Gun-Jumping Rules
Waiting period
Meaning of “prospectus”
(last updated 07 Feb 13)
Gun-Jumping
(controlled disclosure during registration)
Filing
Effective
date
date
Pre-filing period Waiting period
Post-effective period
• no sales [§ 5(a)(1)] • no sales [§ 5(a)(1)] • no prospectus,
unless § 10 OK
• no deliveries [§
• no deliveries [§
5(a)(2)]
• no offers [§ 5(c)]
5(a)(2)]
• no prospectus,
unless § 10 OK
[§5(b)(1)]
[§5(b)(1)]
• no delivery w/o §
10(a) prospectus
[§5(b)(2)]
• no offers, if §8 stop
• no offers, if §8
order [§ 5(c)]
proceeding [§ 5(c)]
Gun-Jumping
(controlled disclosure during registration)
Filing
date
Effective
date
No sales [§ 5(a)(1)]
No deliveries [§ 5(a)(2)]
No prospectus, unless comply § 10 [§ 5(b)(1)]
No delivery w/o
§10 prospectus [§ 5(b)(2)]
No offers [§ 5(c)]
No offers - §8 proceeding / stop order [§ 5(c)]
Pre-filing period
Waiting period
Post-effective period
Gun-Jumping
(controlled disclosure during registration)
Filing
date
Effective
date
Permitted:
• Rule 135 - issuer
of [§ 5(a)(1)]
Nonotice
sales
public offering
• Rule 163 – WKSIs can
No deliveries
[§ 5(a)(2)]
use FWP (legended,
filed
w/ SEC)
• Rule 163A – issuers can
No prospectus, unless comply § 10 [§ 5(b)(1)]
communicate 30+ days
before RS filed
No delivery w/o
• Rule 168 – reporting
issues can give factual
§10 prospectus [§ 5(b)(2)]
info and SEC-filed FLI
(notNo
reference
offering)
offers
[§ 5(c)]
• Rule 169 – non-reporting
No offers - §8 proceeding / stop order [§ 5(c)]
issuers can release
regular factual info (no
FLI,
can’t targetperiod
investors)
Pre-filing
Waiting period
Post-effective period
Gun-Jumping
(controlled disclosure during registration)
Filing
date
No
Effective
date
Permitted:
134 – identifying
No sales •[§Rule
5(a)(1)]
statement (a) issuer and
offering info, (b) legended
No deliveries +[§where
5(a)(2)]
get PP )C) unless
tombstone or accompany
with PP
No
prospectus, unless comply § 10 [§ 5(b)(1)]
• Rule 164 – allows FWP
(conditions in Rule 433)
No delivery w/o
• Not conflict w/ filings
• Legended
§10 prospectus [§ 5(b)(2)]
• unseasoned and nonreporting Issuers must
offers [§ 5(c)]
accompany PP
No• File
offers
- §8 proceeding / stop order [§ 5(c)]
with SEC
Pre-filing period
Waiting period
Post-effective period
Securities Act § 5
(b) Necessity of prospectus meeting
requirements of section 10 of this Act. It
shall be unlawful for any person, directly or
indirectly-(1) to make use of any means or
instruments of transportation or
communication in interstate commerce or
of the mails to carry or transmit any
prospectus relating to any security with
respect to which a registration statement
has been filed under this title, unless such
prospectus meets the requirements of
section 10; or
Securities Act § 2(a)(10)
The term "prospectus" means any
prospectus, notice, circular, advertisement,
letter, or communication, written or by radio or
television, which offers any security for sale
or confirms the sale of any security; except
that … (b) a notice, circular, advertisement,
letter, or communication in respect of a
security shall not be deemed to be
a prospectus if it states from whom a written
prospectus meeting the requirements of
section 10 may be obtained and, in addition,
does no more than identify the security, state
the price thereof, state by whom orders
will be executed, and contain such other
information as the Commission, by rules
or regulations deem necessary or
appropriate in the public interest and for
the protection of investors, and
subject to such terms and conditions as may
be prescribed therein, may permit.
Securities Act § 2(a)(3)
The term "sale" or "sell" shall include every
contract of sale or disposition of a security or
interest in a security, for value. The term
"offer to sell", "offer for sale", or "offer" shall
include every attempt or offer to dispose of, or
solicitation of an offer to buy, a security or
interest in a security, for value. …
Hypothetical #1
Larissa, a Sparrow broker, learns
of the upcoming Smartway IPO in
an inter-office memo.
She cold calls recent grads from
her alma mater. For the few who
take her call, she intones for 5
minutes about Smartway’s great
growth prospects, its great
management team, the usual
IPO “spike.”
Any gun-jumping?
Securities Act § 5(c)
It shall be unlawful for any person,
directly or indirectly, to make use of any
means or instruments of transportation or
communication in interstate commerce or
of the mails to offer to sell or offer to buy
through the use or medium of any
prospectus or otherwise any security,
unless a registration statement has been
filed as to such security, …
Hypothetical #2
CEO Sherry tells
Smartway’s investment
relations staff to put an ad
in the Wall Street Journal.
For investors looking for a high return, Smartway
intends to sell $200 million in common stock
within the next year.
Any gun-jumping?
Smartway’s return on equity, which has run at
28%, is projected to increase to 35% after the
offering.
If interested, contact Sparrow Securities, the
offering’s lead underwriter.
Securities Act § 2(a)(10)
The term "prospectus" means any
prospectus, notice, circular, advertisement,
letter, or communication, written or by radio or
television, which offers any security for sale
or confirms the sale of any security; except
that … (b) a notice, circular, advertisement,
letter, or communication in respect of a
security shall not be deemed to be
a prospectus if it states from whom a written
prospectus meeting the requirements of
section 10 may be obtained and, in addition,
does no more than identify the security, state
the price thereof, state by whom orders
will be executed, and contain such other
information as the Commission, by rules
or regulations deem necessary or
appropriate in the public interest and for
the protection of investors, and
subject to such terms and conditions as may
be prescribed therein, may permit.
Rule 135
• Announce offering (only issuer and only
basic information)
Rule 134
• Identifying statement (issuer or UW, and
more information, but some conditions)
Rule 169
• Factual information (non-reporting issuer
can continue to describe business, no FLI
or offering info)
Rule 164 / Rule 433
• Permits “free writing prospectus”
• Specifies conditions
Rule 134 (synopsis)
• If your communication complies with Rule 134 it is not a "prospectus"
for purposes of § 5(b)(1).
• You can do (a) if you do (b). You need not do (b) if you do either
(c)(1) or (c)(2). Or you can do (d) as specified.
(a) you can give specified written information
about the issuer and the offering (more
detailed than a tombstone ad), IF
(b) you include a legend that no sales until
RS effective and name the underwriters
and where to obtain a preliminary
prospectus, BUT
(c) you need not include this legend if (1)
you include only the information of a
tombstone ad (with URL for UW), or (2)
you send (or link to) an accompanying
preliminary prospectus,
(d) you can ask
investors to
indicate their
interest in the
offering by return
card, if you also
send (or link to) a
preliminary
prospectus and
explain there is
no commitment.
Hypothetical #3
A registration statement relating to these securities has been filed with the SEC but has not
yet become effective. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
CEO Sherry tells
Smartway’s
investment relations
staff to put the
following tombstone
ad in the Wall Street
Journal.
New issue
March 13, 2006
Any gun-jumping?
Sparrow Securities (100 Broadway, NYC, NY)
Smartway, Inc.
(online marketer of last-minute airline tickets)
20,000,000 common shares
Price $10 per share
Copies of the Prospectus may be obtained from the undersigned.
Alexa Café, Inc
Fish Brothers & Co.
First Lynch
GermanBank
MetroGroup Inc
Morton Standard, Inc.
Silverman, Sachs & Co.
Townsend Securities Ltd
Securities Act § 2(a)(10)
The term "prospectus" means any
prospectus, notice, circular, advertisement,
letter, or communication, written or by radio or
television, which offers any security for sale
or confirms the sale of any security; except
that … (b) a notice, circular, advertisement,
letter, or communication in respect of a
security shall not be deemed to be
a prospectus if it states from whom a written
prospectus meeting the requirements of
section 10 may be obtained and, in addition,
does no more than identify the security, state
the price thereof, state by whom orders
will be executed, and contain such other
information as the Commission, by rules
or regulations deem necessary or
appropriate in the public interest and for
the protection of investors, and
subject to such terms and conditions as may
be prescribed therein, may permit.
Rule 134 (synopsis)
• If your communication complies with Rule 134 it is not a "prospectus"
for purposes of § 5(b)(1).
• You can do (a) if you do (b). You need not do (b) if you do either
(c)(1) or (c)(2). Or you can do (d) as specified.
(a) you can give specified written information
about the issuer and the offering (more
detailed than a tombstone ad), IF
(b) you include a legend that no sales until
RS effective and name the underwriters
and where to obtain a preliminary
prospectus, BUT
(c) you need not include this legend if (1)
you include only the information of a
tombstone ad (with URL for UW), or (2)
you send (or link to) an accompanying
preliminary prospectus,
(d) you can ask
investors to
indicate their
interest in the
offering by return
card, if you also
send (or link to) a
preliminary
prospectus and
explain there is
no commitment.
Hypothetical #4
What if Larissa then sends an
email to those who show interest
in Smartway. The email includes
a note, “I think this is a good
investment. Call me or email if
you want to talk further. Go
Muskrats!”
What if she also asks them to
return a card indicating their
interest?
Any gun-jumping?
Rule 135
• Announce offering (only issuer and only
basic information)
Rule 134
• Identifying statement (issuer or UW, and
more information, but some conditions)
Rule 169
• Factual information (non-reporting issuer
can continue to describe business, no FLI
or offering info)
Rule 164 / Rule 433
• Permits “free writing prospectus”
• Specifies conditions
Rule 164/433 (Free writing prospectus)
Free writing prospectus (Rule 164 )
•
allows free writing prospectus (FWP), deemed
to satisfy §10(b) if Rule 433 conditions
satisfied
•
available to issuer, UW or participant
Conditions (Rule 433)
1.
info may not conflict with RS or SEC filings,
2.
FWP must be legended (tell investor to read
prospectus, how obtain)
3.
must be accompanied by (or linked to)
preliminary/final prospectus (only applies to
non-reporting and unseasoned issuers)
4.
must file with SEC (on date of first use)
–
issuers must file FWP and issuer info
(press interview)
–
participants must file FWP that has “broad
unrestricted dissemination”
Rule 134 (synopsis)
• If your communication complies with Rule 134 it is not a "prospectus"
for purposes of § 5(b)(1).
• You can do (a) if you do (b). You need not do (b) if you do either
(c)(1) or (c)(2). Or you can do (d) as specified.
(a) you can give specified written information
about the issuer and the offering (more
detailed than a tombstone ad), IF
(b) you include a legend that no sales until
RS effective and name the underwriters
and where to obtain a preliminary
prospectus, BUT
(c) you need not give this explanation if (1)
you include only the information of a
tombstone ad (with URL for UW), or (2)
you send (or link to) an accompanying
preliminary prospectus,
(d) you can ask
investors to
indicate their
interest in the
offering by return
card, if you also
send (or link to) a
preliminary
prospectus and
explain there is
no commitment.
Hypothetical #5
Smartway mails a glossy brochure with a
photograph of Sherry and detailed
information on the IPO and how it will be
“rocket fuel” propelling Smartway’s growth.
The pamphlets are mailed to all doctors and
lawyers in California and New York.
Any gun-jumping? Is it exempt “free writing”?
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
“Free writing prospectus” (Rule 405)
“any written communication that offers to
sell or solicits an offer to buy a security
[subject to registration] that does not meet
requirements of § 10 statutory prospectus”
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
“Free writing prospectus” (Rule 405)
“any written communication that offers to
sell or solicits an offer to buy a security
[subject to registration] that does not meet
requirements of § 10 statutory prospectus”
Written communication (Rule 405)
“any communication that is written, printed,
a radio or television broadcast, or a graphic
communication”
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
“Free writing prospectus” (Rule 405)
“any written communication that offers to
sell or solicits an offer to buy a security
[subject to registration] that does not meet
requirements of § 10 statutory prospectus”
Written communication (Rule 405)
“any communication that is written, printed,
a radio or television broadcast, or a graphic
communication”
“Graphic communications” (Rule 405)
“… includes all forms of electronic media,
including … audiotapes, videotapes,
facsimiles, CD-ROM, email, Internet web
sites
“… does not include communication that
originates live, in real-time to a live
audience and does not originate in
recorded form.”
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
Rule 433(b)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by
preliminary prospectus (or final
prospectus once RS effective)
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
Rule 433(b)(1)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by
preliminary prospectus (or final
prospectus once RS effective)
Rule 433(c)
• Information in FWP
•
Not conflict with RS / SEC filings
•
Legend: “Read prospectus – from
EDGAR, UW, website, email”
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
Rule 433(b)(1)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by
preliminary prospectus (or final
prospectus once RS effective)
Rule 433(c)
• Information in FWP
• Not conflict with RS / SEC filings
• Legend: “Read prospectus – from
EDGAR, UW, website, email”
Rule 433(d)
• Filing of FWP w/ SEC
• By issuer (on date of use)
• By participant, if broadly disseminate
Hypothetical #6
CEO Sherry of Smartway Inc (the
online last-minute ticket marketer)
works with Harold and Sparrow
Securities to file a RS.
Sherry and Harold meet with large
institutional shareholders in various
“road shows” around the country.
They make PPT presentations and
answer questions.
Any gun-jumping?
Check out
RetailRoadShow.com
Rule 405
• Defines “graphic communication”
• Does not include PPTs (unless
transmitted or simulcast)
Rule 164 / Rule 433
• Permits “free writing prospectus” /
subject to conditions
• Thus PPT handed out at bona fide
roadshow could be FWP (and no
filing if put on company website)
Hypothetical #7
CEO Sherry gives an interview to
SmallBiz magazine. In the interview,
Sherry discusses the offering and her
hope that Smartway’s business will
rapidly expand due to the capital
provided by the offering.
The SmallBiz article quotes the entire
interview.
Any gun-jumping?
Smartway goes public
Rule 164/433 (Free writing prospectus)
• exception for media communications [Rule
433(f)]
– Not subject to delivery of statutory
prospectus, legending and filing with SEC
– Still must be consistent with RS and SEC
filings [433(c)(1)]
• two conditions
– media source not compensated by issuer
– Issuer files the written communication with
the Commission with the legend within four
business days after the issuer becomes
aware of publication
• Filing of 1st story enough
• Filing can correct information
• Filing requirement satisfied with materials
(including transcript) provided by issuer to
media
Hypothetical #8
Harold of Sparrow Securities emails a
packet on the Smartway IPO to potential
dealers and select institutional investors.
Sparrow includes a valuation analysis,
based on the financials in the preliminary
prospectus. Sparrow anticipates that
information in the packet will be sent to
prospective individual investors.
Sparrow forgets to legend the emails or to
file the info packet with the SEC.
Any gun-jumping?
Rule 164/433 (Free writing prospectus)
Free writing prospectus (Rule 164 )
• allows free writing prospectus (FWP),
deemed to satisfy §10(b) if Rule 433
conditions satisfied
• available to issuer, UW or participant
Conditions (Rule 433)
• info may not conflict with RS or SEC filings,
• FWP must be legended (read prospectus,
how obtain)
• must be accompanied by (or linked to)
preliminary/final prospectus (only applies to
non-reporting and unseasoned issuers)
• must file with SEC (on date of first use)
– issuers must file FWP and issuer info (press
interview)
– participants must file FWP that is “broad
unrestricted dissemination”
Immaterial or
unintentional
failures
[Rule 164(c)]
Hypothetical #9
Recall that CEO Sherry and underwriter
Harold have embarked on a “road show”
across the country to pitch the offering to
institutional investors.
Sherry has one of the “shows” recorded and
posted as a media file on Smartway’s
website. “Might as well let everyone know
what we’re doing.”
Any gun-jumping?
Rule 164/433 (Free writing prospectus)
Conditions (Rule 433(d)(8), (h)(5)]
• road show is FWP but need not be filed;
and
• road show for equity offering by nonreporting issuer must be filed,
–
unless issuer makes at least one
version of a bona fide electronic
road show available by means of
graphic communication to any
person
–
A bona fide electronic road show
means a road show that is a written
communication transmitted by
graphic means that contains a
presentation by one or more
officers of an issuer
Hypothetical #10
Sparrow Securities sends an email to its
investor clients:
We’re pleased that you are interested in the
upcoming Smartway IPO. Please find PDF
version of the preliminary prospectus [click
here].
You might also be interested in recent stories
about Smartway in the Wall Street Journal
[click here] and Fortune [click here] . They
give a quite favorable report on the company
and its prospects.
Any gun-jumping?
“Free-writing” (Rule 164)
In connection with a registered
offering of an issuer meeting the
requirements of this section, a
free writing prospectus, as
defined in Rule 405, of the
issuer or any other offering
participant, including any
underwriter or dealer, after the
filing of the registration
statement will be a section
10(b) prospectus for purposes
of section 5(b)(1) of the Act
provided that the conditions set
forth in Rule 433 are satisfied.
Rule 433(b)(1)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by
preliminary prospectus (or final
prospectus once RS effective)
Rule 433(c)
• Information in FWP
• Not conflict with RS / SEC filings
• Legend: “Read prospectus – from
EDGAR, UW, website, email”
Rule 433(d)
• Filing of FWP w/ SEC
• By issuer (on date of use)
• By participant, if broadly disseminated
A thought question …
Consider the marketing of a securities
offering.
In “quiet” pre-filing period we prohibit
all sales efforts, whether oral or
written. Then in “test the markets”
waiting period, we prohibit written
sales efforts, but accept oral and
PPT communications.
Why do we allow investors in their
pajamas to get road shows online,
but they can’t handle (1) oral
communications before the RS
filing or (2) written communications
in the “test the markets” period.
A summary …
Waiting period - what’s permitted?
• Oral offers – §5(c) no longer applies
• Preliminary prospectus that complies § 10(b)
• Tombstone ad under § 2(a)(10)(b) – minimal info that ID issuer,
securities, price, where get prelim prospectus
• Rule 135 – announcement of offering (issuer, security, amount
offered, timing, manner and purpose)
• Rule 134 – identifying information
– (a) broader info
– (b) include legend, where get prelim prospectus – unless (c)
accompanied with prelim prospectus or only tombstone ad
– (d) can get investor interest, accompany prelim prospectus and
statement that not binding, fully revocable
• Rule 168 – safe harbor for reporting company (factual information,
SEC-filed FLI, not reference offering)
• Rule 169 – safe harbor for non-reporting company (factual info, not
reference offering)
• Rule 164 / 433 – free writing prospectus
Waiting period - what’s permitted?
• Oral offers – §5(c) no longer applies
• Preliminary prospectus that complies § 10(b)
• Tombstone ad under § 2(a)(10)(b) – minimal info that ID issuer,
securities, price, where get prelim prospectus
• Rule 135 – announcement of offering (issuer, security, amount
offered, timing, manner and purpose)
• Rule 134 – identifying information
– (a) broader info
– (b) include legend, where get prelim prospectus – unless (c)
accompanied with prelim prospectus or only tombstone ad
– (d) can get investor interest, accompany prelim prospectus and
statement that not binding, fully revocable
• Rule 168 – safe harbor for reporting company (factual information,
SEC-filed FLI, not reference offering)
• Rule 169 – safe harbor for non-reporting company (factual info, not
reference offering)
• Rule 164 / 433 – free writing prospectus
Waiting period - what’s permitted?
Free writing prospectus (Rule 164)
• allows free writing prospectus (FWP), deemed to satisfy §10(b) if
Rule 433 conditions satisfied
• available to issuer, UW or participant
Conditions (Rule 433)
• info may not conflict with RS or SEC filings,
• FWP must be legended (read prospectus, how obtain)
• must be accompanied by (or linked to) preliminary/final prospectus
(only applies to non-reporting and unseasoned issuers)
• must file with SEC (on date of first use)
– issuers must file FWP and issuer info (press interview)
– participants must file FWP that is “broad unrestricted dissemination”
The end