CR-EQUITY: Commonly Asked Questions

No. CR-EQUITY generally is intended only for initial public offerings of common stock, preferred stock, warrants, rights and units comprised of equity securities that also are seeking registration under Section 5 of the Securities Act of 1933. CR-EQUITY is not available for Regulation A offerings. Blank check and blind pool offerings do not qualify for CR-EQUITY. CR-EQUITY may not be available for an offering, even if the offering fits within the initial screening criteria.

An issuer must file an Application for Coordinated State Review (CR-EQUITY-1), uniform forms, fees and other required documents contemporaneously in each jurisdiction in which it seeks to register its securities. The issuer also should file a CR-EQUITY-1, without fees, together with a cover letter indicating its intent to seek coordinated review in Pennsylvania, the jurisdiction responsible for administering CR-EQUITY. If the issuer has filed an application to register the securities in Pennsylvania and has requested coordinated review, it is not necessary to file an additional CR-EQUITY-1.

Can an issuer participate in CR-EQUITY with respect to some but not all jurisdictions in which it is seeking registration?

Yes.

Yes.

An issuer may add as many jurisdictions as it desires so long as such additions occur within the initial 10-day comment period, by amending the CR-EQUITY-1 and filing it with each participating jurisdiction and Pennsylvania. The comment period will be extended an additional five (5) business days from the date each amendment is received. If an issuer seeks to add a jurisdiction after the initial 10-day comment period, acceptance of that addition is discretionary.

A lead disclosure jurisdiction and a lead merit jurisdiction will be selected from the jurisdictions the issuer has included on the CR-EQUITY-1. The lead jurisdictions are responsible for sending comment letters.

A lead disclosure jurisdiction is chosen from those jurisdictions that apply a disclosure standard of review and a lead merit jurisdiction is chosen from those that apply a merit standard of review. The lead merit jurisdiction will have primary responsibility for negotiating resolution to merit issues and the lead disclosure jurisdiction will have primary responsibility for negotiating resolution to disclosure issues, although in certain cases there will be overlap between the issues.

The lead jurisdictions will work together to produce a single comment letter that includes disclosure, merit and state specific comments. The issuer will address the merit and disclosure comments in a single response letter. The issuer will provide a response to state specific comments directly to the jurisdictions making the comments.

Pennsylvania will be responsible for selecting the lead jurisdictions. The issuer does not have the option of selecting specific lead jurisdictions. Pennsylvania will select the lead jurisdictions on the basis of a number of factors including the jurisdictions’ resources and experience in reviewing CR-EQUITY applications. There may be no correlation between the lead jurisdictions and the issuer’s home jurisdiction.

The lead jurisdictions will be selected within three (3) business days after Pennsylvania has received the application.

The lead jurisdictions will act as a team to prepare the initial comment letter in consultation with the other participating jurisdictions. The lead jurisdictions are responsible for negotiating resolution of comments with the issuer.

If the issuer selects only one merit jurisdiction, that jurisdiction will be the lead merit jurisdiction. In this situation, the lead merit jurisdiction will make comments consistent with the CR-EQUITY standards, unless the jurisdiction’s own standards are less restrictive and the jurisdiction elects to apply them. If the issuer selects only one disclosure jurisdiction, that jurisdiction will be the lead disclosure jurisdiction, unless that jurisdiction elects to have the lead merit jurisdiction serve as both lead merit and disclosure jurisdiction and the lead merit jurisdiction accepts that responsibility.

The participating jurisdictions have 10 business days to submit their comments to the lead jurisdictions. Within another five (5) business days, the lead jurisdictions collect and consolidate all comments and create a single letter to be sent to the issuer. The five (5) business day period includes a two (2) business day period for the participating jurisdictions to review the comment letter for changes and corrections.

As indicated above, Pennsylvania has three (3) days to select the lead jurisdictions. The three (3) day period will begin to run the day after Pennsylvania receives notice on a CR-EQUITY-1 that the issuer is seeking coordinated review of its registration application. Pennsylvania will notify the issuer and the participating jurisdictions of the identity of the lead jurisdictions and the date the comment letter is due to the issuer. Additionally, the notice to participating jurisdictions will include the date by which participating jurisdictions must submit comments to the lead jurisdictions, the date by which the lead jurisdictions must submit a draft letter to the commenting jurisdictions, and the date by which participating jurisdictions must submit changes or corrections to the lead jurisdictions.

State specific comments are comments relating to forms, incorrect fee calculations, broker-dealer registration and need for additional documents. To the extent these comments do not conflict with the CR-EQUITY review standards, they will be included in the comment letter sent by the lead jurisdictions.

The NASAA statements of policy relating to offerings of equity securities provide the substantive standards for review of offerings where the issuer has elected to participate in coordinated review. A particular NASAA statement of policy may set forth limitations or thresholds that an offering must meet or it may require that specific disclosures appear in the prospectus. In making the decision as to whether to utilize coordinated equity review, the issuer should consider whether the offering complies with the NASAA statements of policy.

The NASAA statements of policy can be waived only if all (100%) of the participating merit jurisdictions (and/or disclosure jurisdictions if the waiver request applies to a disclosure issue) agree to the waiver.

The issuer may withdraw from the coordinated review process in those jurisdictions that do not agree to the waiver. If the issuer wishes to continue the registration process in those jurisdictions, the jurisdictions may apply their guidelines for non-coordinated review offerings.

The lead jurisdictions will communicate with the issuer and the participating jurisdictions to resolve outstanding comments. The lead jurisdictions are encouraged to consult with the jurisdiction issuing a particular comment to confirm that an issuer’s response satisfies the jurisdiction’s concern.

Yes. The issuer must forward any amendments to the registration statement, uniform forms and CR-EQUITY-1 directly to the participating jurisdictions. Additionally, the issuer must resolve state specific comments directly with the jurisdiction issuing the comment. Further, the issuer must send notices relating to the status of the offering (e.g., notice of SEC effectiveness, withdrawal notices) directly to the participating jurisdictions. The lead jurisdictions are responsible for forwarding the issuer’s response letters to the participating jurisdictions.

Each lead jurisdiction will notify the issuer that it has cleared the application. This notice may be oral or written, at the discretion of the lead jurisdiction.

Participating jurisdictions will receive same-day notice from each lead jurisdiction when the application has been cleared by that jurisdiction.

Yes.

Yes.

Yes.