Ch 2 Deck 6 Flashcards
A prospectus is a sales document but also must provide
accurate and complete information - Everything that an investor needs to know to make an informed choice.
Section 2 of Securities Act of 1933 gives a general definition of prospectus
Any written or broadcast offer to sell securities is considered a prospectus
Any written offer to sell or solicitation of an offer to buy the securities in an offering that is used after a registration statement is filed
Free writing prospectus
FWP can be used before registration is filed only by
WKSI’s
For FWP’s, “Written” offer includes
scripted offer, i.e.
- broadcast on TV
- roadshow presentation slides
FWP may include info not
in final prospectus
FWP may not disagree with
info in final prospectus
FWP must include legend saying
- registration statement has been filed
- place that they can obtain a copy of the preliminary prospectus
FWP must be filed with the SEC no later than
first use
FWP doesn’t need to be filed if
no substantive changes
Preliminary prospectus is also called
red herring
Preliminary prospectus is used during the time
between the filing of the registration statement and the effective date
Preliminary prospectus is reviewed by
SEC
When reviewing the preliminary prospectus SEC will issue a stop order if
it finds that the registration statement contains material omissions or misleading information
If the SEC issues a stop order after reviewing a red herring, it suspends the process until
a rewrite is done and the amendment is filed
If the SEC believes there has been insufficient disclosure in the registration statement, then
the issuer will receive a deficiency letter and the SEC will require an amendment
if SEC requests no changes registration becomes effective
after 20 days
Preliminary prospectus legend must be
on front cover in red
Preliminary prospectus has all the same information as final except
doesn’t contain offering price
Price is generally put in prospectus
right before the offering
Must file how many copies of preliminary prospectus with SEC
5
Final prospectus is used to
- register the security
- as a disclosure document for investors
Must file how many copies of final prospectus with SEC
10
Instructions for Narrative Disclosure in final prospectus found in
Regulation S-K
Instructions for Financial Information found in
Regulation S-K
SEC rule 405 defines a written communication as
Any communication that is “written, printed, a radio or television broadcast, or a graphic communication”
SEC rule 405 includes in a graphic communication
Need to know
All forms of electronic media, including, but not limited to, audiotapes, video tapes, facsimiles, CD-ROM, Electronic mail, Internet websites, substantially similar messages widely distributed (rather than individually distributed) on telephone answering or voicemail systems, Computers, computer networks and other forms of computer data compilation.”
Does red herring legend need to be red?
Traditionally is, but doesn’t have to be
prelimary prospectus is carried on
road show
Instructions for Financial Information is found in
Regulation S-X
An FWP must be in what form?
Written form
An FWP is a written offer to what
Sell or buy securities in an offering
An FWP can only be used after
a registration statement is filed (only WKSI’s can use before)
Who can use FWP’s before a registration statement is filed
WKSI’s
