Summary of Filing Fee Disclosure Format and Procedure Changes
In a bid to modernize the disclosure process, the Securities and Exchange Commission (SEC) recently implemented amendments to most forms and associated rules that included the payment of a fee – recognizing the need to speed up the validation time and enhance the accuracy of the filings, the SEC-mandated rules that are likely to directly affect shelf registration statement filings and prospectus filings.
SEC Fee Disclosure Format and Procedure Changes
As the rule went into effect from January 31, 2022, the following changes are to be noted and taken into account:
How to Disclose Information
Before the rule changes were implemented, filing fee-related information was required to be included on a prospectus filing’s cover page and/or as part of a registration statement.
The new rules mandate filing-fee related information to be presented in a table and included in a separate exhibit. Depending on the type of fee being paid, Item 14(b) of Form SF-3 presents a filer with three table choices. Each table carries data that was previously written as a paragraph on the cover of a prospectus or in Part II of a shelf registration statement. For instance, issuers will likely examine Table 1 and/or Table 2 if searching for Asset-backed securities and, if needed, document the carryover of securities or fee offsets tied to prior registration statements or previous filings.
Instructions on the nature of data to be provided in each table are specified. For instance, Table 1 is to be filled with “Fees to be paid” – the amount of money that is being transferred to the SEC in connection with filing a preliminary prospectus and using pay-as-you-go fees without anything to carry over from a prior shelf or registration statement. This table also has a provision to enter footnotes explaining certain key points, such as prior registration statement has been terminated or completed in order to carry over fees.
Where to Disclose Information
The next change is in the form of where information is to be displayed. Before the new changes were mandated, filing fee calculations were only shown either in a preliminary prospectus or in a registration statement. In line with the new rules, it has to be exhibited as a supplementary table and must include an updated maximum aggregate offering price and a disclaimer that the prospectus is a final prospectus for the related offering. In such a scenario, the issuer would document the amount of the securities sold.
Automation
To improve the accuracy and speed of the filings, the SEC is likely to rely on technological developments and automation. The reasoning behind insisting on the tabular representation of data is to automate the fee validation process. Any disparity in supporting information and data provided will render that filing invalid and suspend progress on the same.
Although the SEC has mentioned that the suspension will only be issued over time with a few months of learning being given to the new issuers, the rules have already started to see a widespread implementation, with many firms preferring to outsource this to experts.
Adopting Inline eXtensible Business Reporting Language
Another small but significant rule mentioned by the SEC is to inform Asset-backed issuers relying on Form SF-3 registration statements that they may now provide the filing fee tables using Inline eXtensible Business Reporting Language (XBRL). Although not mandatory currently, it is likely to be adopted as a rule in the near future with the digitization of the compliance and regulatory process.