Wednesday, February 9, 2011
The SEC voted unanimously to propose amendments to its rules that would remove credit ratings as one of the conditions for companies seeking to use short-form registration when registering securities for public sale. This marks the first in a series of upcoming SEC proposals in accordance with Dodd-Frank to remove references to credit ratings contained within existing Commission rules and replace them with alternative criteria.
The SEC’s proposal focuses on the use of credit ratings as a condition of so-called “short-form” eligibility. Companies that are “short-form eligible” also are allowed to register securities “on the shelf.” Shelf registration provides companies considerable flexibility in deciding when to access the public securities markets. The SEC’s proposed rule amendments would remove the NRSRO investment grade ratings condition included in SEC forms S-3 and F-3 for offerings of non-convertible securities, such as debt securities. Instead of ratings, the new short-form test for shelf-offering eligibility of companies would be tied to the amount of debt and other non-convertible securities they have sold in the past three years
Public comments on the SEC’s proposal should be submitted by March 28, 2011.