On April 11, 2012, the SEC issued guidance, in the form of Frequently Asked Questions (FAQs), on the implementation of changes to Securities Exchange Act of 1934 (Exchange Act) registration and deregistration standards as a result of the passage of the Jumpstart Our Business Startups (JOBS) Act. We recently described the changes to the federal securities laws effected by the passage of the JOBS Act in our Alert issued on April 5, 2012.

As described in our Alert, the JOBS Act raised the threshold for the number of holders of record that trigger registration under Section 12(g) of Exchange Act (and the corresponding requirement to become a public reporting company) from 500 or more persons to either 2,000 or more persons or 500 or more persons who are not accredited investors. For bank holding companies, the registration threshold has been increased to 2,000 or more holders of record. The JOBS Act changed the way the number of record holders is calculated by permitting exclusion of employees who acquire their shares through an employee compensation plan that is exempt from the registration requirements of the Securities Act of 1933. The JOBS Act also amended the Exchange Act to permit bank holding companies to terminate registration under the Exchange Act (and suspend its obligation to file annual and quarterly reports) once it has fewer than 1,200 holders of record. The standards for a company to terminate registration or suspend reporting obligations under the Exchange Act were not changed for other issuers.

Registration
If an issuer, including a bank holding company, triggered a Section 12(g) registration obligation with respect to a class of equity security as of a fiscal year-end before April 5, 2012 but would not trigger such obligation under the amended holders of record threshold contained in the JOBS Act, the SEC FAQs clarify that it will implement the JOBS Act as follows:

  • If the issuer has not yet registered that class of equity security under Section 12(g), then the issuer is no longer subject to a Section 12(g) registration obligation with respect to that class.
  • If the issuer has filed an Exchange Act registration statement and the registration statement is not yet effective, then the issuer may withdraw the registration statement.
  • If the issuer has registered a class of equity security under Section 12(g), it would need to continue that registration unless it is eligible to deregister under Section 12(g) or current rules.

The SEC also advised that an issuer (including a bank holding company) now may exclude from the calculation of holders of record persons who received securities pursuant to an employee compensation plan in transactions exempted from the registration requirements of Section 5 of the Securities Act of 1933, regardless of whether the person is a current employee of the issuer, notwithstanding that the SEC has not yet issued rules revising its definition of “held of record.”

Deregistration
The SEC’s FAQs make clear that the new, higher deregistration threshold for bank holding companies is effective immediately. The SEC advised that if a class of equity security of a bank holding company is held of record by less than 1,200 persons, the bank holding company may file a Form 15 to terminate the Section 12(g) registration of that class effective 90 days after filing. Because Form 15 hasn’t been revised to reflect the new deregistration threshold, a bank holding company should include an explanatory note in its Form 15 indicating that it is relying on revised Exchange Act Section 12(g)(4) to terminate its duty to file reports with respect to that class of equity security.

Separate from the public reporting requirements under Section 12(g) that apply based on the number of record holders of an issuer, when an issuer has a registration statement under the Securities Act of 1933 that has become effective, Section 15(d) of the Exchange Act requires the issuer to file quarterly and annual reports with respect to each class of securities covered by the registration statement. The SEC’s FAQs makes clear that the new, higher deregistration threshold also applies to suspension of reporting obligations under Section 15(d) of the Exchange Act, which is effective immediately upon filing.

Because the regulations regarding termination of registration are complex, and because many bank holding companies have outstanding registration statements on Form S-3 (shelf registrations) or Form S-8 (relating to employee benefit plans) that would require continued public reporting, bank holding companies should consult with counsel before terminating SEC registration.

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