We note that the SEC included language that may be used as a guardrail against the filing of an egregiously large prospectus supplement by an issuer that anticipates it may become subject to I.B.6 in the near future.

The SEC has released new guidance upending longstanding policy as it relates to the at the market (ATM) offering space. On March 19, 2026, the SEC released a new Corporate Finance Interpretation (formerly known as Compliance and Disclosure Interpretations or C&DIs), which will allow issuers eligible to file a prospectus supplement pursuant to General Instruction I.B.1 to “lock in” the amount registered for the life of that prospectus supplement. This is contrary to a longstanding practice which required issuers to “recalculate” their prospectus supplement availability if they were deemed subject to General Instruction I.B.6 limitations at the filing of their annual report.

The Corporate Finance Interpretation released on March 19 is as follows:

Question 116.26

Question: A company entered into a sales agreement with a named selling agent for an at-the-market offering of an amount of securities that the company reasonably expected to offer and sell. The company had an effective Form S-3 registration statement, was eligible to offer and sell securities in reliance on General Instruction I.B.1, and filed a prospectus supplement for the offering. At the time of its next Section 10(a)(3) update, the company does not meet the $75 million public float requirement of Instruction I.B.1 but remains eligible to use Form S-3 in reliance on General Instruction I.B.6 (the “baby shelf”). Will the staff object if the company continues to offer and sell the full amount of securities covered by the prospectus supplement even if that amount would exceed the offering limits of General Instruction I.B.6?

Answer: Under these circumstances, the staff will not object if the company continues offering and selling the full amount of securities covered by the prospectus supplement that was filed prior to the Section 10(a)(3) update. [March 19, 2026]

Background

Issuers eligible to file a shelf registration statement under Form S-3 may be limited in the amount they may register on a prospectus supplement based on the amount of shares held by certain non-insiders of the company, called a non-affiliate float. The non-affiliate float is typically calculated by determining the highest total number of non-affiliated shares outstanding in the 60 days prior to filing multiplied by the highest closing price of the issuer’s common equity in the 60 days prior to filing. If the resulting non-affiliate float exceeds $75 million, the issuer is not subject to the limitations under I.B.6, and instead can file a prospectus supplement for any amount pursuant to I.B.1.

If an issuer’s non-affiliate float exceeds $75 million at any given time within 60 days prior to the filing of its annual report on Form 10-K or at any point thereafter prior to the filing of its next annual report, the issuer is considered to be subject to I.B.1 until the filing of its next 10-K.

If an issuer’s non-affiliate float does not exceed $75 million, the issuer is limited to an offering size of one-third of its non-affiliate float, minus the market value of any securities sold while the issuer was subject to I.B.6 over the prior 12 calendar months. This is often referred to as the “baby shelf rule.”

Prior to the SEC’s new guidance under Question 116.26, longstanding market practice provided that the filing of an issuer’s annual report on Form 10-K was considered an amendment to the outstanding registration statement pursuant to Section 10(a)(3) and therefore an issuer with an ATM prospectus supplement was required to recalculate its non-affiliate float at that time to determine whether it did or did not exceed $75 million. Any issuer with an I.B.1 prospectus supplement that was found to have a non-affiliate float of less than $75 million at the time of a later 10-K filing was required to file an updated prospectus supplement, usually in the form of a one-page “sticker” to reduce the size of the prospectus supplement to be compliant with I.B.6 and include the relevant I.B.6 disclosure on the cover, disclosing the non-affiliate float calculation.

Under past SEC verbal guidance to practitioners, an issuer who filed an ATM prospectus supplement under I.B.6 was not required to recalculate its prospectus supplement at the time of future 10-K filings. Instead, those prospectus supplement amounts were deemed “locked in” from filing. The new SEC guidance now aligns the treatment of I.B.1 prospectus supplements with this practice.

Updated Guidance

Under the new Question 116.26 guidance, an issuer who files an ATM prospectus supplement under a shelf registration statement on Form S-3 pursuant to I.B.1 will “lock in” that total prospectus supplement amount for the life of that prospectus supplement. The SEC will no longer treat the filing of an annual report on Form 10-K as a recalculation trigger under Section 10(a)(3). Therefore, there is no longer a requirement to recalculate an issuer’s non-affiliate float in connection with an existing I.B.1 prospectus supplement.

We note that the SEC included language that may be used as a guardrail against the filing of an egregiously large prospectus supplement by an issuer that anticipates it may become subject to I.B.6 in the near future. Question 116.26 refers to the existing I.B.1 prospectus supplement registering an “amount of securities that the company reasonably expected to offer and sell” (emphasis added). It remains to be seen if the SEC will take enforcement action against an issuer that it deems to have filed an “unreasonable” amount of securities in reliance on this guidance. Issuers should bear this in mind when determining the size of an ATM prospectus supplement under I.B.1.

The new guidance does not address the issuer who has previously filed an ATM prospectus supplement pursuant to I.B.1 and later reduced the prospectus to an I.B.6 due to a reduced public float. At this time, we do not see a path for those issuers to reinstate their I.B.1 prospectus supplement without further guidance from the SEC.

This new guidance has no impact on issuers who have an existing I.B.6 prospectus supplement. As discussed above, an issuer with an I.B.6 prospectus supplement is not required to recalculate its non-affiliate float as it relates to the offering size of that existing I.B.6 prospectus supplement. That amount is treated as “locked in” from the time of its filing.

Any issuer subject to I.B.1 that believes it may become subject to I.B.6 following the filing of their next annual report would be advised to consider locking in a prospectus supplement under an ATM program at its preferred amount without limitation by I.B.6, or refreshing an existing ATM prospectus supplement to an upsized amount. Just as the filing of an ATM program has long been considered “good corporate housekeeping,” it stands to reason that the filing of a non-baby shelf rule limited ATM prospectus supplement may also be seen by the market as more of the same.

For More Information

If you have any questions about this Alert, please contact James T. Seery, Dean M. Colucci, Kelly A. Dabek, Alexander C. Pherson, Kelly R. Carr, Daniel J. Oppenheimer, Elliann Dunbar, any of the attorneys in our Securities and Capital Markets Group or the attorney in the firm with whom you are regularly in contact. 

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