Effective and Post-Effective Period

5(a)

Sale or delivery after sale. Prohibition on sales until the Registration Statement goes effective.

8(a), ©, (d)

Taking effect of registration statement.

Effective date is the 20th day after filing under 8(a). This is totally unworkable. Amendments including price and number of shares restart the clock unless  allowed by the SEC. SEC has power to grant acceleration of effective date, this is what allows price to be set for a stock the night before. 

8(b) → provides a basis for SEC to refuse going effective. Refusal. 

8(c) → Deals with post effective amendments to the registration statement. This bucks forward the date from which you evaluate if the registration statement is true and complete (10 days?). 
8(d) → Can suspend and wreak havoc! Big big stick the SEC has. This is AFTER (ex-post) the effective date. Stop order.

430A

Prospectus in a Registration Statement at the Time of Effectiveness.

Primarily used for IPO/Non-Shelf offerings. Allows a security to go effective with an incomplete prospectus (i.e., price and number of shares, underwriting syndicate) provided that (1) the securities be offered for cash, (2) the registrant furnishes the undertakings required by item 512(i) of Regulation S-K, and (3) information omitted is filed in 424(b) no more than 15 days after the effective date.

(3) is a penalty clause. The problem with missing the 15 day limit is it pulls forward the effective date. Now, you need to redraft your registration statement and you have an increased risk of Section 11 liability. 

430(a)(3) says if you are later than 15 days, you are in serious trouble! But 424(b)(1) days 2 days…so what gives here? You may have violated the gun jumping provisions but this is different than exposing yourself to Section 11 liability! 
TLDR → 15 day window for Section 11 liability, 2 days for gun-jumping. Even if 430A allows an incomplete prospectus to go effective, the issuer will still need to file a 424(b) amendment to avoid liability!

424

Filing of the Prospectus.

Rule 424(b)(1) requires information missing under Rule 430A (price) to be filed within 2 days of effectiveness to avoid § 5 gun jumping liability; not a post-effective amendment if done within 15 days. 

The issuer can later add any omitted information via a prospectus supplement (Under Rule 424(b)(2), this must be done no more than 2 business days following the determination of the offering piece or the date it is first used after effectiveness in connection with an IPO). 

• Regulation S-K Item 512(i): price related info filed under Rule 424(b)(1) is deemed part of the registration statement as of the date the statement was originally declared effective; deviation in price must be “immaterial” under Rule 430A. 

• BASICALLY, 2 Days for Gun Jumping, 15 Days for Fraud, both subject to “good faith reasonable effort to file” or if late already, “as soon as practicable thereafter”. 

Rule 424(b)(3) deems substantive changes to amend the registration statement (giving rise to antifraud liability); these changes do not include price updates under Rule 424(b)(1).

460

Distribution of preliminary prospectus.

SEC will consider if the persons making the offering have taken reasonable steps to make the information contained in the registration statement conveniently available to underwriters and dealers. Requires that a reasonable number of preliminary prospectuses be distributed to underwriters and dealers in a timely manner (often at least 48 hours before confirmation) to inform investors.

461

Factors SEC looks at before granting acceleration:

1. The prospectus was not honestly written to be clear, short, and easy to understand as required by the plain-English rule.

2. The preliminary prospectus that was sent out contains important mistakes or missing information, and corrections have not yet been properly sent to everyone who received it.

3.  The SEC is currently investigating the company, someone who controls the company, or one of the underwriters.

4. An underwriter has agreed to buy the securities but does not meet required financial responsibility rules, even if the agreement depends on normal conditions like legal opinions or accuracy of statements.

5. People connected to the offering have traded the company’s securities in a way that may have unfairly influenced the market price.

6. The underwriters’ pay or related arrangements have not yet been cleared by the industry regulator after required review.

7. For a large resale of securities into the market, the parties involved have not taken enough steps to follow market-manipulation prevention rules.

473

Delaying Amendment. A piece of script on the bottom of the registration statement (that is not yet effective) just says hey each day this is going to be amended, the 20 day timer will reset, until the UWs say ok lets accelerate! 

EA Rule 10(b)-10

TFW & Prospectus Delivery. Confirmation of sale must be sent; EA Rule 10(b)-10

• Confirmation of sale is a prospectus under §2(a)(10): there is a concern of violating §5(b)(1) unless a final prospectus is attached. 

• TFW is how we circumvent this… 

• TFW is exempt from §2(a)(10) [prospectus definition] if a §10(a) is attached; TFW includes all written offering materials that would otherwise be a prospectus. 

  • §2(a)(10)(a) explicitly exempts TFW; these are not prospectuses if §10(a) attaches. 

• Literally any written communication is TFW, and as long as a §10(a) is attached, you’re all good. 

  • No record, legend, or filing requirements.

172

Access = Delivery. Allows access = delivery with some minimal conditions (effective registration, no §8(a) proceedings, filed under §10(a) (Rule 430A OK), and “good faith reasonable effort to file” or if failed, “as soon as practicable thereafter.” 

Even if you are in the delivery period, you do not need to attach a prospectus if it is available online IF it is a final 10(a) prospectus [but dealers do not need to worry about this]. For 5(b)(1) and in some circumstances, 5(b)(2).

173

Requires those subject to prospectus delivery to either notify purchasing investors that the sale took place under an effective registration statement or provide a final prospectus [this informs of §11 and §12(a)(2) rights.

4(a)(1),(2),(3),(4)

§4(a)(1) says §5 does not apply to transactions by any person other than an “issuer, underwriter, or dealer” 

§4(a)(2) says §5 doesn’t apply to transactions that are not public offerings; Ralston Purina

§4(a)(3) says §5 doesn’t apply to a [any] dealer, except [§5 does apply when]:

1. Transactions prior to 40 days after the first date of an offering; 

2. Offerings with a registration statement (public offerings)

   1. If securities have not been sold previously by an issuer (IPO), the applicable period will be prior to 90 days, not 40 days [cabined by Rule 174] [only applies to involved dealers]

3. Transactions constituting the whole part of an unsold [initial] allotment. 

§4(a)(4): §5 doesn’t apply to brokers executing a customer’s order unless they solicit the order.

174

Delivery of Prospectus by dealers: exemptions under 4(a)(3). Rule 174 gives further exemptions for DEALERS [including underwriters] (and different delivery periods)

• Rule 174(b): NO DELIVERY requirement for transactions in securities of REPORTING companies

  • They get to send glossy brochures all day. 

  • UNLESS it’s still part of the unsold initial allotment. 

• Rule 174(d): Non-Reporting & listed on National Exchange have a delivery period of 25 days

Exempts dealers from the 4(a)(3) requirement to deliver a prospectus for transactions in securities of reporting companies, or when the registration statement has been effective for a specified period. See above under 4(a)(3) Exemptions for time periods.

174(b)

Prospectus Delivery for Reporting Companies. 174(b) reduces the prospectus delivery period for a company that is an Exchange Act reporting company immediately prior to the filing of the registration statement to 0 days. 

430A

Allows issuers to go effective with a registration statement that contains a form of the statutory prospectus that omits certain information. 

• Addresses a timing concern. Under 430A, the final prospectus filed as part of the registration statement may omit price-related information. 

• Issuers using 430A must eventually file price-related information with the SEC. 

• If the filing occurs within 15 business days after the effective date, then no post-effective amendment is necessary. Instead, issuers may file a prospectus containing the pricing information [Rule 424(b)(1)]

  • If after 15 business days, and price information is still not provided, then information must be filed as apost-effective amendment to Reg. Stat.2

2(a)(10)(a)

Traditional Free Writing. Provides an exemption from application of 5(b)(1): Traditional free writing. Traditional Free Writing includes all written or broadcast offering materials which would otherwise be a prospectus not complying with §10(a). 

• Issuers can send selling documents to potential investors after the effective date as lon as they include the final statutory prospectus. 

• Not treated like FWP. There are no legends, filling, or record retention requirements for traditional free writing.

5(b)

Prospectus Delivery Requirement. §5(b)(2) requires that a §10(a) prospectus precede or accompany the sale of a security. 

How long does the delivery requirement last? §5(b) provides no limit. Because §4 applies to “any person” even individual investors would have an obligation to send a statutory prospectus to their investors… this is where 4(a) exemptions come in.

4(a)(1), (3)

Exemptions from Prospectus Delivery Requirement. §4(a)(1) exempts transactions not involving any “issuer, underwriter, or dealer" from §5. Exempts individuals selling in ordinary secondary market transactions from the gun-jumping rules. 

§4(a)(3) exempts dealers, but its availability is limited. Dealers still acting as U/W or the offered security are not allowed to use 4(a)(3) exemption, so they must comply with 5(b) delivery requirements. 

Dealers who are not UW but are participants in the distribution still selling an allotment from the offering may not rely on 4(a)(3) for securities that are part of the unsold allotment. 
For other dealers, 4(a)(3) + 174 establishes time periods when 4(a)(3) is not available: 

• 0 days: Issuer that is an Exchange Act Reporting issuer immediately prior to the filing of the registration statement

• 25 days: Issuer whose securities will be listed on a national securities exchange as of the offering date; 

• 40 days: Issuer that does not fit any of the above categories not doing an IPO; 

• 90 days: Issuer that does not fit any of the above categories doing an IPO.

172

Access = Delivery. Streamlines prospectus delivery requirement through “access = delivery”

Rule 172(c) imposes some conditions to qualify for this: 

• Issuer must file a final §10(a) prospectus with the SEC or “make a good faith and reasonable effort to file such prospectus within the time required under Rule 424 and in the event that the issuer fails to file timely such a prospectus, the issuer files the prospectus as soon as practicable thereafter. [Rule 172(c)(3)]. 

If 172(c) is met, Rule 172(a) exempts written confirmations of sales from having to be mailed to the purchasers. 

• General free writing other than written confirmation of sales is not covered under Rule 172 and therefore falls under the traditional prospectus delivery requirement. 

• WKSIs may avoid prospectus delivery if they instead comply with the FWP under 164 and 433 (but FWP subject to 12(a)(2)).

173

U/W, Brokers, and dealers must send some minimal additional information along with the sales confirmation. Rule 173 requires that for transactions in which the final prospectus delivery requirement applies under Rule 174 and 4(a)(3), participating U/W, brokers, and dealers must either notify purchasing investors that the sale took place under an effective registration statement or provide a final prospectus. 

• This notice informs purchaser that they may have rights under §§ 11 and 12(a)(2). 

• The notice must be provided not later than 2 business days following the completion of the sale. Non-compliance with Rule 173, however, does not violate §5. Moreover, compliance with Rule 173’s notice requirement is not a prerequisite for the application of Rule 172’s access-as-delivery

Shelf Offerings

NOT a §5 exemption; they are a way to have “securities on demand”

• This is already an effective registration statement: this gives option to “take them off the shelf”

• Rule 415 allows issuers to sell registered securities for an extended period after the initial effective date.

415

Offerings that meet these requirements may be offered on a “CONTINUOUS or DELAYED basis in the future.”

1. Registration Statement pertains only to: 

   1. Securities where offering will be commenced promptly and made on a continuing basis (ix)

   2. Securities registered on S-3 to be offered and sold on an immediate, continuous, or delayed basis (x) 

2. For Non S-3 Issuers (unseasoned/non-reporting), 2 year time limit

   1. Does not apply to S-3 issuers

3. Prospectus/Registration Update Requirements

   1. Must “furnish all undertakings required by Item 512(a) of Regulation S-K”

   2. Filings are post-effective amendments, unless incorporated by reference. 

      1. There is always §11 liability, even if incorporating by reference. 

4. To do an “at the market” equity offering [offering into an existing market at the prevailing market price] by or on behalf of the issuer, [must be a WKSI/Seasoned (using S-3 or F-3)]. 

5. 3 Year Limit [non S-3 have a 2 year limit]

   1. Must re-register every 3 years (this is a small burden)