SEC Approves 404 Delay for Smaller Companies--Addendum

By: Cydney Posner

With respect to the SEC's new SOX 404 exemptive order, please pay particular attention to the condition in paragraph (g), which provides that companies that rely on the exemption are deemed not to be current for S-3 purposes until they file the required 10-K amendment with the management report and auditor's attestation. Under the S-3 rules, companies with S-3 shelf registration statements need to reexamine their eligibility for S-3 each time there is a post-effective amendment under section 10(a)(3). Filing of a Form 10-K that is incorporated by reference into the S-3 is deemed to be such a post-effective amendment. As a result, companies required to rely on the exemptive order will temporarily lose eligibility and will need to take action to discontinue trading under the S-3 for the period of time between their 10-K filing under the exemption and the time they file the required amendment.

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