvertent omission of a delaying amendment.
- Age of Financial Statements: The proposed rules would amend Rules 3-01(c) and 8-08(b) of Regulation S-X to remove income-based conditions for receiving an extension to the grace period for audited financial statements, benefiting issuers that do not meet the income-related conditions but need to raise capital.
Link to When Will the SEC’s Registered Offering Reform Rules Take Effect? When Will the SEC’s Registered Offering Reform Rules Take Effect?
The proposing release includes numerous specific questions requesting public comment on the range of issues raised by the proposal. Comments on the proposal are due by July 27, 2026. While we cannot predict exactly when the final registered offering reform rules would be adopted, the rules could be adopted in the first half of 2027. We anticipate that the final rules will reflect the SEC’s responses to comments submitted by various market participants and other interested commentators during the comment period and may differ from the proposed rules outlined above.
This is an installment in a series of posts on this blog covering the SEC’s expected proposals to reform the public company reporting framework, consistent with its broader focus on reducing regulatory burdens for public companies. The registered offering reform proposal was announced on the same day as the SEC’s Filer Status Reform Proposal, as discussed in a Securities Law Exchange blog post (Simplifying the Public Company Framework: Understanding the SEC’s Filer Status Reform Proposal), which would simplify the filer status framework and extend disclosure scaling and other accommodations.
The registered offering reform proposal and the filer status proposal build on the semiannual reporting proposal issued on May 5, 2026, as discussed in a prior Securities Law Exchange post (Flexibility in Reporting Frequency: Understanding the SEC’s Semiannual Reporting Proposal), which would allow all public companies to voluntarily elect to file semiannual reports on a new Form 10-S in lieu of quarterly reports on Form 10-Q. These three proposals represent part of the SEC’s comprehensive effort to reform the public company reporting framework and reduce regulatory burdens for public companies. We will publish subsequent posts with details as additional proposals are announced or final rules are adopted by the SEC.
If you have any questions about the proposed rule or need assistance submitting comments, please contact the authors or your relationship partner at Bass, Berry & Sims.