Question 1

What is the waiting period in a U.S. IPO?

Accepted Answer

The waiting period is the time between the public filing of the registration statement and its effective date. Once the registration statement is filed, Section 5(c)'s prohibition on offers no longer applies, but Section 5(a) still makes sales and post-sale deliveries of the registered securities unlawful, and Section 5(b)(1) makes it unlawful to transmit any 'prospectus' for the securities unless it meets the requirements of Section 10 of the Securities Act. Offers may therefore resume after filing — subject to strict limits on their written form. Section 5(c) prohibits offers to sell or offers to buy before a registration statement is filed, and again while the registration statement is subject to a refusal order, stop order, or pre-effective proceeding under Section 8. Section 5(b)(1) applies to any security 'with respect to which a registration statement has been filed.' This period corresponds to the minimum span of the quiet period described on Investor.gov: at a minimum, from the time an issuer files a registration statement until SEC staff declare it effective, during which every 'offer' must comply with the federal securities laws — and the SEC and courts construe 'offer' broadly to include communications that might generate public interest in an issuer or its securities.

Question 2

Why are oral offers permitted during the waiting period while written offers are restricted?

Accepted Answer

Section 5(b)(1) restricts only the transmission of a 'prospectus,' and Section 2(a)(10) defines a prospectus as any prospectus, notice, circular, advertisement, letter, or communication, written or by radio or television, that offers any security for sale or confirms the sale of any security. An oral offer that is not broadcast by radio or television — a telephone call or an in-person, live presentation — is not a prospectus, so Section 5(b)(1) does not reach it once the registration statement is on file. Securities Act Rule 405 defines a 'written communication' as any communication that is written, printed, a radio or television broadcast, or a 'graphic communication.' Graphic communication includes all forms of electronic media — among them e-mail, Internet websites, audiotapes, videotapes, facsimiles, CD-ROM, and widely distributed voice-mail messages — but excludes a communication that, at the time it is made, originates live, in real time to a live audience and does not originate in recorded form, even if it is transmitted through graphic means. That carve-out is what keeps a live, real-time webcast presentation on the oral side of the line.

Question 3

What is the preliminary prospectus, or red herring?

Accepted Answer

Under Securities Act Rule 430, a form of prospectus filed as part of the registration statement is deemed to meet the requirements of Section 10 for purposes of Section 5(b)(1) before the effective date, provided it contains substantially the information a Section 10(a) prospectus requires — except that it may omit the offering price, underwriting discounts or commissions, discounts or commissions to dealers, amount of proceeds, conversion rates, call prices, and other matters dependent upon the offering price. This is the document distributed to prospective investors during the waiting period; the SEC itself has referred to it as the 'section 10 preliminary "red herring" prospectus.' The statutory basis is Section 10(b) of the Securities Act, which directs the Commission to permit by rule the use of a prospectus for Section 5(b)(1) purposes that omits in part or summarizes information required in the full Section 10(a) prospectus. Rule 430 also provides that every such form of prospectus is deemed to have been filed as part of the registration statement for purposes of Section 7. The quoted 'red herring' usage appears in SEC Release No. 33-7943, Integration of Abandoned Offerings (66 FR 8887, February 5, 2001). Rule 430's eCFR source note records amendments at 47 FR 11440 (March 16, 1982) through 76 FR 71876 (November 21, 2011).

Question 4

What legend must the preliminary prospectus carry?

Accepted Answer

Item 501(b)(10) of Regulation S-K requires a prospectus used before the effective date of the registration statement (or, under Rule 430A, before the public offering price is determined) to include a prominent 'Subject to Completion' legend stating that: the information in the prospectus will be amended or completed; a registration statement relating to the securities has been filed with the SEC; the securities may not be sold until the registration statement becomes effective; and the prospectus is not an offer to sell, and is not soliciting an offer to buy, the securities in any state where offers or sales are not permitted. Item 501(b)(10)(ii) supplies model plain-English wording: 'The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.' Under Item 501(b)(10)(iii), the state-law statement may be excluded if the offering is not prohibited by state law. The 'red herring' name is traditionally associated with this legend; the current rule prescribes the legend's content and prominence but not its color. The Item's source note records adoption at 63 FR 6381 (February 6, 1998, the Plain English Disclosure rules) with amendments through 84 FR 12718 (April 2, 2019).

Question 5

What may a Rule 134 notice say after the registration statement is filed?

Accepted Answer

Rule 134, 'Communications not deemed a prospectus,' takes a communication outside both the Section 2(a)(10) 'prospectus' definition and the Rule 405 free-writing-prospectus definition if the communication is limited to items the rule specifies and is published or transmitted only after a registration statement that includes a Section 10 prospectus has been filed. Permitted items include: factual identity information about the issuer (name, address, contact details, country of organization, geographic areas of business); the title and amount of securities offered; a brief indication of the issuer's general type of business; the price or its method of determination, or a bona fide estimate of the price range given by the issuer or managing underwriter; a brief description of the intended use of proceeds if disclosed in the filed prospectus; the sender's identity and its participation in the distribution; the type of underwriting and names and roles of the underwriters; the anticipated offering schedule and marketing events; account-opening and indication-of-interest procedures, including directed share plans; exchange or market listings; ticker symbols; and the CUSIP number. Paragraph (a) of the rule enumerates 22 numbered categories of information (item (a)(17) is reserved), including legal-investment and tax-status opinions of counsel, rights-offering mechanics, state-required legends, and corrections of prior Rule 134 communications. The SEC has described the rule's history this way: 'Originally, rule 134 communications, known as "tombstone advertisements," were intended merely to announce the existence of a public offering and serve as a simple means for soliciting inquiries for the statutory prospectus' (Release No. 33-8101, 67 FR 36712, May 24, 2002). Rule 134 was last amended at 85 FR 33352 (June 1, 2020).

Question 6

What legend and conditions apply to Rule 134 notices?

Accepted Answer

Under Rule 134(b), unless an exception in paragraph (c) applies, every Rule 134 communication used before effectiveness must state: 'A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective,' and must give the name and address of a person from whom a written Section 10 prospectus (other than a free writing prospectus) may be obtained. Rule 134(c) excuses the legend where the communication does no more than state from whom (and the URL where) a Section 10 prospectus may be obtained, identify the security, state its price, and state by whom orders will be executed — or where it is accompanied or preceded by a Section 10 prospectus including a price range where required. Rule 134(d) permits soliciting an offer to buy or an indication of interest only if the communication is accompanied or preceded by such a prospectus and contains substantially this statement: 'No offer to buy the securities can be accepted and no part of the purchase price can be received until the registration statement has become effective, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time prior to notice of its acceptance given after the effective date' (not required in communications to dealers). Under Rule 134(f), an active hyperlink satisfies the accompany-or-precede condition in paragraphs (c)(2) and (d). Under Rule 134(g), the rule is unavailable for communications relating to registered investment companies other than registered closed-end funds.

Question 7

What is a free writing prospectus?

Accepted Answer

Securities Act Rule 405 defines a free writing prospectus (FWP) as any written communication that constitutes an offer to sell or a solicitation of an offer to buy securities in a registered offering, used after the registration statement is filed (or, for a well-known seasoned issuer, whether or not it is filed), and made by means other than: (1) a prospectus satisfying Section 10(a) or Rules 430, 430A, 430B, 430C, 430D, or 431; (2) a written communication used in reliance on Rules 167 and 426; (3) a communication within the exception in clause (a) of Section 2(a)(10); or (4) a written communication used in reliance on Rule 163B or Section 5(d) — that is, testing-the-waters communications are excluded from the definition and operate under their own accommodation. Under Rules 164(a) and 433(a), a free writing prospectus that satisfies Rule 433's conditions is a prospectus permitted under Section 10(b) for purposes of Sections 2(a)(10), 5(b)(1), and 5(b)(2) — a lawful written offer beyond the statutory prospectus — and may include information the substance of which is not in the registration statement. Rule 433(a) also deems such a free writing prospectus public, without regard to its method of use or distribution, because it relates to a public offering under a filed registration statement. The FWP framework was adopted in Securities Offering Reform, SEC Release No. 33-8591 (70 FR 44722, August 3, 2005), effective December 1, 2005.

Question 8

Which issuers may use a free writing prospectus, and on what conditions?

Accepted Answer

Rule 433(b) divides issuers into two groups. Seasoned issuers and well-known seasoned issuers — those meeting the specified Form S-3, F-3, or N-2 eligibility provisions — may use a free writing prospectus once a registration statement including a Section 10 prospectus has been filed. All other issuers, including a non-reporting IPO issuer, fall under Rule 433(b)(2): a free writing prospectus prepared by or on behalf of, or used or referred to by, the issuer or another offering participant (or whose dissemination is paid for) may be used only if the filed registration statement includes a Section 10 prospectus with a price range where required by rule, and the free writing prospectus is accompanied or preceded by the most recent such statutory prospectus. For a first-time issuer this means the red herring travels with the free writing prospectus. A note to Rule 433(b)(2)(i) provides that an electronic free writing prospectus satisfies the accompany-or-precede condition with an active hyperlink to the most recent statutory prospectus; after effectiveness and availability of a final Section 10(a) prospectus, that final prospectus must precede or accompany any free writing prospectus. Under Rule 164(e) through (g), the FWP accommodation is unavailable to 'ineligible issuers' as defined in Rule 405 (except for terms-only free writing prospectuses, a carve-out that itself excludes recent blank check companies, shell companies, and penny stock issuers), to registered investment companies other than closed-end funds, to registered business combination transactions under Rule 165(f)(1), and to Form S-8 offerings by issuers other than well-known seasoned issuers.

Question 9

What content, legend, filing, and record-keeping conditions does Rule 433 impose on an FWP?

Accepted Answer

A free writing prospectus may include information not in the registration statement, but under Rule 433(c)(1) that information must not conflict with the filed registration statement or with the issuer's Exchange Act reports incorporated by reference. Under Rule 433(c)(2), it must carry substantially this legend: 'The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov...' Under Rule 433(d), issuer free writing prospectuses, issuer information contained in another participant's free writing prospectus, and descriptions of the final terms of the offering must be filed with the SEC by a means reasonably calculated to result in filing no later than the date of first use. Other offering participants must file any free writing prospectus they use that is distributed in a manner reasonably designed to lead to its broad unrestricted dissemination (Rule 433(d)(1)(ii)). A description containing only final terms is filed within two days of the later of the date the final terms are established for all classes and the date of first use (Rule 433(d)(5)(ii)); a free writing prospectus without substantive changes from one already filed need not be re-filed (Rule 433(d)(3)). For unpaid media-published free writing prospectuses, the prospectus-delivery, legend, and filing conditions are deemed satisfied if the participant files the communication with the required legend within four business days of becoming aware of it (Rule 433(f)). Free writing prospectuses that are used but not filed must be retained for 3 years following the initial bona fide offering (Rule 433(g)). Rule 433's source note runs from 70 FR 44815 (August 3, 2005) through 89 FR 60083 (July 24, 2024).

Question 10

What happens if an FWP condition is breached — is the offering blown?

Accepted Answer

Rule 164 contains curing provisions. An immaterial or unintentional failure to file, or delay in filing, a free writing prospectus does not violate Section 5(b)(1) or forfeit the rule if a good faith and reasonable effort was made to comply and the free writing prospectus is filed as soon as practicable after discovery (Rule 164(b)). The same standard applies to an omitted or incorrect legend — provided the document is amended and, if already transmitted, retransmitted with the legend by substantially the same means to substantially the same prospective purchasers (Rule 164(c)) — and to record-retention lapses (Rule 164(d)). Two preliminary notes bound the accommodation: Rule 164 is not available for any communication that, although in technical compliance, is part of a plan or scheme to evade the requirements of Section 5; and attempted compliance is not an exclusive election — the person relying on the rule may also claim any other applicable exemption or exclusion. Rule 164's source note records adoption at 70 FR 44806 (August 3, 2005), as amended at 85 FR 33352 (June 1, 2020).

Question 11

How are road shows treated during the waiting period?

Accepted Answer

A road show — defined in Rule 433(h)(4) as an offer, other than a statutory prospectus, that contains a presentation regarding an offering by one or more members of the issuer's management and includes discussion of one or more of the issuer, its management, and the securities being offered — is permitted during the waiting period. A live road show presented in real time to a live audience is not a 'written communication' under Rule 405 (the graphic-communication definition excludes live, real-time communications that do not originate in recorded form), so it is treated as oral. A road show that is a written communication — for example, a recorded or downloadable presentation — is a free writing prospectus under Rule 433(d)(8)(i), but generally is not required to be filed with the SEC. The filing exception has one carve-out: under Rule 433(d)(8)(ii), a written road show for an offering of common equity or convertible equity securities by an issuer that, at the time the registration statement is filed, is not required to file Exchange Act Section 13 or 15(d) reports — the typical IPO issuer — must be filed unless the issuer makes at least one version of a 'bona fide electronic road show' available without restriction by graphic means to any person, including any potential investor (and, if multiple written versions exist, the unrestricted version is made available no later than the others). Rule 433(h)(5) defines a bona fide electronic road show as a written road show transmitted by graphic means containing a presentation by one or more officers or management persons that, if more than one written road show is used, covers the same general areas of information as the others. A note to Rule 433(d)(8) adds that a communication provided or transmitted simultaneously with a road show, and available only as part of it, is deemed part of the road show.

Question 12

What must broker-dealers deliver to investors during the waiting period?

Accepted Answer

Exchange Act Rule 15c2-8 makes it a deceptive act or practice under Section 15(c)(2) for a broker or dealer participating in a registered distribution — any underwriter or member or proposed member of the selling group — to fail to comply with the rule's prospectus-delivery obligations. In an IPO — an issue whose issuer has not previously been required to file reports under Exchange Act Sections 13(a) or 15(d) — the broker-dealer must deliver a copy of the preliminary prospectus to any person who is expected to receive a confirmation of sale at least 48 hours before that confirmation is sent (Rule 15c2-8(b)). The rule also requires participating broker-dealers to take reasonable steps to furnish the latest preliminary prospectus on file with the Commission to anyone who makes a written request between the filing date and a reasonable time before effectiveness (paragraph (c)); to make the preliminary prospectus, and any amended preliminary prospectus promptly after filing, available to associated persons who are expected to solicit customer orders before the effective date, before any such solicitation (paragraph (e)); and, for managing underwriters, to see that all participating brokers and dealers are promptly furnished sufficient copies of each preliminary prospectus, amended preliminary prospectus, and the final prospectus (paragraphs (g) and (h)). The rule was adopted at 35 FR 18457 (December 4, 1970) and last amended at 79 FR 57344 (September 24, 2014).

Question 13

What liability applies to waiting-period communications, and how does the waiting period end?

Accepted Answer

Every permitted communication remains subject to liability. Section 12(a)(1) of the Securities Act gives purchasers a right of action against any person who offers or sells a security in violation of Section 5; Section 12(a)(2) reaches any person who offers or sells a security by means of a prospectus or oral communication that includes an untrue statement of a material fact or omits a material fact necessary to make the statements not misleading; and Exchange Act Rule 10b-5 makes it unlawful to make any untrue statement of material fact, omit a material fact, or employ any fraudulent device in connection with the purchase or sale of any security. Non-compliant offers around a registration statement are referred to as 'gun-jumping.' The waiting period ends when the registration statement becomes effective — the offering is then priced, and sales and confirmations may lawfully begin. Rule 433(c)(1) separately requires that information in a free writing prospectus not conflict with the registration statement, and Investor.gov states that the SEC and courts have broadly construed 'offer' to include communications that might generate public interest in an issuer or its securities. Two adjacent stages are not restricted by these rules: testing-the-waters communications with qualified institutional buyers and institutional accredited investors remain available 'either prior to or following the date of filing of a registration statement' under Rule 163B(b)(1) and Securities Act Section 5(d) (and written testing-the-waters communications are expressly excluded from the free-writing-prospectus definition), and the road show takes place within this window under the rules described above. At effectiveness — which under Section 8(a) occurs on the twentieth day after filing unless the SEC accelerates it, in practice on the issuer's Rule 461 request — the price-related information omitted from the red herring is supplied: Rule 430A permits a cash-offering registration statement to become effective still omitting the public offering price, underwriting syndicate, discounts and commissions, and amount of proceeds, provided the omitted information is filed in a prospectus under Rule 424(b).

Communication	Governing provision	Key conditions	Filed with the SEC?
Oral offers (not by radio or television)	Securities Act Sections 5(b)(1) and 2(a)(10) · source	Permitted once the registration statement is filed; not a 'prospectus' because Section 2(a)(10) covers only written, radio, or television communications; antifraud provisions and Section 12(a)(2) still apply	No filing provision
Preliminary prospectus (red herring)	Rule 430 (17 CFR 230.430) · source	Must contain substantially the Section 10(a) information; may omit offering price, underwriting discounts and commissions, proceeds, and other price-dependent items; must carry the Item 501(b)(10) 'Subject to Completion' legend	Yes — deemed filed as part of the registration statement (Rule 430; Section 7) · source
Rule 134 notice	Rule 134 (17 CFR 230.134) · source	Content limited to the rule's enumerated factual items; pre-effectiveness legend and prospectus-source statement under Rule 134(b) unless a Rule 134(c) exception applies; solicitations of interest only when accompanied or preceded by a Section 10 prospectus (Rule 134(d))	No filing requirement stated in the rule
Free writing prospectus	Rules 164 and 433 (17 CFR 230.164, 230.433) · source	Issuer eligibility under Rule 433(b) and Rule 164(e)-(g); for non-reporting issuers, must be accompanied or preceded by the most recent statutory prospectus including a price range where required (Rule 433(b)(2)(i)); no conflict with the registration statement; Rule 433(c)(2) legend	Issuer FWPs, issuer information, and final-terms descriptions filed no later than the date of first use (Rule 433(d)); unfiled FWPs retained 3 years (Rule 433(g)) · source
Road show (live, in real time)	Rule 433(h)(4); Rule 405 ('graphic communication') · source	A presentation regarding the offering by issuer management; if it originates live, in real time to a live audience and not in recorded form, it is not a written communication and is treated as an oral offer	No filing provision
Bona fide electronic road show	Rule 433(d)(8) and (h)(5) · source	A written (recorded or graphic) road show is a free writing prospectus; a non-reporting issuer offering common or convertible equity must file its written road show unless at least one bona fide electronic road show version is made available without restriction to any person	Generally exempt from filing (Rule 433(d)(8)(i)); filing required in the non-reporting equity case unless the unrestricted version is made available (Rule 433(d)(8)(ii)) · source
Testing-the-waters communications (QIBs and institutional accredited investors)	Rule 163B (17 CFR 230.163B); Securities Act Section 5(d) · source	Separate accommodation available before or after filing; audience limited to actual or reasonably believed qualified institutional buyers and institutional accredited investors; written versions are excluded from the free-writing-prospectus definition	Not required to be filed (Rule 163B(b)(3))

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Waiting-Period Communications