SEC Proposes Reforms to Expand Issuers' Access to Public Markets

The Securities and Exchange Commission (Commission or SEC) has proposed expanding the eligibility of issuers to conduct shelf securities offerings. We describe the elements of the proposal and note that novel public offerings and a potential increase in the volume of shelf offerings will require issuers, underwriters, and regulators to consider how SEC Regulation M and FINRA Rule 5190 will apply in those contexts.

This Insight discusses the Commission's proposed amendments to significantly broaden the eligibility of issuers to use shelf registration. "Registered Offering Reform," Securities Act Release 33-11418 (May 19, 2026). As described by the Commission, the proposed reforms are a continuation of its efforts over the years to broaden the availability of short-form registration and shelf offerings to facilitate capital formation in the public securities markets. The Commission stated that public offerings of securities can benefit issuers and investors when compared with offerings in private markets. In the SEC's view, aspects of the existing public capital-raising framework require modernization and reform and certain Securities Act requirements, while originally adopted as investor protection measures, may now unnecessarily impede efficient capital formation in modern public markets.

A key theme of the proposed release is increased issuer "flexibility," as noted in the Fact Sheet accompanying the proposed reforms: "Taken together, the proposed amendments are intended to allow a greater number of issuers flexibility to access the public securities markets quickly by using Form S-3 while also ensuring that investors remain appropriately protected."

Form S-3 and Rule 415

The proposal would revise Form S-3's eligibility requirements to allow a broader range of issuers to conduct offerings using the form, including delayed primary offerings (i.e., "shelf offerings") and at-the-market (ATM) primary offerings.

Form S-3 is a short-form registration statement that eligible issuers can use to register offerings under the Securities Act of 1933 (Securities Act). The ability to use Form S-3 can confer significant advantages on eligible companies seeking to raise capital through the public markets. Notably, an issuer that is Form S-3 eligible for primary offerings is permitted to conduct shelf offerings—that is, offerings made on a delayed basis—under Rule 415.

Rule 415 under the Securities Act provides issuers with considerable flexibility to access the public securities markets from time to time in response to changes in the market and the issuer's capital needs. Issuers that are eligible to conduct shelf offerings under Rule 415 are permitted to register securities offerings prior to planning any specific offering and, once the registration statement is effective, issue securities in one or more offerings without waiting for further Commission or staff action.

By having more control over the timing of their offerings, eligible issuers can take advantage of desirable market conditions, thus allowing them to raise capital on more favorable terms (such as a higher equity price or lower debt interest rate). As a result, the ability to sell securities "off the shelf" as needed gives issuers a financing alternative that may be more advantageous for them than other available methods, such as private placements with securities priced at discounted values based in part on their relative illiquidity.

The ability of an issuer to use Form S-3 is currently subject to a number of registrant and transaction requirements. The SEC proposes to amend Form S-3's registrant requirements and to eliminate the form's transaction requirements. In particular, the proposal would:

• Eliminate the One-Year Seasoning requirement that requires an issuer to have been a reporting company pursuant to the Securities Exchange Act of 1934 (Exchange Act) for at least 12 calendar months prior to filing a Form S-3. As a consequence, an issuer would immediately become eligible to use Form S-3 upon having a class of securities registered pursuant to section 12(b) or 12(g), or becoming subject to section 15(d), of the Exchange Act. However, eligibility would be contingent on the issuer having timely filed all reports and other materials required to be filed under sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act, other than specified reports on Form 8-K, during the preceding 12 calendar months and any portion of a month immediately preceding the filing of a Form S-3, or, if an issuer had been subject to such requirements for less than 12 calendar months, during the time the issuer had been required to file such reports and materials.[1] The SEC also proposes to amend the form's instructions to provide that an issuer would remain eligible to use Form S-3 notwithstanding an untimely filing during the relevant lookback period, as long as the filing was made within seven calendar days of the original due date and the issuer made only one such untimely filing.
• Eliminate the current $75 million minimum public float requirement. According to the SEC, Form S-3 eligibility should be based on the investors' ability to readily obtain issuer-specific information in Exchange Act reports and whether an issuer is current and timely with respect to its reporting obligations, and not on the amount of an issuer's public float.[2] Regarding the potential for price manipulation and financial reporting errors by small issuers, the Commission believes that the proposed restrictions on the use of Form S-3 by certain issuers and the antifraud and antimanipulation rules under the Exchange Act, including 17 CFR 240.10b-5, Regulation M, and Regulation SHO, address concerns about price manipulation in a more appropriate and targeted manner than conditioning Form S-3 eligibility on a minimum public float requirement.
• Expand Form S-3 eligibility to majority-owned subsidiaries. Certain majority-owned subsidiaries that are not Exchange Act reporting companies may nonetheless continue to register Guarantee-Related Offerings on a parent's Form S-3, provided their parent is eligible to use the form and the parent and subsidiary are identified on the registration statement as co-registrants. However, Exchange Act reporting majority-owned subsidiaries would not be permitted to rely solely on a parent's Form S-3 eligibility if the subsidiaries do not meet the Current and Timely Exchange Act Reporting requirements or are otherwise barred from using Form S‑3 under proposed General Instruction I.A.2 (which covers certain "ineligible issuers") or I.A.3 (which includes FPIs, asset‑backed issuers, investment companies, and BDCs). Those subsidiaries cannot rely on their relationship with a Form S‑3‑eligible parent to conduct an offering on Form S-3 under proposed General Instruction I.B.1.
• Limit eligibility to conduct ATM offerings to securities listed or traded only in specified markets. The release notes that expanding Form S-3 eligibility would increase the population of issuers eligible to conduct offerings of equity securities into an existing trading market for outstanding shares of the same class at other than a fixed price, i.e., ATMs. To address investor protection concerns that may arise in connection with this expanded population of issuers, amended Rule 415(a)(4) would limit eligibility to conduct ATM offerings to securities listed or traded only in specified markets. Specifically, the SEC proposes to amend Rule 415(a)(4) to specify that the term "trading market" means that the securities are listed and traded on a national securities exchange, or, if not listed and traded on a national securities exchange, the securities are traded in a market designated by the Commission.[3] Consistent with historical SEC Staff practice, an offering of securities that qualify for the OTCQX Best Market tier or OTCQB Venture Market tier of the OTC Link ATS would continue to qualify as offerings into an existing "trading market" for purposes of Rule 415(a)(4).

Examples of Potential Impact on the Securities Offering Process

• Staff Review of Registration Statements. The Commission acknowledges that fewer registered offerings may be subject to Commission staff review under the proposed amendments. However, the staff would retain the ability to review certain filings. For example, the proposal would not affect the staff's ability to conduct a selective review of Form S-3 registration statements that are not automatic shelf registration statements if it chooses to do so. The staff also could review the Exchange Act reports that are incorporated by reference into the Form S-3 prior to acceleration of the effective date. The SEC also believes that the liability provisions under the Federal securities laws that apply to shelf registration statements help protect against material misstatements and omissions from prospectuses used in connection with shelf takedowns.
• The Underwriting Process. The release also acknowledges that shelf registration can present some challenges for underwriters in performing their due diligence activities. The Commission noted, however, that underwriters have been conducting due diligence under compressed timelines in the context of shelf offerings for many years. Also, underwriters can be held strictly liable under sections 11 and 12(a)(2) of the Securities Act for any material misstatements or omissions made in connection with a registered offering, except to the extent they can demonstrate that they conducted adequate due diligence or exercised reasonable care, respectively, and can be held liable under section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. As a result, the Commission believes that underwriters will continue to be incentivized to conduct thorough due diligence for purposes of establishing an affirmative defense to disclosure liabilities under sections 11 and 12(a)(2) of the Securities Act, and to negate an inference of fraud under Rule 10b-5. Therefore, the SEC expects underwriters and issuers will develop market practices that would allow underwriters to conduct the necessary due diligence while still allowing issuers to benefit from the greater flexibility that their proposed amendments will provide with respect to registered offerings.
• Regulation M and FINRA Rule 5190. The release notes that Regulation M will be applicable to offerings made pursuant to the proposed expansion of Form S-3 and shelf offering eligibility.

Regulation M consists of a set of rules that are designed to prevent manipulation of the market price of a security around the time of an offering of that security. The Regulation is directed at market activity that would have the intent or effect of promoting the success of the offering. Unless an exception applies, Regulation M applies to an offering that is a "distribution" as defined in Rule 100 of that regulation, irrespective of whether the offering is required to be registered under the Securities Act, such as on Form S-3. The length of the applicable "restricted period" is generally determined by the value of the average daily trading volume (ADTV) of the security to be distributed.[4] The release notes that "under the proposed amendments, an issuer could become an Exchange Act reporting company—for example, by registering a class of equity securities on Form 10 under section 12(g) of the Exchange Act—and then immediately conduct its first registered offering on Form S-3." If the issuer's security had little or no trading volume, the ADTV likely would require a restricted period of five business days prior to pricing of the offered shares.

Rule 101 is the principal Regulation M rule applying to a broker-dealer participating in an offering, such as an underwriter or selling group member, and their "affiliated purchasers." Rule 101 (and Rule 102 with respect to issuers, selling shareholders, and their affiliated purchasers) restricts certain market activities from the beginning of the "restricted period" applicable to the offering until the offering (or the broker-dealer's participation in the offering) is completed. As interpreted by the SEC, in the context of shelf offerings, each takedown off the shelf must be analyzed to determine whether it constitutes a distribution. Moreover, when sales off a shelf by an issuer, or by any issuer affiliated purchaser, constitute a distribution, an issuer and all its affiliated purchasers are subject to the applicable restricted period under Rule 102. Similarly, when sales off a shelf by a selling security holder constitute a distribution, all other security holders who are affiliated purchasers of the selling security holder are subject to the applicable restricted period under Rule 102, as provided by Staff Legal Bulletin No. 9.

FINRA Rule 5190 requires that certain filings be made with the Financial Industry Regulatory Authority (FINRA) when a member participates in a "distribution" as defined in Regulation M. Rule 5190(c)(1)(A) requires that a "restricted period notification" be filed "no later than the business day prior to the first complete trading session of the applicable restricted period, unless later notification is necessary under specific circumstances." FINRA has recognized that shelf offerings can present circumstances where a filing may be made later than the point otherwise required by the Rule. Rule 5190(c)(1)(B) requires a filing of the pricing of a distribution "no later than the close of business the next business day following the pricing of the distribution, unless later notification is necessary under specific circumstances." FINRA has also recognized that ATM distributions require special accommodations regarding such filings. See SEC Regulation M-Related Notice Requirements Under FINRA Rules Frequently Asked Questions, FAQ 1.33. If the SEC proposals are adopted, the frequency of such circumstances will likely increase.

The text of Rule 5190 does not address the filing requirements in the context of shelf offerings. In those situations, the "restricted period" for the issuer (e.g., five business days prior to pricing) may differ from the "restricted period" applicable to the underwriter or broker-dealer that will distribute the shares who may become a "distribution participant," and therefore subject to Regulation M, after the commencement of the issuer's restricted period. FINRA may need to provide clarity on how and when a "restricted period notification" should be filed in those circumstances.[5] Additionally, in light of the likely increase in the number of ATM offerings, FINRA may at some point want to consider incorporating the guidance in FAQ 1.33 into the Rule.

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Larry Bergmann is senior counsel and Ella Beres is an associate in DWT's Washington, D.C. office. For questions or more insights, please reach out to the authors or another member of our financial services team and sign up for our alerts.