SEC Form S-3: Definition, Parts, When to Use It, and How to File

What Is SEC Form S-3?

Form S-3 is a simplified security registration form utilized by businesses that have already met other reporting requirements. The form registers securities with the SEC under the Securities Act of 1933 for U.S.-based companies only.

Companies looking to use the S-3 must have satisfied all reporting requirements of the Securities Exchange Act of 1934 from sections 12 or 15(d) that follows the assumption that companies seeking to register, have some form of security filed with the SEC.

Key Takeaways

  • SEC Form S-3 is a regulatory filing that provides simplified reporting for issuers of registered securities.
  • An S-3 filing is utilized when a company wishes to raise capital, usually as a secondary offering after an initial public offering has already occurred.
  • In order to utilize the simplified process, firms must first meet a certain set of eligibility criteria.

SEC Form S-3 Explained

The SEC form S-3 is sometimes filed after an initial public offering (IPO) and is generally filed concurrently with common stock or preferred stock offerings.

There are a variety of other requirements that must be met for a business to file the S-3 form. In the 12 months prior to filling out the form, a company must have met all debt and dividend requirements. The SEC Act of 1933 also requires that these forms be filed to ensure that essential facts about the business are disclosed upon the company’s registration of securities. Doing so allows the SEC to provide investors with specifics about the securities being offered and works to eliminate fraudulent sales of such securities.

Composition of the SEC Form S-3

Form S-3 is essentially composed of two parts. Part one consists of a cover page, risk factors, and a prospectus that will eventually be made available to all potential investors. Part two consists of exhibits, undertakings, and various other disclosures that are not typically distributed to investors but are made available to the public through the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.

The prospectus primarily consists of a summary section that lays out all critical information about the security offering, including the security type, if it is an overallotment option, the exchange (if any) where it will be listed, and how proceeds will be utilized. Issuers that are fairly new or fairly unknown are likely to include business strategy, market strengths, and often basic financial information about the company as well. Pricing terms are not included until the final draft of the prospectus, the version that is delivered to investors with confirmations of sales from the underwriters.

The disclosure of risk factors is generally divided into subsections, including risks relevant to the offering itself and risks associated with the issuing company. Most risk factors can be found on the issuing company’s most up-to-date Form 10-K or Form 10-Q.

Additional sections that must be included in the S-3 form, depending upon the type of issuing company and the type of security being issued, include disclosure of the ratio of earnings to fixed charges, plan of distribution, and full descriptions of the securities that are being registered.

In most instances, the S-3 form also discloses information about the expertise of the issuer's accountants and counsel that offer validation of the securities up for sale.

Form S-3 vs. Form S-1

The S-3 form follows a simplified process. The S-1 form filing, on the other hand, is used as the initial registration for new securities issued by public companies in the United States. The filing must be completed before shares can be traded on a national exchange. Most companies file the S-1 form ahead of their IPO.

When a company completes the S-1 filing, it must disclose several key details about the company including how it intends to use the capital raised, its business model, along with a prospectus about the security.

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