Securities Reg - please help with public offering question Forum

[pasteurizedmilk]

I have no idea what is going on with waiting period offers. What is the interplay between § 5(b)(1), § 2(a)(3) and § 10?

I have something in my notes that says:L

"§ 2(a)(10) prospectus definition sweeps in all written and broadcast communications offering the security; § 5(b) then prohibits such communications if they do not comply with § 10."

....what? I'm so confused. What's the interplay between these three sections and what is the implication for offers during the waiting period?

TYIA

[FlightoftheEarls]

I have no idea what is going on with waiting period offers. What is the interplay between § 5(b)(1), § 2(a)(3) and § 10?

I have something in my notes that says:L

"§ 2(a)(10) prospectus definition sweeps in all written and broadcast communications offering the security; § 5(b) then prohibits such communications if they do not comply with § 10."

....what? I'm so confused. What's the interplay between these three sections and what is the implication for offers during the waiting period?

TYIA

Once you're in the waiting period, §5(a) (sales) and § 5(b) are still in play, and §5(c) ceases to control. § 5(b)(1) prohibits transmitting any prospectus that does not comply with §10. I'm trying to recall why §2(a)(3) comes in, as I think the more important section will be §2(a)(10) which defines what constitutes a prospectus (basically, any non-oral, non-broadcast communication that offers to sell a security, but oral includes real-time electronic communications (all contained in Rule 405)). So basically, §2(a)(10) describes a ton of things you can send that will be considered a "prospectus", but only prospectuses that meet the requirements of §10 (referred to as "statutory prospectuses") are legit and avoid violating §5(b)(1).

During the Waiting period, you can only communicate offers through a statutory prospectus that complies with §10 to avoid violating §5(b)(1), so you'll typically be looking at a Preliminary Prospectus (Rule 430) or Summary Prospectus (Rule 431). You also have new safe harbors in the form of tombstone advertisements (Rule 134) and Free Writing Prospectuses (Rules 164/433 together, which allows pretty much any written communications as long as a statutory prospectus is included and the written communications don't conflict with the info in the prospectus, among other requirements; also, this is easier for WKSIs and Seasoned Issuers, who don't have the same requirement to deliver a statutory prospectus complying with §10).

If none of that makes sense (or if it explains something you already knew), let me know. In any event, I think §2(a)(3) may only be relevant insofar as it describes what constitute an offer, and a prospectus must offer to sell securities. Nonetheless, §§ 2(a)(10), 5(b), and 10 will be the meat of what you need to get for the Waiting Period. Good luck!