Pay-As-You-Go Registration

How does pay-as-you-go registration work?

At the initial filing of a WKSI shelf, the filing fees for all of the securities that could be offered off the WKSI shelf need not be paid. Under Rule 456(b), a WKSI may pay the filing fee for securities sold in a takedown at any time from the date the WKSI shelf is filed until the date the related final prospectus supplement is required to be filed. Payment of the filing fee at the time of each completed takedown, commonly referred to as pay-as-you-go registration, is available only to WKSIs. See Release No. 33-8591 at 230-32 (discussing pay-as-you-go registration generally). Even if the WKSI takedown involves a preliminary prospectus supplement, the fee need not be paid until the due date for filing the final prospectus supplement under Rule 424(b)(2) (i.e., no later than the second business day after the earlier of pricing or first use – in other words, file by Wednesday for a deal that priced on Monday morning). C&DI 639.02. This is helpful because the issuer may not know the aggregate offering amount when the preliminary prospectus supplement is filed.

How should a WKSI complete the fee table for the initial filing of a WKSI shelf using the pay-as-you-go program contemplated by Rule 456(b)?

No matter when the registration fee is paid, the initial WKSI shelf filing should list each type of security being registered in the fee table on the cover page of the registration statement and state when the registration fee is being paid in a footnote to that table. If the registration fee is paid with the initial filing of the WKSI shelf, the table should include the dollar amount of the fee for each type of security registered. By contrast, if the registration fee will be paid subsequently in advance of any takedown or on a pay-as-you-go basis, the issuer should include “$0” or a blank in the fee table on the cover page of the registration statement for the amount of registration fee for each type of security to be registered and indicate deferral of fee payment in a footnote to the fee table. See C&DI 240.14.

When the fee is paid at takedown, how should the issuer indicate payment of the fee in the final prospectus supplement?

Unless previously indicated in a filed fee table, when the final prospectus supplement is filed in connection with the takedown, the cover page of the prospectus supplement must include the fee table reflecting payment of the fee. Release No. 33-8591 at 231. The SEC Staff has indicated that a WKSI may file a prospectus supplement that includes the fee table reflecting payment of the fee and subsequently file another prospectus supplement without the fee table. C&DI 239.01.
How is the fee calculated and paid?

Regardless of when the fee is paid (whether in advance, with a post-effective amendment, or at takedown), the fee is calculated in accordance with Rule 457(r) based on the SEC filing fee schedule in place at the time of payment. Filing fees are normally paid by wire transfer to the SEC’s account at US Bank. Wire transfers should always include a notation with the issuer’s SEC-assigned CIK number. See Fee Payment Instructions.

A WKSI that initially relied on the pay-as-you-go provisions of Rule 456(b) inadvertently failed to pay the filing fee at the time of a takedown. What should the issuer do?

The issuer may pay the fee within four business days of the original due date and file a revised prospectus supplement with the fee table on the cover page reflecting payment of the fee, if it fails “after a good faith effort” to pay the filing fee on time. Rule 456(b)(1)(i)see also Release No. 33-8591 at 231.

Even if the fee is not paid within the cure period (i.e., more than four business days have passed since the filing fee due date), if the relevant class of securities was identified in the WKSI shelf, the issuer should file an additional prospectus supplement with a corrected fee table and pay the filing fee. Under these circumstances, Rule 456(b)(2) provides that a pay-as-you-go registration statement will be considered filed for Section 5 purposes when it is received by the SEC (if it complies with all other requirements of the Securities Act). That takes care of the Section 5 issue, and the corrective filing and fee payment will address the potential Section 6 violation resulting from nonpayment of the registration fee. C&DI 140.02. If the securities sold in the takedown were not identified in the shelf registration statement at all, let’s talk.

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