Shelf registration

A regulation that a corporation can evoke to comply with U.S. Securities and Exchange Commission (SEC) registration requirements for a new stock offering up to three years before doing the actual public offering. However, the corporation must still file the required annual and quarterly reports with the SEC.

In terms of SEC regulations, it is formally known as SEC Rule 415.

Investopedia Says:
Sometimes current market conditions are not favorable for a specific firm to issue a public offering. For example, suppose the housing market is heading toward a dramatic decline. In this case, it may not be a good time for a home builder to come out with its second offering, as many investors will be pessimistic about companies working in that sector. By using shelf registration, the firm can fulfill all registration-related procedures beforehand and go to market quickly when conditions become more favorable.

Related Links:
Find out how this regulatory body protects the rights of investors. Policing The Securities Market: An Overview Of The SEC
What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop. IPO Basics Tutorial

Popular name for the Securities and Exchange Commission rule allowing securities issuers to file registration statements and sell the securities in a Public Offering at a later date. The SEC's Rule 415, adopted initially in 1982, allows issuers to register securities they expect to sell within two years of the initial effective date, without having to file additional registration statements with each offering.

This allows issuers to act quickly when the market seems ready without the delays of registration, possibly getting a better price for its securities offered for sale. Under SEC Rule 415, issuers are expected to file amendments disclosing any changes in financial condition. Delayed offerings originally were used by corporations, but the SEC also has approved their use by limited partnership tax shelters, employee benefit plans, and issuers of mortgage pass-through certificates.

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Shelf registration is an arrangement with the U.S. Securities and Exchange Commission that allows a single registration document to be filed that permits the issuance of multiple securities. Key shelf registration qualification criteria include $75 million market capitalization held by outsiders, timely SEC filings, investment-grade ratings of debt, no defaults on debt payments, and listing on national stock exchanges.

In July 2005 the SEC put in place “automatic registration” shelf filings. This filing is a relaxed registration process that applies to well-known, seasoned issuers (WKSIs), and covers debt securities, common stock, preferred stock and warrants, among other various instruments. A WKSI is a company that has filed all annual, quarterly and current reports in a timely manner, and either has a greater than $700 million market capitalization or has issued $1 billion in registered debt offerings over the past three years.

Shelf registration is a registration of a new issue which can be prepared up to two years in advance, so that the issue can be offered quickly as soon as funds are needed or market conditions are favorable. For example, current market conditions in the housing market are not favorable for a specific firm to issue a public offering. In this case, it may not be a good time for a firm in the sector (e.g. a home builder) to come out with its second offering because many investors will be pessimistic about companies working in that sector. By using shelf registration, the firm can fulfill all registration-related procedures beforehand and go to market quickly when conditions become more favorable.

Finally, firms often use universal shelf filings and choose between debt and equity offerings based on the prevailing relative market conditions.

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