Securities Regulation Outline
Fall 2008
1. Post Effective Period
a. Occurs after the registration statement has become effective
i. 5(a)(1) no longer prohibits closing sales and 5(a)(2) allows for the delivery of the security
ii. Delivery – must be accompanied by a § 10 prospectus; must be a final pps - § 5(b)(2)
1. Final PPS includes offering price, underwriter compensation, amount of the
proceeds, and other information that is dependent on the offering price
b. Rule 172
i. 172(a)
1. No longer have to meet § 5(b)(1)’s written confirmation requirement as well as
notifications that allocations will be made from a registered offering
2. No longer have to physically provide a final pps
3. EXCEPTION
a. Exchange Act Rule 15c2-8(b) – underwriter must deliver a preliminary
pps to buyers at least 48 hours before sending confirmation of sales
ii. 172(b)
1. 5(b)(2) normally allows sale of securities interstate commerce only if
accompanied by a final pps
2. 172(b) creates an exception – if final §10(a) pps is filed with SEC, provided also
that registration statement is not subject to enforcement actions
c. Rule 433
i. Encourages distribution participants to use the Free writing period rules
1. must comply with legend and filing requirements
d. Duration of Section 5 Requirements
i. Issuers
1. subject to § 5 as long as they are offering the security to the public
ii. Underwriters and Dealers
1. Subject to § 4(3)(C) as long as their allotment or subscription is unsold
2. Rule 172 and 174 reduces this
a. 172(a) – dealers no longer have to deliver a pps
b. Rule 172(c)(4) – dealers do not have to deliver when transporting
securities
3. Rule 173 – if not exempt under 172 or 174, must deliver a pps within 2 business
days after the sale
e. Section 4(3) and Delivery of a PPS by a Dealer
i. Dealer v. Broker
1. Dealer solicits investor’s interest in a security
ii. 4(3) applies if you are a dealer
iii. Rule 153
1. dealer no longer has to deliver a pps in connection with the delivery of securities
iv. Rule 174
1. a dealer that is not an underwriter does not have to file a pps if the issuer was a
reporting company under the ’34 act
2. 174(d) - if not a reporting company and security is listed on a national exchange
or registered with interdealer quotation system of a registered SRO, then no
delivery of a pps
v. 172(c)(4) and 174(h) - No delivery of a pps for a dealer as long registration statement is
not the subject of SEC enforcement proceeding
vi. 173 – fallback provision – if not excepted then you must deliver a pps within 2 business
days
f. Section 4(4) and Broker’s Exemption
i. Broker that does not solicit her client’s interest in a registered security
ii. Broker merely serves as an agent
2. Shelf Registration Under Rule 415
a. Generally
i. Shelf Registration – registration of securities to be offered on a delayed or continuous
basis
1. issuers use this to take advantage of market windows
2. Can be used to accomplish a series of acquisitions with stock
ii. Problem was with § 6(a) – stated that a registration shall be effective only as to those
securities specified therefore as proposed to be offered
1. trying to ensure that registration info is as current as possible
iii. Deal with these fears by filing post effective amendments to keep info current
1. Filing is pursuant to 415(a)(3) and is set forth in 512(a) of S-K
2. must file an amendment covering any pps required under § 10(a)(3)
a. essentially update financial statements annually
b. Rule 415
i. Traditional shelf offerings are permitted under (a)(1)(i) through (a)(1) (ix) expressly
authorize shelf registration
ii. 415(a)(1)(x) permits shares to be registered on S-3 or F-3 and they can be offered and
sold on a delayed or continuous basis, by or on behalf of the registrant
iii. Good vs. Bad
1. Good
a. Decreases underwriting fees
b. Allows for quick deals
2. Bad
a. Less time for diligence because deals occur quickly
b. Increases the bought deal
iv. 415 doesn’t specify the form to use – have to look at eligibility for that form
c. WKSI
i. 2005 reform allowed for automatic registration for WKSI – Release No. 8591
ii. WKSI can register unspecified number of securities that become immediately effective
when Form S-3 or F-3 is filed
1. gives lots of leeway in determining amount and type of security to offer
iii. allows WKSI to omit more information from base pps than is allowed under 430B
1. can omit – whether the offering is primary or secondary, description of securities,
names of any selling security holders, and plan of distribution
2. can add info later through post-effective amendment, incorporation by reference,
or pps or pps supplement
iv. statements are effective on filing and last for three years
d. Updating via 430B and 430C
i. 430B authorizes mission from base prospectus information that is unknown or not
reasonably available
ii. Base prospectus is not a final pps
iii. 430B(d) – info that is omitted is added later though amendment, pps filed pursuant to
424, or incorporation by reference
iv. 430B(e) – any omitted information that is later added becomes part of registration
statement so that § 11 liability attaches
v. 430C – information supplemented in other offerings becomes part of registration
statement as well