For the second time in as many months, the U.S. Securities and Exchange Commission’s Division of Corporation Finance (“Corp Fin”) has issued a Revised Statement on Well-Known Seasoned Issuer Waivers (“WKSIs”). As we mentioned last month, WKSIs are issuers of securities that can get the benefit of registering their securities offerings on shelf registrations that become automatically effective upon filing, as opposed to having to wait for a Corp Fin review and a declaration that its registration statement has become effective.  Issuers can lose their WKSI status if they become “ineligible issuers” by engaging in certain prohibited conduct, such as being criminally convicted or violating the anti-fraud provisions of the federal securities laws.

In its March 12, 2014 Revised Statement on Well-Known Seasoned Issuer Waivers, Corp Fin set out factors it would consider in determining whether to grant a waiver where an issuer had engaged in prohibited conduct that could cause it to lose its WKSI status.  Corp Fin expressly put the burden on the issuer to show Corp Fin why a waiver would be in the public interest and for the protection of investors.  In so deciding, Corp Fin said it would particularly consider the nature of the issuer’s violation or conviction.  Specifically, Corp Fin said that it will look at whether the violation was a criminal conviction or scienter-based violation, or a civil or administrative non-scienter-based violation.

On April 24, 2014, Corp Fin clarified the impact of the type of violation on its decision-making process.  Now, under that clarification, when an issuer seeks a waiver for conduct that falls into the more serious category – a criminal conviction or scienter-based violation – “the issuer’s burden to show good cause that a waiver is justified would be significantly greater.”

While the revision appears small, the import is large.  Corp Fin’s message is that issuers cannot expect to commit intentional violations or crimes on one hand and retain their WKSI benefits on the other.  This guidance is consistent with the many recent strong SEC statements regarding aggressive enforcement and the Commission view that there should be meaningful consequences for securities violations.