1.5 Rule 3-13 Waivers and Other Requests

There may be situations in which registrants wish to seek relief from complying with the various reporting requirements under Regulation S-X, including the omission of financial statements of an acquiree under Rule 3-05 or Rule 3-14 and related pro forma financial information. Regulation S-X, Rule 3-13, gives the SEC staff the authority to permit the omission or substitution of certain financial statements otherwise required under Regulation S-X “where consistent with the protection of investors.” Further, the SEC staff has historically encouraged registrants to seek modifications to their financial reporting requirements, as permitted under Rule 3-13, particularly when the requirements may not be material to the total mix of information available to investors.

As a result of the SEC’s May 2020 final rule amendment related to business acquisitions, there may be fewer instances in which registrants may need waivers for the reporting requirements under Rules 3-05 and 3-14 and Article 11; however, there are still circumstances in which registrants may wish to seek a waiver under Rule 3-13. The SEC staff has indicated that it is available to discuss potential waiver fact patterns by phone before a registrant submits a written request via online form.

At the 2022 AICPA & CIMA Conference on Current SEC and PCAOB Developments, the SEC staff offered the following recommendations to registrants submitting a waiver request related to significant acquisitions (Rule 3-05):

• Ensure that the initial waiver request is as complete as possible and includes a description of the key terms of the acquisition.
• Include in the waiver request the results of all three significance tests, including both components of the income test (see Section 2.3).
• Explain why the significance tests required by Rule 3-05 do not reflect the overall size of the acquisition.
• Articulate why the information subject to the waiver request is not necessary for investors.
• Explain any other compensating disclosures that will provide investors with information related to the acquisition.

Further, the SEC staff explained that when a registrant is required to file two years of audited financial statements for a significant acquired business, it may wish to seek a waiver for the oldest annual period. In connection with that request, if a registrant would like the waiver to also include the omission of the prior comparative interim period information that would have been required in a two-year presentation, this specific request should be included in the waiver letter. That is, the waiver of the comparative interim financial statements is not automatic.

The SEC staff noted that although the above recommendations are related to waivers for significant acquisitions (Rule 3-05), the SEC staff may also grant waivers for significant acquisitions of real estate operations (Rule 3-14) and significant equity method investments (Regulation S-X, Rule 3-09). Some of the recommendations above may also apply in those circumstances.

For additional guidance on Rule 3-13 waivers and prefiling letter requests, see Appendix B of Deloitte’s Roadmap SEC Comment Letter Considerations, Including Industry Insights.