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Securities Regulation > Public Offerings (Chapter 7) > Flashcards

Public Offerings (Chapter 7) Flashcards

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SIE Exam flashcards
1
Q

Section 5 bars

A

• § 5(a): Unlawful to sell a security unless registration in effect
o Text: “Unless a registration is in effect as to a security, it shall be unlawful for any person, directly or indirectly (1) to . . . sell [a] security through the use of medium of any prospectus . . . .”
• § 5(b)(1): Prospectus Ban
o Text: “It shall be unlawful for any person (1) to . . . 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 . . . .”
• § 5(b)(2): Prospectus Delivery Requirement
o Text: “It shall be unlawful for any person (1) to carry . . . any such security for the purpose of sale or for delivery after sale, unless accompanied or preceded by a prospectus that meets the requirements” of § 10(a).
• § 5(c): Unlawful to offer to sell or offer to buy unless registration has been filed
o Text: “It shall be unlawful for any person . . . to offer to sell or offer to buy . . . any security, unless a registration statement has been filed as to such security . . . .”

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2
Q

Section 7

A

x

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3
Q

Rule 421

A

x

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4
Q

Form S-1

A

All companies qualify, except for the securities of foreign governments or the political subdivisions of such governments.

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5
Q

Form S-3

A

Available to domestic issuers that satisfy one of several eligibility provisions.

(1) The most important category: companies that (a) have been reporting companies for at least one year; (b) were timely in their periodic filings during the past year; and (c) have over $75 million in equity held by non-affiliates.
(2) This $75 mil float req’t is waived if the company is selling no more than 20% of its equity.

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6
Q

Sec. (2)(a)(3)

A

x Defines offer

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7
Q

Sec. (2)(a)(4)

A

x

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8
Q

Sec. (2)(a)(10)

A

x

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9
Q

Sec. (2)(a)(11)

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x

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10
Q

Sec. 4(1)

A

x

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11
Q

Sec. 5

What provisions, and when do they matter?

A

§ 5(a): no sales (applies through waiting period)
§ 5(c): no offers (applies through pre-filing period)
§ 5(b)(1): (starts with waiting period) no prospectus unless meets requirements of § 10
§ 5(b)(2): (post-effective period) Cannot transmit securities for sale unless § 10(a) prospectus before or after

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12
Q

Sec. 10

A

x

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13
Q

Rule 135

A

x

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14
Q

Rule 163

A

Safe harbor for WKSIs: Provides a special exemption solely for WKSIs communicating during the pre-filing period.
o Applies to both oral and written communications.
• Written = free writing prospectuses and prospectuses under 2(a)(10).
• By deeming a Rule 163 written communication as a prospectus, the SEC creates both Rule 10b-5 and 12(a)(2) private antifraud liability.

WKSIs relying on 163 must meet several conditions:
• (1) Written communication must include a specified legend – 163(b)(1)
• (2) WKSI must file written communications under 163 with the SEC “promptly” after the filing of the RS – 163(b)(2)
• (3) An offering participant who is an underwriter or dealer, even if acting on behalf of the WKSI, may not take advantage of 163 – 163(c)

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15
Q

Rule 163A

A

30-day cool down rule, general safe harbor

It imposes several conditions:
o (1) Communication may not refer to the securities offering – 163A(a)
o (2) Issuer must take reasonable steps to ensure that further distribution or publication of the communication does not occur during the 30 days immediately prior to the filing of the RS – 163A(a)
o (3) An offering participant who is an underwriter or dealer, even if acting on behalf of the issuer, may not take advantage of Rule 163A – 163A(c)

Justification: to provide a sufficient time period to cool any interest in the offering that might arise from the communication.

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16
Q

Rule 168

A

Reporting issuer safe harbor: Safe harbor for regularly released or disseminated factual business info and forward-looking info. If it applies, it excludes comm’s from the definition of an offer for purposes of 5(c) and 2(a)(10).

Conditions Imposed:
• (1) Only factual business or forward-looking info are permitted under 168(a).
• (2) An offering participant who is an underwriter or dealer, even if acting on behalf of the issuer, cannot rely on Rule 168. – 168(b)(3)
• (3) Rule 168 doesn’t permit disclosure of info about the public offering, nor can such disclosure be a “part of the offering activities.” – 168(c)
• (4) The info under 168 must be regularly released or disseminated – 168(a), and the issuer must have previously released or disseminated the same type of info in the ordinary course of business – 168(d)(1).

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17
Q

Rule 169

A

Non-reporting issuer safe harbor: Provides a safe harbor for regularly released or disseminated factual business info for all issuers, including those who fail to qualify for 168.

o Conditions imposed:
• (1) Unlike 168, only factual business info is permitted – 169(a)
• 169(b)(1) defines factual business info to include:
o (i) Factual info about the issuer, its business or financial developments, or other aspects of its business; and
o (ii) Advertisements of, or other info about, the issuer’s products or services.
• (2) An offering participant who is an underwriter or dealer, even if acting on behalf of the issuer, cannot rely on Rule 169. – 169(b)(2)
• (3) Release of info may neither contain info about the public offering nor represent it as “part of the offering activities.” – 168(c)
• (4) The info under 169 must be regularly released or disseminated – 169(a), and the issuer must have previously released or disseminated the same type of info in the ordinary course of business – 169(d)(1).

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18
Q

Rule 405

A

Electronic communications are “offers” if NOT in real-time

  • “real time” = if the other person on the other side of the communication has the ability to ask questions and get answers
  • Hyperlinks can be an offer – Rule 433(e)
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19
Q

Rule 421

A

x

20
Q

Rule 433(e)

A

Hyperlinks can be an offer – Rule 433(e)

21
Q

Rule 430

A

x

22
Q

Rule 134

A

x

23
Q

Rule 164

A

x

24
Q

Rule 433

A

x

25
Q

Sec. 4(a)(3)

A

x

26
Q

Sec. 4(a)(4)

A

Exempts unsolicited broker’s transactions

Example: Underwriters’ brokers can assist investors in executing unsolicited transactions in the issuer’s secondary market securities, even if the issuer plans to sell securities in a public offering.

27
Q

Sec. 5(b)(2)

A

x

28
Q

Rule 172

A

x

29
Q

Rule 173

A

x

30
Q

Rule 174

A

x

31
Q

Rule 430(a)

A

x

32
Q

Rule 430A

A

x

33
Q

Sec. 6(a)

A

x

34
Q

Rule 174(c)

A

x

35
Q

Rule 413(b)

A

x

36
Q

Rule 415

A

x

37
Q

Rule 424(b)(2)

A

x

38
Q

Rule 424(b)(3)

A

x

39
Q

Rule 430B

A

x

40
Q

Rule 456(b)

A

x

41
Q

Rule 462(e)

A

x

42
Q

Item 512(a)(1)

A

x

43
Q

Regulation S-K

A

x

44
Q

In re Carl M. Loeb

A

Communications that “condition the public mind or arouse public interest in the particular securities” may undermine the goal of slowing the selling process os investors have time to digest info.

45
Q

SEC Act Release No. 3844 (1957)

A

Gives examples of “condition the public mind”

  • Thousands of brochures mailed w/ positive indsutry info (without mentioning issuer or upcoming public offering) are press release with “representations, forecasts, and quotes which could not have been supported as reliable data” (aka soft forward-looking info) would = conditioning
  • In contrast, a CEO presentation scheduled well before teh decision to go public is an example of a communication deemed NOT an offer
  • -> BUT, the SEC did recommend against distributing printed documents in connection with the presentation
46
Q

SEC Act Release No. 5180 (1971)

A

While “initiating” publicity while in registration is problematic, an issuer may continue to respond to legitimate inquiries.

Did issuer intend to condition the market? Look to purpose

47
Q

Factors Defining an Offer

A

(1) Motivation of the communication;
(2) The type of info, particularly the presence of soft forward-looking info;
(3) The breadth of communication;
(4) Form of the communication (e.g., written); and
(5) Whether the underwriter is mentioned by name (or other facts about the offering)

Securities Regulation (10 decks)

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