Filing Requirements

• Author: Stephanie Tsacoumis
• Profession: Recognized securities law practitioner and professor at Georgetown Law Center
• Pages: 41-76

41

Chapter3

Filing Requirements

Securities Offerings

Basics of the 1933 Act

The 1933 Act takes a transaction- based approach that requires com-

panies to make disclosures when issuing securities to the public.

Specically, offers to buy or sell securities are forbidden until the

applicable form containing specied disclosures (a “registration

statement”) has been led with the SEC. Sales of securities may

not be consummated until the applicable registration statement

is deemed “effective” by the SEC. (These restrictions and registra-

tion requirements do not apply to exempt offerings, such as private

placements, where different requirements apply, or to offerings of

exempt securities, such as short- term commercial paper.)

An “offer” is dened broadly to include “every attempt or offer to dispose of,

or solicitation of an offer to buy a security... for value.” Any communication

that may “contribute to conditioning the public mind or arousing public

interest” in a securities offering may be an offer under the 33 Act.

The specic circumstances are important. Communications that have been

deemed to constitute “offers” include:

• A New York Times interview of the CEO of a company with an IPO reg-

istration statement pending at the SEC, during which the CEO discussed

aspects of the company’s business and its competitors.

(continued)

42 What Must Public Companies Disclose?

(continued)

• A magazine story quoting the founders of a popular search engine, one

week before ling their IPO registration statement with the SEC, as they

addressed how going public might inuence corporate culture.

Examples of communications that may fall outside of the denition of

“offer” include ordinary factual business communications that are regularly

released, such as product advertising and press releases regarding factual

developments in the business.

These 33 Act provisions effectively divide the registration process

into three distinct time periods: the preling or quiet; waiting; and

posteffective periods.

Preling or Quiet Period

The preling or quiet period begins when a company decides

to proceed with a public offering (usually by retaining one or more

investment banks to undertake the offering) and ends when the reg-

istration statement is rst led publicly with the SEC. Nothing that

would be considered to be an offer of securities generally is permit-

ted during the preling period (although the SEC has expanded the

extent to which “test the waters” communications are permitted).

Waiting Period

The waiting period extends from the time of publicly ling the

registration statement until the SEC staff declares the registration

statement effective. During the waiting period, no sales of securi-

ties are permitted. Under the statute, oral offers are permitted and

written offers must meet the statutory requirements for a “prospec-

tus,” which is broadly dened to encompass a wide range of offering-

related communications. Because the SEC considers many forms of

oral communications— such as TV broadcasts, voicemail messages,

and recorded presentations— to constitute “writings” for this pur-

pose, communications during the waiting period must be carefully

designed and effectuated.

Impermissible advertising or publicity of the offering during the

waiting period, often called “gun jumping,” could delay effectiveness

Chapter3 ■ Filing Requirements 43

of the registration statement to allow for a “cooling off period”

and, depending on the circumstances, could require disclosure in

the prospectus about the contingent liabilities created by the viola-

tion. The SEC also can assess administrative penalties against those

responsible for improper offer- related activity.

Posteffective Period

During the posteffective period, after the registration state-

ment is effective, underwriters and other distribution participants

may sell the securities by means of a nal prospectus meeting 33

Act requirements. The 33 Act continues to govern publicity and the

sales process until the distribution of securities is completed or the

expiration of the period during which underwriters must deliver a

nal prospectus, if later.

Consequences of Violations

Violations of 33 Act provisions regarding offers and sales of secu-

rities could have adverse consequences. Most signicantly, any inves-

tor who buys securities in a transaction that did not properly adhere

to the restrictions relating to offers and sales can rescind the sale

and recover the purchase price paid (plus interest less any distribu-

tions with respect to the security). In other words, the investor could

return the securities to the seller— no questions asked and no other

proof required— at any time during the year following the sale; the

investor in effect receives a “put” right.

Registration Statement Requirements

The disclosure focus of the 33 Act is embodied in the requirements

that a registration statement containing prescribed disclosures be

led and become effective and that a nal prospectus (which is a

signicant component of the registration statement) be delivered to

investors. The information required to be contained in a registration

statement was specied in Schedule A to the 33 Act and was later

reected in SEC regulations, culminating in Regulation S-K, which

today sets forth key public company disclosure requirements under

both the 33 and 34 Acts.