SEC Proposes Registered Offering Reforms to Significantly Enhance Access to Public Capital Markets

If the SEC’s semiannual reporting proposal was greeted with overly dramatic headlines, the SEC’s proposed registered offering reforms published on May 19, 2026 have been greeted with surprisingly little fanfare despite their potential to dramatically expand access to the public markets for capital raising.

It is hard to overstate the potential significance of the changes. If adopted, the changes will move thousands of companies that are currently ineligible to use Form S-3, or are eligible but limited by “baby shelf”[1] rules as to the amount of primary capital they can raise, into eligibility without capital raising limits. In addition, if adopted, the changes will enable companies that are listed on a national securities exchange to file a pay-as-you-go unallocated universal shelf immediately after their IPO and to go automatically effective on Form S-3s filed after being public for one year, regardless of their public float. Enhanced access to the public markets should lower the cost of capital, in particular for smaller market cap issuers. While PIPEs will still have a place in certain circumstances, we expect growth in registered direct offerings and ATMs.

Background

For many decades, the SEC has distinguished public companies, and the ease with which they and their shareholders can access the public markets, based on three criteria:

• Seasoning. Being public for a certain period of time — currently 12 calendar months — accords issuers meaningful benefits, specifically the ability to raise primary capital using a short form registration statement that can be filed as a “shelf.” A shelf registration offers the flexibility to access the markets multiple times on a delayed basis without the need for further filings that are subject to SEC review after the initial registration statement is filed and is declared (or becomes) effective.
• Size. An issuer with less than $75 million in public float is currently limited in the size of primary offerings that it can conduct on a Form S-3, i.e., one third of its public float. A WKSI[2] can file a short-form registration statement on Form S-3 that becomes automatically effective with no SEC review (removing the risk of review delay).
• Financial Stability. An issuer that, since the date of its last filed audited financial statements, failed to pay a dividend on preferred stock or defaulted on any debt repayments for borrowed money or under a long-term lease, if material to the issuer, is not permitted to use Form S-3.

Significant Expansion of S-3 Eligible Companies and Flexible Use of Form S-3

The proposed rules permit all Exchange Act reporting companies (other than certain ineligible companies) to use Form S-3:

• Without the requirement that they have been public for 12 calendar months.
• Without regard to whether they defaulted on a dividend, interest or rent payment since the date of their last audited financial statements.
• Without any limitation on the amount of primary capital that they can raise even if they have less than $75 million in public float (i.e., the baby shelf limitations).

Under the new regime, the SEC proposes to terminate the existing categories of “unseasoned issuer,” “seasoned issuer” and “well-known seasoned issuer” and create three new tiered categories, which we set out below alongside each categories’ primary benefits:          

	Form S-3 Eligible Issuer	Eligible Listed Issuer (ELI)	Seasoned Eligible Listed Issuer (SELI)
New Definition	Exchange Act reporting company that has timely filed all required reports for 12 calendar months or such shorter period as it was required to make such filings.	Form S-3 Eligible Issuer plus a class of equity securities listed on a national securities exchange.	An Eligible Listed Issuer plus subject to Exchange Act reporting obligations for 12 calendar months.
Offering Regime (benefits are cumulative from left to right)	Substantially the same as the current Form S-3 regime with the following key differences: “Baby shelf” rules eliminated so primary capital can be raised without limitation by a Form S-3 Eligible Issuer.   All Form S-3 Eligible Issuers may omit names of selling security holders and amounts to be registered on their behalf, although they need to register a specific number of securities for primary and secondary offerings.	An ELI will be able to file a shelf registration statement on Form S-3 that registers an unspecified number of securities, without allocating between primary and secondary offerings, and then effect shelf takedowns on a “pay-as-you-go” basis. This mirrors the current WKSI-regime without automatic effectiveness of the initial registration statement.	The SELI regime will fully mirror the current WKSI regime (e.g., automatically effective registration statement on Form S-3) without the $700 million public float requirement.
Companies Covered[3]	1,127 new companies will be eligible to use Form S-3 (representing 20.3% of potentially eligible 10-K filers). 1,023 additional companies that are currently Form S-3-eligible will no longer be subject to the “baby shelf” rules (representing 18.4% of potentially eligible 10-K filers).	4,203 companies will qualify as ELIs (representing 75.7% of potentially eligible 10-K filers). There are currently 2,086 companies that identify as WKSIs.	4,114 companies will qualify as SELIs (representing 74.1% of potentially eligible 10-K filers). Put differently, only 89 ELIs lack the reporting history to be SELIs.

In addition to enjoying the enhanced registration benefits detailed above, these filers will also benefit from additional incremental pre-filing and post-filing communication flexibility.

The determination date for ELI and SELI status for first time filers will be the date on which the company files a Form S-3. For issuers with a Form S-3 on file already, the determination will be retested with the filing of an annual report on Form 10-K.

Retention of Timely-Filing Requirement

The SEC is retaining the requirement that, in order to file a Form S-3, companies must have timely filed all required Exchange Act reports (e.g., 10-K, 10-Q and specified Form 8-Ks)[4] during the 12 months preceding the filing of a Form S-3 or such shorter period as it was required to make such filings; however, the SEC is providing a new seven calendar day grace period that can be used once during the 12-month lookback period in order to excuse a late filing and retain Form S-3 eligibility. This new grace period is in addition to the existing extension to file Form 10-K (15 calendar days) and Form 10-Q (five calendar days) provided by Exchange Act Rule 12b-25, but cannot be combined with this extension rule. This means that if a company that attempts to rely on Rule 12b-25 misses the extended deadline, the seven-calendar day grace period will be calculated from the filing’s initial due date.

Do Not Pass Go; Do Not Collect $200

There will still be a group of companies that will be ineligible to use Form S-3. These ineligible issuers are as follows:

Ineligible Issuer	Currently Prohibited?
Any company that was, during the prior three years, a blank check company, penny stock issuer or a shell company, but not including a domestic special purpose acquisition company (SPAC) that has completed a business combination.[5]	Effectively yes, but this is a broader construct.
A company if it or one of its subsidiaries was subject to an administrative order or judicial decree based on violation of an antifraud provision of U.S. securities laws related to a public or private offering of securities within the past three years (Bad Actors).	Yes, but this is a narrower definition of violation because it is limited to acts or omissions in connection with offerings.
A company if it or one of its subsidiaries was subject to certain securities-law related felonies or misdemeanors within the past three years.	Yes.
A company that was the subject of any refusal or stop order under Securities Act Section 8 within the past three years.	Yes.
A company with a pending Securities Act Section 8 exam or proceeding or Securities Act Section 8A cease and desist proceeding.	Yes.
Foreign governments.	Yes.
FPIs.	Not if filing on domestic forms (but see below for proposed treatment).
Asset-backed issuers.	Yes.
Business development companies (BDCs).	No, but required to use other forms.
Investment companies.	No, but required to use other forms.

 

ATM Offerings

Rule 415(a)(4) permits the use of Form S-3 for “at the market offerings” into an “existing trading market.” An existing trading market includes a national securities exchange and, as a matter of administrative procedure, the SEC has interpreted it to include the OTCQX Best Market Tier and the OTCQB Venture Market Tier, but not the OTCID Basic Market or the Pink Limited Market. The removal of the “baby shelf” limitations currently associated with Form S-3, coupled with expanded eligibility to use Form S-3, has led the SEC to propose formalizing this administrative approach by requiring itself to designate eligible markets. The SEC currently envisages designating those two existing tiers as eligible.

What is the Practical Impact on Capital Raising?

Previously Ineligible Reporting Companies. We expect many of the more than 1,000 companies that were previously ineligible to use Form S-3 will file a Form S-3, given the flexibility it offers to raise capital at lower cost. These companies may find the ability to undertake an ATM offering attractive, particularly with the removal of the “baby shelf” limitations. If these companies are not listed on a national securities exchange, they will still have to specify the number of primary and secondary securities and pay the required registration fee at the time of effectiveness.

Listed Companies Generally and Particularly Those That Have Been Timely Filers for 12 Months. Many non-WKSI listed companies currently file shelf registration statements. The ability to file an unallocated shelf registration statement on a pay-as-you-go basis will enhance the attractiveness of this option for listed companies, and even more so for those that have been timely filers for the prior 12 months and are permitted to file an automatically effective shelf registration statement. The removal of the “baby shelf” limitation will be particularly attractive to the small-cap listed companies, many of which have found the limitation challenging and have been forced to raise capital via PIPE transactions as a result.

Companies Conducting IPOs. Immediately after completing an IPO, a company will be eligible to register an unspecified number of primary and secondary shares on Form S-3 for sale on a delayed basis. The registration statement would still be subject to SEC review, but it could become more standard to file such a registration statement soon after an IPO in order to provide maximum flexibility to conduct primary and secondary offerings once customary IPO lock-up restrictions expire. Such a registration statement could also be submitted confidentially, although the fact that the registration statement need not specify an amount of securities or whether it is primary or secondary may lessen the benefit of a confidential submission. This can be contrasted with the current regime, under which each offering needs to be conducted on a separate Form S-1 during the first 12 calendar months after an IPO. The increased flexibility for resale by existing private companies may also heighten interest in IPO exit options from private company shareholders.

Mitigating the Pain of Form S-1 Filings

The SEC is also proposing to lower the burden on public companies that are required to use Form S-1. The proposed rules would (1) allow backward incorporation by reference on Form S-1 regardless of whether a company had filed its Form 10-K for its most recently completed fiscal year and (2) enable all companies that meet the criteria to backward incorporate by reference to also forward incorporate by reference, thereby eliminating in each case the need for post-effective amendments and prospectus supplement updates.

But That’s Not All

The proposed rules include several additional technical and conforming amendments, including the following notable changes:

• Delaying Amendment Practice to Be Scrapped. Pursuant to the proposed rules, the effectiveness of nonautomatically effective registration statements will be automatically deemed delayed, unless the company affirmatively includes language stating the registration statement will become effective in accordance with Section 8(a).
• A Boon for Loss Corporations. The proposed rules would no longer foreclose loss corporations from utilizing the extended grace period for third-quarter financials so long as the company has filed all reports due.
• Say Goodbye to Blue Sky Registration. The proposed rules would preempt Blue Sky registration for all registered offerings by adding a new definition of “qualified purchaser.” This change would be particularly impactful for nonlisted, publicly registered REITs and BDCs that conduct Securities Act-registered offerings. The elimination of Blue Sky requirements would significantly reduce time and costs. In addition, some sponsors may decide to conduct Securities Act-registered offerings (rather than private, Reg D offerings) to reach a broader set of investors.

Foreign Private Issuers

The SEC is not extending the proposed regime to foreign private issuers pending the completion of its ongoing evaluation of foreign private issuer status and benefits. The proposed rules will also amend Forms S-1 and S-3 to clarify that they cannot be used voluntarily by foreign private issuers, including foreign private issuers that elect to file domestic Exchange Act forms. This represents a change from historic policy. The SEC notes that a foreign private issuer could seek to avoid this prohibition by “reorganizing its corporate structure” (presumably reincorporating in the United States or possibly adjusting the composition of its board or executives).

The concept of being a WKSI and the related ability to use an automatically effective shelf registration statement on Form F-3 will be retained for foreign private issuers. In addition, a Form F-3 filed by a foreign private issuer will continue to be subject to the “baby shelf” rules, and it will be necessary for foreign private issuers that are not WKSIs to continue to disclose the allocation of shares between primary and secondary offerings.