Commission's Rules of Practice

<RULE> SECURITIES AND EXCHANGE COMMISSION <CFR>17 CFR Part 201</CFR> <DEPDOC>[Release No. 34-103980]</DEPDOC> <SUBJECT>Commission's Rules of Practice</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Securities and Exchange Commission. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Securities and Exchange Commission (“Commission”) is amending its Rules of Practice relating to procedures governing Commission review of staff actions made pursuant to delegated authority in connection with the determination of the effective dates of registration statements and post-effective amendments and the determination of the dates and times of qualification of an offering statement and post-qualification amendments under Regulation A. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective Date:</E> The final rules are effective September 19, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> John Fieldsend, Special Counsel, Division of Corporation Finance at 202-551-3430, or Anna Sandor, Senior Counsel, or Jaea F. Hahn, Senior Counsel, Division of Investment Management, at 202-551-6787, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> The Commission is adopting amendments to 17 CFR 201.431 (“Rule 431”). <HD SOURCE="HD1">I. Background</HD> Rule 431 of the Commission's Rules of Practice governs Commission review of actions made pursuant to delegated authority. provides that an action made pursuant to delegated authority shall have immediate effect and be deemed the action of the Commission. The rule also provides that, upon filing with the Commission of a notice of intention to petition for Commission review by an aggrieved person, or upon the vote of one member of the Commission that a matter be reviewed, an action made pursuant to delegated authority is automatically stayed until the Commission orders otherwise. The automatic stay does not apply to certain delegated actions specified in Rule 431(e). The Commission is now amending Rule 431(e) to add determinations of the effectiveness of a registration statement and post-effective amendments to a registration statement and determinations of the date and time of qualification of an offering statement and post-qualification amendments to an offering statement under Regulation A  <SU>3</SU> <FTREF/> to the list of actions for which there shall be no automatic stay of delegated action when the Commission reviews an action taken by delegated authority. <FTNT> <SU>1</SU>  Congress granted the Commission explicit authority to delegate certain functions to an individual commissioner, division directors and others in 1962. Public Law 87-592, 76 Stat. 394. This authority appears in sections 4A and 4B of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. 78d-1 and 78d-2. </FTNT> <FTNT> <SU>2</SU>  17 CFR 201.431(e). </FTNT> <FTNT> <SU>3</SU>  17 CFR 230.251 <E T="03">et seq.</E> </FTNT> Section 5 of the Securities Act of 1933 (“Securities Act”)  <SU>4</SU> <FTREF/> requires that a registration statement be in effect as to a security before an issuer may sell it. <SU>5</SU> <FTREF/> Under section 8(a) of the Securities Act (“section 8(a)”), <SU>6</SU> <FTREF/> a registration statement becomes effective automatically, without Commission or staff action, on the twentieth day after the registration statement is filed. Securities Act Rule 461  implementing section 8(a), provide for an alternative process that allows an issuer to delay automatic effectiveness of a Securities Act registration statement by including a “delaying amendment.”  <SU>9</SU> <FTREF/> <FTNT> <SU>4</SU>  15 U.S.C. 77a <E T="03">et seq.</E> </FTNT> <FTNT> <SU>5</SU>  15 U.S.C. 77e(a). </FTNT> <FTNT> <SU>6</SU>  15 U.S.C. 77h(a). </FTNT> <FTNT> <SU>7</SU>  17 CFR 230.461. </FTNT> <FTNT> <SU>8</SU>  17 CFR 230.473. </FTNT> <FTNT> <SU>9</SU>  Certain Securities Act registration statements become effective automatically upon filing with the Commission. <E T="03">See, e.g.,</E> 17 CFR 230.462. </FTNT> If an issuer includes a delaying amendment, effectiveness of the registration statement is delayed until: (i) the issuer files an amendment specifically stating that the registration statement shall become automatically effective in accordance with section 8(a) of the Securities Act, or (ii) such date as the Commission, acting pursuant to section 8(a), may determine (the “acceleration process”). <SU>10</SU> <FTREF/> To use the acceleration process, the issuer submits a request that the Commission accelerate the effective date of a registration statement pursuant to Securities Act Rule 461. Following the issuer's request for acceleration of effectiveness, the staff, acting pursuant to its delegated authority, will accelerate the effective date of the registration statement if it meets the criteria under section 8(a) and Securities Act Rule 461. <SU>11</SU> <FTREF/> <FTNT> <SU>10</SU>  17 CFR 230.473. </FTNT> <FTNT> <SU>11</SU>   <E T="03">See</E> 17 CFR 200.30-1(a)(5). In addition, the Director of the Division of Corporation Finance has delegated authority to determine to be effective applications for registration of securities on a national securities exchange prior to 30 days after receipt of a certification pursuant to section 12(d) of the Exchange Act (15 U.S.C. 78 <E T="03">l</E> (d)), and to accelerate at the request of the issuer the effective date of registration statements filed pursuant to section 12(g) of the Exchange Act (15 U.S.C. 78 <E T="03">l</E> (g)). <E T="03">See</E> 17 CFR 200.30-1(f)(1) and (f)(6). The Director of the Division of Investment Management possesses similar delegated authority to accelerate effectiveness of a registration statement under the Securities Act and the Exchange Act. <E T="03">See</E> 17 CFR 200.30-5. </FTNT> Regulation A provides an exemption from the Securities Act registration requirements for certain offers and sales of securities. <SU>12</SU> <FTREF/> Any issuer relying on this exemption must file an offering statement, <SU>13</SU> <FTREF/> and the Commission must qualify the offering statement before the issuer may sell securities. <SU>14</SU> <FTREF/> As with a registration statement, the Commission has delegated its authority to qualify an offering statement to the Division of Corporation Finance. <SU>15</SU> <FTREF/> <FTNT> <SU>12</SU>   <E T="03">See</E> Conditional Small Issues Exemption under the Securities Act of 1933 (Regulation A), Release No. 33-10591 (Dec. 19, 2018) [84 FR 520 (Jan. 31, 2019)]. </FTNT> <FTNT> <SU>13</SU>   <E T="03">See</E> 17 CFR 230.252. </FTNT> <FTNT> <SU>14</SU>  See 17 CFR 230.251(D)(2)(i)(A). </FTNT> <FTNT> <SU>15</SU>  See 17 CFR 200.30-1(b)(2). </FTNT> The ability to use the acceleration and qualification processes provides issuers flexibility to time their securities offerings based on prevailing market conditions and other transactional considerations. Once a registration statement is effective, market participants such as issuers, underwriters, and the exchange on which the securities will be listed, if any, can immediately engage in market activities related to sales in reliance on the effective registration statement, and often do. Similar considerations apply to sales made in reliance on Regulation A. We believe that when the acceleration and qualification processes are used, having a stay of the staff's determination go into effect automatically upon the filing of a notice of intent or petition for review, or upon the vote of one member of the Commission that a matter be reviewed, would be unnecessary and disruptive to the registration and qualification processes. <SU>16</SU> <FTREF/> Once the registration statement is effective, or the offering statement is qualified, the issuer, underwriters, if any, and other market participants may commence sales of the securities. As a result, an automatic stay of the staff's determination to accelerate effectiveness or to qualify an offering statement after sales have commenced would disrupt the sales process, and market participants could experience costs and uncertainty as a result. <FTNT> <SU>16</SU>  In adopting Rule 431(e), the Commission recognized that, in the context of a staff action pursuant to delegated authority to authorize a subpoena enforcement proceeding, an automatic stay would “disrupt judicial proceedings commenced on the basis of [the staff action]” and was unnecessary due to the presence of a federal judge overseeing the subpoena enforcement proceeding. <E T="03">Rules of Practice,</E> Release No. 34-5833 (June 9, 1995) [60 FR 32738, 32778 (June 23, 1995)]. </FTNT> For example, an offering delay or interruption due to an automatic stay could adversely impact the issuer's or selling securityholder's access to capital by delaying the ability to raise the necessary financing, as well as subjecting the issuer or selling securityholder to the risk of adverse changes in financing conditions during the automatic stay, which could result in a decrease in the amount of financing or a worsening of financing terms, or even jeopardize offering completion. An automatic stay implemented after an offering has commenced could similarly negatively affect the issuer or any selling securityholders and also create uncertainty for underwriters that have sold securities and investors that have purchased securities in the affected offering. Because of the potential disruptive consequences of an automatic stay in this scenario, we are amending Rule 431(e). Rather than automatically stay delegated actions to accelerate the effectiveness of registration statements ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 19k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━