The Securities and Exchange Commission (SEC) has relaxed the disclosure requirements for public offerings as part of guidelines issued to streamline the process for companies seeking to raise funds from the capital market.

“The streamlined procedures are part of the Commission’s efforts to encourage more companies to tap the capital markets for their business expansion needs,” SEC Chairperson Emilio B. Aquino said.

He added that, “the SEC will continue to find more ways to make the registration of securities and securing a license to sell such securities easier, which will also translate to more investment opportunities for the public.”

On Sept. 12 and 21, the Commission issued SEC Memorandum Circular (MC) Nos. 13 and 14, Series of 2023 to amend Annex C of Rule 12 of the 2015 Implementing Rules and Regulations of the Securities Regulation Code (SRC).

Annex C of SRC Rule 12 details the non-financial information that must be disclosed in the registration statements filed with the SEC by corporations issuing securities such as shares of stock, corporate bonds, and commercial papers in order to raise capital. 

Part III, Paragraph A, Subparagraph 2(a) of Annex C directs a registrant to discuss its “financial condition, changes in financial condition, and results of operation for each of the last three fiscal years” under the Management’s Discussion and Analysis section of its prospectus. 

MC 13 clarifies that registrants are required to disclose financial information for only two comparative periods for the last three fiscal years. 

For instance, financial statements for the year ended Dec. 31, 2022 must contain line items showing comparative balances only for Dec. 31, 2022 and Dec. 31, 2021. 

In addition, the financial statements must contain line items for the comparative balances only for the fiscal years ended Dec. 31, 2021 and Dec. 31, 2020. 

Meanwhile, MC 14 relaxes the requirement for a registrant to provide mitigating factors in the Risk Factors section of its prospectus, making the disclosure optional. 

Part I of Annex C directs a registrant to provide a description of its business, including a discussion of major risks involved in the company and its subsidiaries. 

MC14 amends the provision by stating that “[t]he company may include disclosure of the procedures to identify, assess, and manage such risks.”

Furthermore, Paragraph C, Part VI of Annex C has been amended such that “[t]he registrant may indicate measures to mitigate the risks” related to its business. Such risks include factors that make the offering speculative or risky such as the absence of operating history, lack of profit from recent operations, poor financial position, or lack of market for the registrant’s securities. 

Recently, the SEC shortened the settlement cycle from three days to two days after the trade date by amending the 2015 Implementing Rules and Regulations of Republic Act No. 8799, or the Securities Regulation Code, through SEC Memorandum Circular No. 11, Series of 2023. 

The SEC has also empowered funding portals to act as registrars of qualified institutional and individual buyers, which eliminates the need for these portals to use third party institutions to assist potential investors with their applications as qualified buyers.