CorpFin issued two new Compliance and Disclosure Interpretations (C&DIs) on Friday, one presents a somewhat niche scenario involving application of the resale limitations set forth Rule 905 of Regulation S, and the other, of more general utility, addresses the treatment of non-searchable graphics in EDGAR filings.
Regulation S-T, Rule 304: Using Graphics and Images in EDGAR Filings
Regulation S-T sets forth the rules governing electronic filings in the Commission’s EDGAR (Electronic Data Gathering, Analysis and Retrieval) system. The EDGAR Filer Manual is promulgated by the Commission under Rule 301 of Regulation S-T.
EDGAR filings are made in two formats ASCII (e.g., this MSFT 10-K from 2000) and HTML (e.g., this MSFT 10-K from 2014). ASCII filings don’t support the use of graphics or images, but HTML filings do. Neither ASCII nor HTML filings support the use of audio or video materials.
Rule 304 of Regulation S-T provides, in part, that where graphics, images, audio or video materials are used in a document delivered to investors but are not reproduced in the EDGARized version of that document, the EDGARized version “must include a fair and accurate narrative description, tabular representation or transcript of the omitted material.” Further, Rule 304(e), the subject of the Commission’s latest C&DI, prohibits (except in certain specified cases) the use of graphics or images to submit information that must be searchable or downloadable in a spreadsheet format (e.g., financial statements).
C&DI question 118.01 asks whether a filing can ever contain graphics or images that include non-searchable information.
To which CorpFin opines:
In our view, ‘information such as text or tables that users must be able to search and/or download’ [Rule 304(e)] consists of all information that the filer is required to include in the particular filing, such as disclosures in response to applicable form and Regulation S-K items and any additional information required to be included under Securities Act Rule 408 or Exchange Act Rule 12b-20.
We recognize that registrants may present information in Commission filings in formats such as bar graphs or other graphics that are not text-searchable but that they believe may be more useful to readers than tables or paragraphs that present the same information in searchable form. We welcome the use of graphic and image files to make information more accessible for users, provided that the filing complies with applicable EDGAR … requirements and the filer’s use of graphics does not interfere with a user’s ability to search required information. Therefore, with regard to required disclosures, a filer may present required information using graphics that are not text-searchable and still comply with Rule 304(e) if the filer also presents the same information as searchable text or in a searchable table within the filing. … Any additional information that the filer chooses to include in the filing and that is not required to be disclosed may be presented graphically without a separate text-searchable presentation.
Regulation S, Rule 905: The Application of Resale Limitations to Former FPIs
Regulation S provides an exclusion from Securities Act registration for offerings and sales of securities made outside of the United States. Both domestic and foreign issuers can use Regulation S.
Rule 905 of Regulation S provides, in part, that equity securities acquired from a domestic issuer, underwriter, dealer or other offering participant, or any of their respective affiliates, in a Regulation S offering are “restricted securities” within the meaning of Rule 144 and remain so following an offshore resale pursuant to either Rule 901 or 904 of Regulation S.
C&DI question 279.01 asks whether restricted securities acquired in a Rule 144 transaction (other than Rule 144(a)(3)(v), which addresses equity securities acquired from domestic issuers subject to the conditions of Rule 901 or 903 of Regulation S) from an issuer that was a foreign private issuer at the time of the acquisition, but is now a domestic issuer, may be resold in an offshore transaction under Rule 904 without regard Rule 905.
CorpFin’s answer: “Yes. Rule 905 only applies to equity securities that, at the time of issuance, were those of a domestic issuer.”