Rule: Securities: Securities Offerings Reform Registration Communications, and Offering Processes Modification

Wednesday,
August 3, 2005
Part II
Securities and
Exchange
Commission
17 CFR Parts 200, 228, 229, et al.
Securities Offering Reform; Final Rule
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44722 Federal Register / Vol. 70, No. 148 / Wednesday, August 3, 2005 / Rules and Regulations
SECURITIES AND EXCHANGE eliminating Rule 434 7 under the i. Factual Business Information
COMMISSION Securities Act.8 We are adding Rules (A) Scope of the Safe Harbor
159, 159A, 163, 163A, 164, 168, 169, (B) Comments on the Scope of the Safe
17 CFR Parts 200, 228, 229, 230, 239, Harbor
172, 173, 430B, 430C, and 433 under the
ii. Forward-Looking Information
240, 243, 249, and 274 Securities Act. We are amending Forms (A) Scope of the Safe Harbor
[Release Nos. 33–8591; 34–52056; IC– S–1, S–3, S–4, F–1, F–3, and F–4 and iii. Conditions of Safe Harbor in Rule 168
26993; FR–75, International Series Release eliminating Forms S–2 and F–2 9 under (A) ‘‘By or on Behalf of’’ the Issuer
No. 1294 and File No. S7–38–04] the Securities Act; amending Rule 100 10 (1) Definition
of Regulation FD 11 and Rule 14a–2 12 (2) Comments on Definition
RIN 3235–AI11 (B) Regularly Released Information
under the Securities Exchange Act of
1934; 13 amending Forms 10, 10–K, 10– (1) Regularly Released Condition
Securities Offering Reform (2) Comments on Regularly Released
Q, 10–KSB, and 20–F 14 under the
Condition
AGENCY: Securities and Exchange Exchange Act; and amending Form N– (C) Exclusion for Offering-Related
Commission. 2 15 under the Securities Act and the Information
ACTION: Final rule. Investment Company Act of 1940.16 (1) Scope of Exclusion
Table of Contents (2) Comments on Exclusion
SUMMARY: The Securities and Exchange c. Exception for Regularly Released Factual
Commission is adopting rules that will I. Introduction Business Information—Available to Non-
modify and advance significantly the A. Overview Reporting Issuers
B. Background i. Scope of the Safe Harbor
registration, communications, and 1. Advances in Technology
offering processes under the Securities ii. Comments on the Safe Harbor
2. Exchange Act Reporting Standards 2. Other Permitted Communications Prior
Act of 1933. Today’s rules will II. Well-Known Seasoned Issuers; Other To Filing a Registration Statement
eliminate unnecessary and outmoded Categories of Issuers a. 30-Day Bright-line Exclusion From the
restrictions on offerings. In addition, the A. Well-Known Seasoned Issuers Prohibition on Offers Prior To Filing a
rules will provide more timely 1. Definition of Well-Known Seasoned Registration Statement—All Issuers
investment information to investors Issuer i. Scope of Exclusion
without mandating delays in the a. Market Capitalization Threshold ii. Comments on 30-Day Bright-line
b. Registered Offerings of Non-Convertible Exclusion
offering process that we believe would Securities Threshold
be inconsistent with the needs of issuers b. Permitted Pre-Filing Offers for Well-
2. Timing of Determination of Well-Known Known Seasoned Issuers
for timely access to capital. The rules Seasoned Issuer Status i. Overview
also will continue our long-term efforts 3. Well-Known Seasoned Issuers’ ii. Exemption for Pre-Filing Offers
toward integrating disclosure and Securities Offerings iii. Comments on Exemption for Pre-Filing
processes under the Securities Act and 4. Comments Regarding the Definition of Offers
the Securities Exchange Act of 1934. Well-Known Seasoned Issuer 3. Relaxation of Restrictions on Written
The rules will further these goals by B. Other Categories of Issuers Offering-Related Communications
addressing communications related to III. Communications Rules a. Rule 134
A. Communications Requirements Prior to i. Expansion of Permitted Information
registered securities offerings, delivery Today’s Rules and Amendments
of information to investors, and ii. Section 10 Prospectus Requirement
B. Need for Modernization of iii. Changes to Required Information
procedural aspects of the offering and Communications Requirements b. Permissible Use of Free Writing
capital formation processes. 1. General Prospectuses
EFFECTIVE DATE: December 1, 2005. 2. Definition of Written Communication i. Overview
a. ‘‘Written Communication’’ and ‘‘Graphic ii. Definition of Free Writing Prospectus
FOR FURTHER INFORMATION CONTACT:
Communication’’ (A) Scope of Definition
Amy M. Starr, Daniel Horwood, or Anne b. Comments Regarding Proposals
Nguyen, at (202) 551–3200, in the (B) Comments on Definition
C. Overview of Communications Rules iii. Permitted Use of a Free Writing
Division of Corporation Finance, U.S. D. Communications Rules Prospectus After the Filing of a
Securities and Exchange Commission, 1. Permitted Continuation of Ongoing Registration Statement Under Rule 433
100 F Street, NE., Washington, DC Communications During an Offering (A) Overview
20549 or, with respect to questions a. Overview (B) Issuer Eligibility
regarding investment companies, Kieran b. Exception for Regularly Released Factual (1) Comments on Ineligible Issuer
Brown in the Division of Investment Business and Forward-Looking Definition
Information—Available to Reporting (C) Conditions to Permitted Use of a Free
Management, at (202) 551–6784. Issuers
SUPPLEMENTARY INFORMATION: We are
Writing Prospectus
(1) Prospectus Delivery or Availability
amending Rule 30–1 1 of the 230.413; 17 CFR 230.415; 17 CFR 230.418; 17 CFR (a) Prospectus Delivery Conditions for
Administrative Practice and Procedure, 230.424; 17 CFR 230.426; 17 CFR 230.430A; 17 CFR Non-Reporting Issuers and Unseasoned
Item 512 2 of Regulation S–B,3 Item 512 4 230.439; 17 CFR 230.456; 17 CFR 230.457; 17 CFR
230.462; 17 CFR 230.473; 17 CFR 230.497; and 17
Issuers
of Regulation S–K,5 and Rules 134, 137, CFR 230.902. (b) Prospectus Availability Condition for
138, 139, 153, 158, 174, 401, 405, 408, 7 17 CFR 230.434. Seasoned Issuers and Well-Known
412, 413, 415, 418, 424, 426, 430A, 439, 8 15 U.S.C. 77a et seq. Seasoned Issuers
456, 457, 462, 473, 497, and 902 6 and 9 17 CFR 239.11; 17 CFR 239.13; 17 CFR 239.25; (c) Comments on Prospectus Delivery or
17 CFR 239.31; 17 CFR 239.33; 17 CFR 239.34; 17 Availability Condition
1 17 CFR 200.30–1. CFR 239.12; and 17 CFR 239.32. (2) Information in a Free Writing
2 17 CFR 228.512.
10 17 CFR 243.100. Prospectus
3 17 CFR 228.10 et seq. 11 17 CFR 243.100 through 243.103. (a) Information Conditions
4 17 CFR 229.512. 12 17 CFR 240.14a–2. (b) Amendment to Rule 408
5 17 CFR 229.10 et seq. 13 15 U.S.C. 78a et seq. (c) Legend Condition
6 17 CFR 230.134; 17 CFR 230.137; 17 CFR 14 17 CFR 249.210; 17 CFR 249.308a; 17 CFR (i) Discussion
230.138; 17 CFR 230.139; 17 CFR 230.153; 17 CFR 249.310; 17 CFR 249.310b; and 17 CFR 249.220f. (ii) Cure for Unintentional or Immaterial
230.158; 17 CFR 230.174; 17 CFR 230.401; 17 CFR 15 17 CFR 239.14 and 17 CFR 274.11a–1. Failure to Include a Legend
230.405; 17 CFR 230.408; 17 CFR 230.412; 17 CFR 16 15 U.S.C. 80a–1 et seq. (iii) Impermissible Legends or Disclaimers
Federal Register / Vol. 70, No. 148 / Wednesday, August 3, 2005 / Rules and Regulations 44723
(3) Filing Conditions vii. Research and Proxy Solicitations (A) Information That May be Omitted From
(a) General Conditions IV. Liability Issues the Base Prospectus
(i) Scope of General Conditions A. Information Conveyed by the Time of (B) Mechanics for Including Information
(ii) Conditions Specific to Final Terms of Sale for Purposes of Section 12(a)(2) and (C) Registration of Securities to be Offered
the Securities or Offering Section 17(a)(2) Liability (D) Pay-as-You-Go Registration Fees
(iii) Asset-Backed Issuers 1. Interpretation and Rule (1) Pay-as-You-Go Fee Rules
(iv) Comments on Filing Condition 2. Comments and Guidance Regarding Our (2) Comments on Pay-as-You-Go Fees
(b) Immaterial or Unintentional Failures to Interpretation and Rule 159 (E) Registration Under Securities Act
File a. The Section 12(a)(2) and Section 17(a)(2) Sections 5 and 6
(i) Scope of Cure Provision Analysis of the Information Conveyed (F) Immediate Effectiveness
(ii) Comments on Cure Provision b. Determination of Time of Sale (G) Duration
(4) Record Retention Condition c. Termination of Old Contract and 3. Unseasoned Issuers and Non-Reporting
(a) Discussion Creation or Reformation of a New Issuers
(b) Immaterial or Unintentional Failure To Contract a. Overview
Retain a Free Writing Prospectus 3. Rule 412 and Rule 430B b. Amendments to Form S–1 and Form F–
(D) Road Shows 4. Relationship of Section 12(a)(2) and 1—Expanded Use of Incorporation by
(1) Definition of Electronic Road Show Section 17(a)(2) Interpretation and Rule Reference
(2) Treatment of Electronic Road Shows 159 to Section 11 Liability i. Eligibility
(3) Comments on Electronic Road Shows B. Issuer as Seller ii. Procedural Requirements
(E) Treatment of Communications on Web C. Due Diligence Interpretation iii. Comments on Form S–1 and Form F–
Sites and Other Electronics Issues V. Securities Act Registration Rules and 1 Amendments
(1) General Amendments c. Elimination of Form S–2 and Form F–
(2) Historical Information on an Issuer Web A. Overview 2
Site B. Procedural Rules VI. Prospectus Delivery Reforms
(3) Comments on Treatment of 1. Procedural Changes Regarding Shelf A. Current Prospectus Delivery
Communications on Web Sites and Other Offerings Requirements
Electronics Issues a. Overview B. Prospectus Delivery Revisions
(F) Media Publications or Broadcasts b. Information in a Prospectus 1. Access Equals Delivery
(1) Overview i. Mechanics a. Rule 172
(2) Application of Rule 164 and Rule 433 (A) Rule 430B (i) Scope of Rule
to Media Publications (B) Means for Providing Information (ii) Comments on Rule 172
(a) Prospectus Delivery or Availability
(C) Identification of Selling Security b. Exceptions to the Rule
(i) Where Media Publications Are Prepared
Holders Following Effectiveness c. Notification
or Consideration Paid by Issuer or
(1) Scope of Provision (i) Rule 173
Offering Participant
(2) Comments on Identification of Selling (ii) Comments on Rule 173
(ii) Unaffiliated Media Publications
Security Holders 2. Written Confirmations and Notices of
(b) Filing
(c) Issuers in the Media Business ii. Information Deemed Part of Registration Allocations
(3) Responses to Comments on Treatment Statement 3. Transactions Taking Place on an
of Media Publications iii. Date of Inclusion of Prospectus Exchange or Through a Registered
(G) Liability Issues Affecting Free Writing Supplements in Registration Statements Trading Facility—Rule 153
Prospectuses and New Effective Dates of Registration 4. Aftermarket Prospectus Delivery—Rule
(1) General Statements 174
(2) Filed Free Writing Prospectus Not Part (A) Scope of Provisions VII. Additional Exchange Act Disclosure
of Registration Statement (B) New Effective Dates for Section 11 Provisions
(3) Cross-Liability Issues Purposes A. Risk Factor Disclosure
c. Interaction of New Communications (C) Comments on Prospectus Supplements 1. Scope of Requirement
Rules with Regulation FD and New Effective Dates 2. Comments on Risk Factor Disclosure
i. Amendments to Regulation FD iv. Amendments to Rule 415 Requirement
ii. Comments on Amendments to (A) Elimination of Limitation on Amount B. Disclosure of Unresolved Staff
Regulation FD of Securities Registered Comments
4. Use of Research Reports (1) Revised Provisions 1. Disclosure Requirement
a. Current Regulatory Treatment of (2) Comments on Elimination of Limitation 2. Comments on Disclosure of Outstanding
Research Reports on Amount of Securities Registered Comments
b. Amendments to Exemptions for (B) Immediate Takedowns From a Shelf C. Disclosure of Status as Voluntary Filer
Research Registration Statement Filed Under Rule Under the Exchange Act
i. Definition of Research Report 415(a)(1)(x) VIII. Paperwork Reduction Act
(A) Definition (C) Eliminating ‘‘At-the-Market’’ Offering A. Background
(B) Comments on Definition of Research Restrictions for Seasoned Issuers B. Summary of Information Collections
Report v. Rule 424 Amendments C. Summary of Comment Letters on the
ii. Rule 137 vi. Elimination of Rule 434 PRA Analysis
iii. Rule 138 vii. Issuer Undertakings D. Paperwork Reduction Act Burden
(A) Amendments to Rule 138 (A) Treatment of Information in Prospectus Estimates
(B) Comments on Rule 138 Amendments Supplements 1. Exchange Act Periodic Reports and
iv. Rule 139 (B) Prospectus Supplements Deemed Part Registration Statements
(A) Issuer-Specific Reports of a Registration Statement and New 2. Communications and Prospectus
(1) Amendments Regarding Issuer-Specific Effective Dates Delivery
Reports c. Changes to Form S–3 and Form F–3 3. Securities Act Registration Statements
(2) Comments on Issuer-Specific Reports 2. Automatic Shelf Registration for Well- IX. Cost Benefit Analysis
(B) Industry-Related Reports Known Seasoned Issuers A. Background
(1) Amendments Regarding Industry- a. Overview B. Summary of Rules
Related Reports i. Rule Changes 1. Communications
(2) Comments on Industry-Related Reports ii. Comments on Automatic Shelf 2. Securities Act Registration Rules
v. Rule 139a Registration 3. Prospectus Delivery
vi. Research Report Amendments in b. Automatic Shelf Registration Mechanics 4. Exchange Act Reports
Connection With Regulation S and Rule i. Eligibility C. Comments on the Proposals
144A Offerings ii. Information in a Registration Statement D. Benefits
1. Increased Information Flow magnitude that the proposals Commission.24 It recommended a

2. Investor Protection represented, commenters provided number of areas where simplification
3. Facilitating Capital Formation many thoughtful comments and useful and modernization of the registration
4. Reduced Regulatory Uncertainty
suggestions. We are adopting the rules and offering process could be
5. Lower Costs
E. Costs and amendments as proposed with accomplished. In July 1996, the
1. Compliance Costs certain modifications to address a Advisory Committee on the Capital
2. Potential for Increased Liability number of points that commenters Formation and Regulatory Processes
3. Other Potential Costs raised. delivered its report to the
X. Consideration of Burden on Competition The rules we are adopting today Commission.25 Its principal
and Promotion of Efficiency, continue the evolution of the offering recommendation was that the Securities
Competition and Capital Formation process under the Securities Act that Act registration and disclosure
XI. Final Regulatory Flexibility Act Analysis began as far back as 1966, when Milton
A. Reasons for and Objectives of the Rules processes be more directly tied to the
and Amendments
Cohen noted the anomaly of the philosophy and structure of the
B. Significant Issues Raised by Public structure of the disclosure rules under Exchange Act through the adoption of a
Comment the Securities Act and the Exchange Act system of ‘‘company registration.’’
C. Small Entities Subject to the Rules and suggested the integration of the Under company registration, the focus
D. Reporting, Recordkeping and Other requirements under the two statutes.20 of Securities Act and Exchange Act
Compliance Requirements Mr. Cohen’s article was followed by a registration and disclosure would move
E. Agency Action To Minimize Effect on 1969 study led by Commissioner
Small Entities from transactions to issuers, and
Francis Wheat 21 and the Commission’s corollary steps would be taken to
XII. Statutory Authority—Text of the Rules
and Amendments
Advisory Committee on Corporate provide for disclosure and registration
Disclosure in 1977.22 These studies of individual offerings within the
I. Introduction eventually led to the Commission’s company registration framework.
A. Overview adoption of the integrated disclosure Promptly after the Advisory
system, short-form registration under Committee on the Capital Formation
On November 3, 2004, we issued the Securities Act, and Securities Act and Regulatory Processes delivered its
proposed rule and form changes under Rule 415 permitting shelf registration of report, the Commission issued a concept
the Securities Act and the Exchange Act continuous offerings and delayed release regarding regulation of the
that would modernize the securities offerings.23 securities offering process.26 The release
offering and communication processes The Commission’s attention to the sought input on a number of significant
while maintaining protection of offering and communications processes issues, including:
investors under the Securities Act.17 We under the Securities Act continued • Whether the concept of company
received over 130 comment letters on more recently. In particular, in March registration should be pursued;
the proposals.18 While a large number of 1996, members of the Commission staff • Whether other methods of
letters focused on only one area of the delivered the Report of the Task Force increasing the integration of Securities
proposals,19 a significant number of the on Disclosure Simplification to the Act and Exchange Act disclosure and
other letters addressed many aspects of
other processes should be considered;
the proposals. In general, commenters 20 Milton H. Cohen, Truth in Securities Revisited,
79 Harv. L. Rev. 1340 (1966). (‘‘It is my thesis that • Whether existing or further reliance
strongly supported the proposals and
the combined disclosure requirements of these on Exchange Act filings should be
their objectives. A number of statutes would have been quite different if the 1933 accompanied by enhancements to
commenters believed that the proposals and 1934 Acts * * * had been enacted in opposite Exchange Act reporting;
struck the appropriate balance between order, or had been enacted as a single, integrated
statute—that is, if the starting point had been a • Whether companies make
improving the capital formation process
statutory scheme of continuous disclosures information about their public securities
and modernizing offering covering issuers of actively traded securities and offerings available to investors in an
communications, while preserving the question of special disclosures in connection appropriate and timely manner,
investor protection and avoiding with public offerings had then been faced in this
setting. Accordingly, it is my plea that there now including:
unnecessary impediments to the capital
be created a new coordinated disclosure system Æ At what point in the offering
formation process. As with other having as its basis the continuous disclosure system process delivery of, or access to,
rulemakings, including those of the of the 1934 Act and treating the ‘1933 Act’ information should be assured in
disclosure needs on this foundation.’’)
17 Securities Offering Reform, Release No. 33– 21 See Disclosure to Investors—A Reappraisal of connection with registered offerings
8501 (Nov. 3, 2004) [69 FR 67392] (‘‘Proposing Federal Administrative Policies under the ’33 and under the Securities Act and whether
Release’’). ’34 Acts, Policy Study (the ‘‘Wheat Report’’), current requirements ensure timely
18 The public comments we received are available www.sechistorical.org/museum/Museum_Papers/ delivery of information to the secondary
for inspection in our Public Reference Room at 100 museum_Papers_Chron.php#1960 (Mar. 27, 1969).
market in connection with such
F Street, NE, Washington, DC 20549 in File No. S7– 22 See Report of the Advisory Committee on
38–04, or may be viewed at http://www.sec.gov/ Corporate Disclosure, Cmte. Print 95–29, House offerings;
rules/proposed/s73804.shtml. Cmte. On Interstate and Foreign Commerce, 95th Æ Whether prospectus supplements
19 A large number of commenters submitted Cong., 1st. Sess., Nov. 3, 1977 (Nov. 3, 1977). In in shelf offerings should be made part
comments that addressed only issues regarding addition, beginning in 1968, the American Law of the registration statement;
electronic road shows. See, e.g., letters from Robert Institute (‘‘ALI’’) began its work on a Federal
Alpert; E. Price Ambler; Kenneth Arnot; Richard Securities Code, which was approved in 1978 by
24 Report of the Task Force on Disclosure
Barrera; Lisa Baudot; Thomas Bengtsson; Barry the ALI membership. The ALI Federal Securities
Bruner; Harold Candland; Nikita Chitnis; Herbert Code included company registration as a central Simplification, available at www.sec.gov/news/
Chung; Rick Dowdle; Pat Gilbert; Ira Ginsburg; component. See American L. Inst., Federal studies/smpl.htm (Mar. 5, 1996).
Naval Goel; Bernard Krieg; Francis Lanio; Jimmy Securities Code (1980). 25 Report of the Advisory Committee on the
Liu; Marvin Lutz; Peter Martin; Craig Millar; Piers 23 See Adoption of Integrated Disclosure System, Capital Formation and Regulatory Process (the
Monckton; NetRoadshow Inc. (‘‘NetRoadshow’’); F. Release No. 33–6383 (Mar. 3, 1982) [47 FR 11380] ‘‘Advisory Committee Report’’), available at
Thomas O’Halloran, Paul J. Rasplicka; Kim (‘‘Integrated Disclosure Release’’): Delayed or www.sec.gov/news/studies/capform.htm (July 24,
Redding; Eric Ribner; David Schumacher, Andre Continuous Offering and Sale of Securities, Release 1996).
Shih; Susquehanna International Group, LLP No. 33–6423 (Sept. 2, 1982) [47 FR 39799]; and 26 Securities Act Concepts and Their Effects on
(‘‘SIG’’); Steve Smart-O’Connor; Bob Smith, Forrest Shelf Registration, Release No. 33–6499 (Nov. 17, Capital Formation, Release No. 33–7314 (July 25,
Tempel; Chris Wallis; and Adam White. 1983) [48 FR 52889]. 1996) [61 FR 40044] (the ‘‘1996 Concept Release’’).
Æ Whether and, if so, in what recognized in the Proposing Release, • Reflect the increased importance of
circumstances electronic access should much of the comment in response to the electronic dissemination of information,
replace actual delivery of information in 1998 proposals suggested that the including the use of the Internet;
connection with offerings registered system of regulating capital formation in • Make the capital formation process
under the Securities Act; and the registered offering market provides a more efficient; and
Æ Whether restrictions on written number of advantages that should be • Define more clearly both the
offers under the Securities Act should considered carefully and retained if we information and the timeliness of the
be liberalized and what liability are to make other changes. availability of information against
standards should attach to such The rules we are adopting today are which a seller’s statements are
communications; focused primarily on constructive,
• Whether adjustments to the roles evaluated for liability purposes.
incremental changes in our regulatory The rules we are adopting today
and responsibilities of traditional structure and the offering process rather
‘‘gatekeepers’’ in the Securities Act reflect certain modifications from the
than the introduction of a far-reaching proposals to address important points
offering process, such as underwriters new system, as we believe that we can
and accountants, should be made in commenters raised. The modifications
best achieve further integration of to the proposals include the following:
light of increases in the speed of and Securities Act and Exchange Act
other evolutions in the offering process; • The definitions of graphic
disclosure and processes by making
• Whether changes should be made to communication and written
adjustments in the current integrated
address evolution in the relationships communication (including as to road
disclosure and shelf registration
between the public and private offering shows) exclude live, in real-time
processes, including: systems. Further, consistent with our
communications to a live audience that
Æ Whether changes in Rules 144A 27 belief that investors and the securities
are transmitted graphically;
and 144 28 under the Securities Act markets will benefit from greater
permissible communications by issuers • The free writing prospectus rules
should be considered; and address ‘‘cross-liability’’ concerns
Æ Whether there should be any while retaining appropriate liability for
these communications, we have sought among offering participants arising from
relaxation in our prohibition against the use of free writing prospectuses;
general solicitations of interest or offers to address the need for timeliness of
in unregistered private offerings; and information for investors by building on • The free writing prospectus rules
• Whether the review process of existing statutory provisions and clarify the filing conditions applicable
issuer filings under the Securities Act processes without mandating delays in to media publications, descriptions of
and the Exchange Act by the staff of the the offering process that we believe the final terms of securities and
Division of Corporation Finance should would be inconsistent with the needs of offerings, and electronic and other road
be modified to limit the impact of the issuers for timely access to the securities shows, and modify the record retention
process on access to capital markets, at markets and capital. provisions;
least for some category of large seasoned We are adopting the proposed • The shelf registration rules address
issuers.29 revisions to the registration, issues regarding the liability of officers,
In 1998, the Commission proposed communications, and offering processes directors, and accountants and other
new rules under the Securities Act that for registered transactions under the experts arising from the new effective
were intended to modernize the Securities Act with certain dates triggered by the filing of
securities offering process.30 As we modifications. We believe the rules we prospectus supplements;
are adopting, while limited in scope, • The definition of ineligible issuer
27 17 CFR 230.144A. properly address the areas that are in more closely conforms the definition to
28 17 CFR 230.144.
29 In addition, the 1996 Concept Release sought
need of modernization. The adopted other ineligibility provisions in the
input on a number of items suggested for rules involve three main areas: Securities Act;
consideration by the Task Force on Disclosure • Communications related to • The rule permitting specified
Simplification, including the following: Allowing registered securities offerings; written notices that are not prospectuses
smaller issuers that have been reporting for one year
to make delayed offerings (without altering the • Registration and other procedures narrows the types of information for
disclosure requirements or permitting forward in the offering and capital formation which a preliminary prospectus will
incorporation by reference); eliminating ‘‘at-the- processes; and have to include a price range as a
market’’ offering restrictions; allowing universal condition;
shelf registration for secondary offerings; allowing • Delivery of information to investors,
issuers and majority-owned subsidiaries to be including delivery through access and • The definition of well-known
named as possible issuers on a shelf registration notice, and timeliness of that delivery. seasoned issuer enables issuers to
(without designating the issuer until takedown); include all registered non-convertible
allowing reallocation of securities on a shelf Today’s rules reflect our view that
registration statement by post-effective amendment; revisions to the Securities Act securities, other than common equity,
allowing registration by seasoned issuers without registration and offering procedures are issued for cash in measuring the amount
any specification of the classes registered; and of registered fixed income securities
allowing seasoned issuers to pay registration fees at appropriate in light of significant
the time of the takedown. developments in the offering and capital over the prior three years; and
30 See The Regulation of Securities Offerings, formation procedures and can provide • The prospectus delivery rule
Release No. 33–7606A (Nov. 13, 1998 [63 FR 67174] enhanced protection of investors under addresses concerns about potential
(the ‘‘1998 proposals’’). The Commission proposed underwriter liability due to an issuer’s
these new rules after it was granted general
the statute. We believe that the rule
exemptive authority under the Securities Act. The changes we adopt today will: failure to timely file its final prospectus.
National Securities Markets Improvement Act of • Facilitate greater availability of We also have endeavored to provide
1996 (NSMIA) (Pub. L. 104–290, 110 Stat. 3416
(Oct. 11, 1996)) provided the Commission with
information to investors and the market more guidance to market participants
general authority to adopt exemptive rules under with regard to all issuers; regarding our interpretation of the
the Securities Act to the extent that such exemptive • Eliminate barriers to open liability provisions of Securities Act
action is ‘‘necessary or appropriate in the public Sections 12(a)(2) and 17(a)(2).31
interest and consistent with the protection of
communications that have been made
investors.’’ See Securities Act Section 28 [15 U.S.C. increasingly outmoded by technological
77z–3]. advances; 31 15 U.S.C. 77l(a)(2) and 15 U.S.C. 77q(a)(2).
B. Background A public issuer’s Exchange Act record • Providing further interpretive

provides the basic source of information guidance regarding the content and
1. Advances in Technology
to the market and to potential understandability of Management’s
As we noted in the Proposing Release, purchasers regarding the issuer and its Discussion and Analysis of Financial
significant technological advances over management, business, financial Condition and Results of Operations
the last three decades have increased condition, and prospects. Because an (MD&A)—a disclosure item we believe
both the market’s demand for more issuer’s Exchange Act reports and other is at the core of a reporting issuer’s
timely corporate disclosure and the publicly available information form the periodic reports.38
ability of issuers to capture, process, basis for the market’s evaluation of the Many of the recent changes to the
and disseminate this information. issuer and the pricing of its securities, Exchange Act reporting framework
Computers, sophisticated financial investors in the secondary market use provide greater rigor to the process that
software, electronic mail, that information in making their issuers must follow in preparing their
teleconferencing, videoconferencing, investment decisions. Similarly, during financial statements and Exchange Act
webcasting, and other technologies a securities offering in which an issuer reports. Senior management now must
available today have replaced, to a large uses a short-form registration statement, certify the material adequacy of the
extent, paper, pencils, typewriters, an issuer’s Exchange Act record is very content of periodic Exchange Act
adding machines, carbon paper, paper often the most significant part of the reports. Moreover, issuers, with the
mail, travel, and face-to-face meetings information about the issuer in the involvement of senior management,
relied on previously. The rules we are registration statement. now must implement and evaluate
adopting today seek to recognize the With the enactment of the Sarbanes- disclosure controls and procedures and
integral role that technology plays in Oxley Act and our recent rulemaking internal controls over financial
timely informing the markets and and interpretive actions, we have reporting. Further, we believe the
investors about important corporate enhanced significantly the disclosure heightened role of an issuer’s board of
information and developments. included in issuers’ Exchange Act directors and its audit committee
filings and accelerated the filing provides a structure that can contribute
2. Exchange Act Reporting Standards deadlines for many issuers. The to improved Exchange Act reports.
The role that a public issuer’s following are examples of recent As we recognized in the Proposing
Exchange Act reports play in investment regulatory actions that have improved Release, the 1996 Concept Release and
decision making is a key component of the delivery of timely, high-quality the 1998 proposals also considered the
the rules we are adopting today. information to the securities markets by role of enhanced Exchange Act
Congress recognized that the ongoing issuers under the Exchange Act: reporting as an important corollary to
dissemination of accurate information • Requiring the establishment of reform of the offering process under the
by issuers about themselves and their disclosure controls and procedures; 34 Securities Act.39 We believe that the
securities is essential to the effective • Requiring a public issuer’s top enhancements to Exchange Act
operation of the trading markets. The management to certify the content of reporting described above enable us to
Exchange Act and underlying rules have periodic reports and highlight their rely on these reports to a greater degree
established a system of continuing responsibilities for and evaluation of the in adopting our rules to reform the
disclosure about issuers that have issuer’s disclosure controls and securities offering process.
offered securities to the public, or that procedures and internal control over II. Well-Known Seasoned Issuers; Other
have securities that are listed on a financial reporting; 35 Categories of Issuers
national securities exchange or are • Modifying the approach to current
broadly held by the public. The disclosure by increasing significantly A. Well-Known Seasoned Issuers
Exchange Act rules require public the types of events that must be reported We are modifying the framework for
issuers to make periodic disclosures at on a current basis and shortening the communications in connection with
annual and quarterly intervals, with time for filing current reports; 36 public offerings for all issuers and the
other important information reported on • Approving listing standard changes framework of the registration process for
a more current basis. The Exchange Act intended to improve corporate most issuers that report under the
specifically provides for current governance and enhance the role of the Exchange Act. As we explained in the
disclosure to maintain the timeliness audit committee of the issuer’s board of Proposing Release, we believe that the
and adequacy of information disclosed directors with regard to financial most far-reaching revisions of our
by issuers, and we have significantly reporting and auditor independence; 37 communications rules and registration
expanded our current disclosure and processes should be considered for
requirements consistent with the issuers that have a reporting history
Disclosure Requirements and Acceleration of Filing under the Exchange Act and are
provision in the Sarbanes-Oxley Act of Date, Release No. 33–8400 (Mar. 16, 2004) [69 FR
2002 32 that ‘‘[e]ach issuer reporting 15594] and Additional Form 8–K Disclosure presumptively the most widely followed
under Section 13(a) or 15(d) * * * Requirements and Acceleration of Filing Date; in the marketplace.40
disclose to the public on a rapid and Correction, Release No. 33–8400A (Aug. 4, 2004)
[69 FR 48370] (‘‘Form 8–K Releases’’). 38 See Commission Guidance Regarding
current basis such additional 34 See Certification of Disclosure in Companies’
Management’s Discussion and Analysis of Financial
information concerning material Quarterly and Annual Reports, Release No. 33–8124 Condition and Results of Operations, Release No.
changes in the financial condition or (Aug. 28, 2002) [67 FR 57276] (‘‘Certification 33–8350 (Dec. 19, 2003) [68 FR 75056] (the ‘‘2003
operations of the issuer * * * as the Release’’). MD&A Release’’).
35 See Management’s Report on Internal Control
Commission determines * * * is 39 Enhanced Exchange Act reporting also was
Over Financial Reporting and Certification of central to the recommendations of the Advisory
necessary or useful for the protection of Disclosure in Exchange Act Periodic Reports, Committee. See note 25.
investors and in the public interest.’’ 33 Release No. 33–8238 (June 5, 2003) [68 FR 36636]; 40 Today’s rules will provide a class of well-
Certification Release, note 34. known seasoned issuers greater flexibility in
32 Pub.L. 107–204, 116 Stat. 745 (2002). 36 See Form 8–K Releases, note 33.
registering their securities offerings under a more
33 SeeSection 409 of the Sarbanes-Oxley Act, 37 See Standards Relating to Listed Company streamlined registration process known as
which added Section 13(l) to the Exchange Act (15 Audit Committees, Release No. 33–8220 (Apr. 9, automatic shelf registration. Under the automatic
U.S.C. 78m(l)). See also Additional Form 8–K 2003) [68 FR 18788]. shelf registration process, eligible well-known
Today, the largest issuers are followed registered under the Securities Act; 44 accounted for more than 96% of the
by sophisticated institutional and retail and total debt raised in registered offerings
investors, members of the financial • The issuer must not be an ineligible over the past eight years by issuers
press, and numerous sell-side and buy- issuer.45 listed on a major exchange or equity
side analysts that actively seek new If it does not itself meet the market. These issuers, accordingly,
information on a continual basis. Unlike conditions for eligibility as a well- represent the most significant amount of
smaller or less mature issuers, large known seasoned issuer, a majority- capital raised and traded in the United
seasoned public issuers tend to have a owned subsidiary of a well-known States. As a result of the active
more regular dialogue with investors seasoned issuer will nonetheless be a participation of these issuers in the
and market participants through the well-known seasoned issuer in markets and, among other things, the
press and other media. The connection with the offer and sale of its wide following of these issuers by
communications of these well-known own securities if: market participants, the media, and
seasoned issuers are subject to scrutiny • The securities are non-convertible institutional investors, we believe that it
by investors, the financial press, securities, other than common equity, is appropriate to provide
analysts, and others who evaluate and the parent of the majority-owned communications and registration
disclosure when it is made. subsidiary is a well-known seasoned flexibilities to these well-known
issuer and fully and unconditionally seasoned issuers beyond that provided
1. Definition of Well-Known Seasoned guarantees those securities; 46 to other issuers, including other
Issuer • The securities are guarantees of seasoned issuers.
We are adding a new category of non-convertible securities, other than
common equity, of (1) its well-known a. Market Capitalization Threshold
issuer—a ‘‘well-known seasoned
issuer’’—that will be permitted to seasoned issuer parent or (2) another As we discussed in the Proposing
benefit to the greatest degree from the majority-owned subsidiary where those Release, we believe that non-affiliate
modifications to our rules we are non-convertible securities are fully and equity market capitalization, or ‘‘public
adopting today regarding unconditionally guaranteed by the well- float,’’ of a reporting issuer can be used
communications and the registration known seasoned issuer parent; 47 or as a proxy for whether the issuer has a
• The majority-owned subsidiary is demonstrated market following.49 We
processes.41 We are defining a well-
offering non-convertible investment are adopting as a threshold a public
known seasoned issuer as an issuer that
grade securities.48 float of $700 million or more. We have
is required to file reports pursuant to Overall, the issuers that will meet our
Section 13(a) or Section 15(d) the used market capitalization as a proxy for
thresholds for well-known seasoned public float in evaluating this threshold
Exchange Act and satisfies the following issuers are the most active issuers in the
requirements as of the date on which its and its implications.
U.S. public capital markets. In 2004, To determine whether an issuer meets
status as a well-known seasoned issuer those issuers, which represented
is determined: the $700 million threshold under the
approximately 30% of listed issuers, definition, the issuer will calculate its
• The issuer must meet the registrant accounted for about 95% of U.S. equity
requirements of Form S–3 or Form F– public float in the same manner that it
market capitalization. They have calculates its public float for purposes of
3; 42
• The issuer either: determining Form S–3 or F–3
44 As we discuss below, these issuers generally
Æ As of a date within 60 days of its are limited in the types of securities they may
eligibility.50 We have revised the
eligibility determination date must have register on an automatic shelf registration statement definition from the proposal to clarify
a worldwide market value of its as a well-known seasoned issuer. See Section II.A.3 that the non-affiliate equity market
below under ‘‘Well-Known Seasoned Issuers capitalization is determined on a
outstanding voting and non-voting Securities Offerings.’’
common equity held by non-affiliates of 45 See definition of ‘‘ineligible issuer’’ added to
worldwide basis, as it historically has
$700 million or more; or Securities Act Rule 405 and discussed in Section been for purposes of eligibility to use
Æ As of a date within 60 days of its III.D.3 below under ‘‘Issuer Eligibility.’’ Further, an Form F–3. In addition, for purposes of
eligibility determination date, must issuer will not meet the definition of well-known calculating public float of a non-U.S.
seasoned issuer if it is an asset-backed issuer (as issuer to determine eligibility as a well-
have issued in the last three years, at defined in Item 1101(b) of Regulation AB [17 CFR
least $1 billion aggregate principal 229.1101(b)], an investment company registered known seasoned issuer and eligibility to
amount of non-convertible securities, under the Investment Company Act of 1940, or a use Form S–3 or F–3, we interpret
other than common equity,43 in primary business development company. Business
development companies are a category of closed- 49 Public float also is one of the key determinants
offerings for cash, not exchange, end investment companies that are not required to for eligibility for current short-form registration on
register under the Investment Company Act. See Form S–3 or Form F–3.
seasoned issuers can register, on a more flexible Section 2(a)(48) of the Investment Company Act of 50 The determination of public float is based on
basis than is currently the case, offerings of 1940 [15 U.S.C. 80a–2(a)(48)]. a public trading market. This is the same
different types of securities using Form S–3 or Form 46 Whether a guarantee is full and unconditional
requirement in General Instruction I.B.1 of Form S–
F–3 registration statements that are effective upon is analyzed under the same principles as those used 3 and Form F–3 that a registrant have a $75 million
filing. See discussion in Section V.B.2. below under under Rule 3–10 of Regulation S–X [17 CFR 210.3– market value and in the definition of accelerated
‘‘Automatic Shelf Registration for Well-Known 10] and Exchange Act Rule 12h–5 [17 CFR 240.12h– filer in Exchange Act Rule 12b–2 [17 CFR
Seasoned Issuers.’’ 5]. In addition, the guarantee may only be of 240.12b2]. Therefore, an entity with $700 million of
41 Except for expanding eligibility for certain securities that have a limited duration and are not common equity securities outstanding but not
majority-owned subsidiaries, as discussed below, perpetual. This analysis is not different from the trading in any public trading market would not be
we are not changing the existing eligibility current analysis under Form S–3 or Form F–3 for a well-known seasoned issuer based on market
standards for the use of Form S–3 and Form F–3. registered guaranteed securities. capitalization. See Simplification of Registration
42 Through the form requirements, the definition 47 See amendments to Securities Act Rule 405.
Procedures for Primary Securities Offerings, Release
requires that a well-known seasoned issuer be Unless the majority-owned subsidiary itself meets No. 33–6964 (Oct. 29, 1982) [57 FR 48970];
current and timely in its Exchange Act reporting the eligibility conditions for a well-known seasoned Simplification of Registration Procedures for
obligations. issuer, it may, of course, only register securities as Primary Securities Offerings, Release No. 33–6943
43 ‘‘Common equity’’ is defined in Securities Act a well-known seasoned issuer on its parent’s (July 22, 1992) [57 FR 32461] (proposing release);
Rule 405 as ‘‘any class of common stock, or an automatic shelf registration statement. Integrated Disclosure Release, note ; and
equivalent interest, including but not limited to a 48 These offerings would be required to meet the Reproposal of Comprehensive Revision to System
unit of beneficial interest in a trust or a limited conditions of General Instruction I.B.2 of Form S– for Registration of Securities Offerings, Release No.
partnership interest.’’ 3 or Form F–3. 33–6331 (Aug. 18, 1981) [46 FR 41902].
‘‘common equity’’ as defined in period and accounted for the following counted toward the $1 billion issuance
Securities Act Rule 405 as including a percentages of capital raised: threshold may have been issued in any
class of participating voting or non- registered primary offering for cash, on
voting preferred stock of a foreign issuer OFFERING PROCEEDS, BY ISSUER CAP- any form (other than Form S–4 or Form
where the issuance of the preferred ITALIZATION PRIMARY SEASONED OF- F–4). Those non-convertible securities
stock results from requirements of the FERINGS, 1997–2004 * need not be investment grade securities
applicable foreign jurisdiction or market [$Billions (%) Proceeds from Offerings, by
to be included in the calculation. In
and where the class of preferred stock Issuer Capitalization] calculating the $1 billion amount,
has liquidation or dividend preferences issuers generally may include the
and other terms that cause it to be the Market Capitalization of Issuers principal amount of any debt and the
substantial economic equivalent of a greater of liquidation preference or par
>$700mm >$0 (All Issuers) value of any non-convertible preferred
class of common stock.
stock that were issued in primary
To evaluate the implications of a $700 Equity $396 (70%) $567 (100%)
Debt 54 1,849 (96%) 1,927 (100%) registered offerings for cash.57
million public float threshold, staff in Issuers may not include the principal
our Office of Economic Analysis Total .. 2,245 (90%) 2,494 (100%)
amount of securities that were offered in
(‘‘OEA’’) obtained data on the 12,551 * Source: OEA estimates using Center for registered exchange offers by the issuer
registered offerings that were conducted Research in Securities Prices at the University when determining compliance with the
from 1997 to 2004 by 2,875 issuers that of Chicago and Securities Data Corporation
data. $1 billion non-convertible securities
had public equity outstanding and were threshold. A substantial portion of these
listed on a major exchange or equity b. Registered Offerings of Non- offerings involve registered exchange
market.51 Of these offerings, 9,164 were Convertible Securities Threshold offers of substantially identical
debt offerings that raised proceeds of Issuers that do not meet the public securities for securities that were sold in
$1,927 billion, and 3,387 were equity equity float test will be considered well- private offerings. In those cases, the
offerings that raised proceeds of $567 known seasoned issuers if they have original sale to investors in the private
billion. The average issuer conducted issued for cash more than an aggregate offering, relying upon, for example, the
4.2 debt offerings and 1.1 equity of $1 billion in non-convertible exemptions of Securities Act Section
offerings per calendar year, although as securities, other than common equity, 4(2) 58 and Rule 144A, is not registered
many as 209 debt offerings have been through registered primary offerings and is not carried out under the
conducted by a single issuer within a over the prior three years. These issuers Securities Act’s disclosure or liability
calendar year. also will have to satisfy the other standards. Moreover, in the subsequent
OEA also analyzed data on the conditions of the well-known seasoned registered exchange offers purchasers
financial market conditions under issuer definition, such as the form may not be able, in certain cases, to
which these offerings were made. High eligibility requirement.55 In determining avail themselves effectively of the
levels of analyst coverage, institutional compliance with this threshold: remedies otherwise available to
ownership, and trading volume are • Issuers may aggregate the amount of purchasers in registered offerings for
useful indicators of the scrutiny that an non-convertible securities, other than cash. While these exchange offers are
issuer receives from the market, common equity, issued in registered permitted in some circumstances, the
although no one statistic can fully primary offerings during the prior three policy preference for registered
capture the extent to which an issuer is years; offerings, in conjunction with the
followed by the market.52 Issuers with • Issuers may include only such non- streamlining of the registration process
market capitalization in excess of $700 convertible securities that were issued we provide today, lead us to conclude
million that conducted offerings from in registered primary offerings for that such exchange offers should not
1997 to 2004 typically had an average of cash—they may not include registered count towards the $1 billion threshold.
12 analysts following them prior to the exchange offers in this aggregation; and OEA analyzed statistics on issuers
offering.53 This includes only sell-side • Parent company issuers only may that did not meet the $700 million
analysts and is, we believe, a include in their calculation the public equity threshold. OEA found that
conservative indicator of analyst principal amount of their full and very few issuers that had public
scrutiny. Institutional investors unconditional guarantees, within the common equity but did not meet the
accounted for an average of 52% of meaning of Rule 3–10 of Regulation S– $700 million public float threshold
equity ownership prior to offerings by X,56 of non-convertible securities, other would meet the $1 billion non-
issuers with market capitalization above than common equity, of their majority- convertible securities threshold.
$700 million. Those issuers had an owned subsidiaries issued in registered However, OEA also found that a number
average daily trading volume of nearly primary offerings for cash during the of issuers without any public common
$52 million prior to offerings in this three-year period. equity would meet the $1 billion
The aggregate principal amount of threshold. Based on OEA’s analysis,
51 OEA compiled and analyzed the supporting non-convertible securities that may be from 1997 to 2004 the issuers of fixed
data for the public float (using market
capitalization) and outstanding debt thresholds. 54 Because the methodology includes only listed 57 Some commenters asked for clarification on
52 See, e.g., Harrison Hong, Terrence Lim, and issuers, it excludes debt-only issuers (including how to value certain types of debt issuances, such
Jeremy C. Stein, Bad News Travels Slowly: Size, companies that will be well-known seasoned as debt issuances involving original issue discount
Analyst Coverage and the Profitability of issuers), including those that are subsidiaries of or debt issued in foreign currency denominations.
Momentum Strategies, 55 Journal of Finance 265 companies with listed public equity but that are not See, e.g., letters from the American Bar Association
(2000); Robert C. Merton, A Simple Model of themselves listed. (‘‘ABA’’) and the New York State Bar Association
Capital Market Equilibrium with Incomplete 55 As we discuss below, these issuers generally (‘‘NYSBA’’). We have not made any modifications
Information, 42 Journal of Finance 483 (1987). are limited in the types of securities they may to the definition in response to these comments.
53 Issuers with a market capitalization of between register on an automatic shelf registration statement Issuers should use the same calculation that they
$75 million and $200 million, in most cases, have as a well-known seasoned issuer. See Section II.A.3 use to determine the dollar amount of securities
between zero to five analysts following them, with below under ‘‘Well-Known Seasoned Issuers that they are registering for purposes of determining
approximately 50% having zero to two analysts Securities Offerings.’’ their filing fees under Securities Act Rule 457.
following them. 56 17 CFR 210.3–10. 58 15 U.S.C. 77d(2).
income securities that did not have 20–F. If the issuer does not accomplish 4. Comments Regarding the Definition
outstanding public common equity but its Section 10(a)(3) update or file its of Well-Known Seasoned Issuer
met the $1 billion threshold accounted annual report when due, the due date Commenters generally supported the
for 16.7% of all of the issuers without will become the date of determination addition of a class of well-known
public common equity that issued and, because the issuer will be neither seasoned issuers who will benefit the
public debt, but accounted for 65% of timely nor current in its reporting most from the new rules.64 Most of the
total debt and preferred stock issued by obligations under the Exchange Act at comments related to the threshold for
all of such issuers. None of the debt that time, it will cease to be a well- eligibility based on public equity float,
offerings of issuers meeting the known seasoned issuer. It can of course the definition of ‘‘debt security’’ for
threshold was rated below investment purposes of the debt threshold
become a well-known seasoned issuer
grade, and 86% of their debt offerings calculation, the inclusion of securities
again in the future if and when it meets
were rated A or higher by a nationally issued in exchange offers, the frequency
recognized security rating organization applicable requirements.
of eligibility determinations, and the
(an ‘‘NRSRO’’). This group of issuers A well-known seasoned issuer may inclusion or exclusion of Schedule B
also on average had 19 basis points not be an ineligible issuer on the date issuers, voluntary issuers, and asset-
lower yield spread for their issues of determination of well-known backed issuers.65 A number of
relative to issuers without public seasoned issuer status. The date of commenters also suggested that the
common equity that had issued less determination of whether an issuer is an timing of the eligibility determination
than $1 billion of fixed income ineligible issuer for these purposes is for well-known seasoned issuers be
securities in the past three years. We the same date as that used for other revised.66
believe that this lower yield spread purposes in determining the issuer’s Some commenters expressed the view
reflects lower default risk (higher status as a well-known seasoned issuer. that the $700 million threshold was too
ratings) and higher liquidity and high, while others thought additional
transparency of the issuers.59 3. Well-Known Seasoned Issuers’ eligibility conditions should be
Securities Offerings included.67 None of the commenters
2. Timing of Determination of Well-
Known Seasoned Issuer Status An issuer that meets the definition of provided any empirical data supporting
their views to modify the thresholds.
Whether an issuer satisfies the well-known seasoned issuer based on
Other commenters suggested alternative
eligibility requirements for being a well- the $700 million public float threshold
ways to measure whether an issuer
known seasoned issuer generally will be can use an automatic shelf registration should be considered a well-known
determined on an approximately annual statement, as discussed below, to seasoned issuer, including average daily
basis. We revised the timing of register any offering of securities, other trading volume or institutional
determination of status as a well-known than those for business combination ownership measures.68 Many
seasoned issuer in response to transactions.62 An issuer that meets the commenters requested that we clarify
comments.60 As adopted, the definition definition of well-known seasoned that the public float used in the
uses the 60-day window period used in issuer based on the amount of registered calculation be the company’s worldwide
Form S–3 and Form F–3 and provides non-convertible security issuances in public float.69 A number of commenters
that the eligibility determination will be the prior three years also may register on the definition requested that we
made as of the later of the time of filing direct the staff to reconsider the bases
any such offering for cash using
of the issuer’s most recent shelf for the thresholds in two to three
automatic shelf registration if it is
registration statement or the time of its years.70
most recent amendment (by post- eligible to register a primary offering of
its securities on Form S–3 or Form F– Commenters on the debt threshold
effective amendment, incorporated were most concerned about the types of
Exchange Act report, or form of 3 pursuant to General Instruction I.B.1.
prospectus) to a shelf registration of such forms.63 An issuer that meets 64 See, e.g., letters from Alston; The Bond Market
statement for purposes of complying the definition of well-known seasoned Association (‘‘TBMA’’); Citigroup Global Corporate
with Securities Act Section 10(a)(3).61 In issuer based on the amount of registered & Investment Bank (‘‘Citigroup’’); LaSalle Broker-
the event that the issuer has not filed a non-convertible security issuances in Dealer Services Division of ABN–AMRO Financial
Services, Inc. (‘‘LaSalle’’); NYSBA; and Reuters
shelf registration statement or amended the prior three years but is not eligible America LLC (‘‘Reuters’’).
a shelf registration statement for to register a primary offering of 65 See, e.g., letters from ABA; the American Bar
purposes of complying with Securities securities on Form S–3 or Form F–3 Association comment letter on asset-backed
Act Section 10(a)(3) for sixteen months, pursuant to General Instruction I.B.1 of securities (‘‘ABA–ABS’’); Cleary Gottlieb Steen &
Hamilton (‘‘Cleary’’); Fried, Frank, Harris, Shriver &
the determination date will be the time such forms may use automatic shelf Jacobson (‘‘Fried Frank’’); the International Bar
of filing of the issuer’s most recent registration to register only offerings for Association (‘‘IBA’’); the Securities Industry
annual report on Form 10–K or Form cash of non-convertible securities, other Association (‘‘SIA’’); and TBMA.
66 See, e.g., letters from Alston; Davis Polk; E &
than common equity, whether or not Y; NYCBA; and TBMA.
59 See Gordon J. Alexander, William F. Sharpe,
and Jeffrey V. Bailey, Fundamentals of Investments

investment grade. 67 See, e.g., letters from ABA; the American
(2001 ed.) at 530. Institute for Certified Public Accountants

60 See, e.g., letters from Alston & Bird LLP 62 Under the Rule, business combination (‘‘AICPA’’); BDO Seidman, LLP (‘‘BDO Seidman’’);
(‘‘Alston’’); Davis Polk & Wardwell (‘‘Davis Polk’’); transactions are those defined in Rule 165(f)(1) [17 Deloitte & Touche LLP (‘‘Deloitte’’); E & Y; Fried
Ernst & Young LLP (‘‘E&Y’’); and the Association of Frank; the National Association of Real Estate
CFR 230.165(f)(1)]. Rule 165(f)(1) defines a business
the Bar of the City of New York (‘‘NYCBA’’). Investment Trusts (‘‘NAREIT’’); NYSBA; Reuters;
combination transaction to mean any transaction Sullivan & Cromwell (‘‘S&C’’); and Students in
61 See 15 U.S.C. 77j(a)(3). Under Form S–3 and
specified in Rule 145(a) [17 CFR 230.145(a)] or Professor Samuel C. Thompson’s Investment
Form F–3, the Section 10(a)(3) update need not be exchange offer.
made through a post-effective amendment. Rather, Banking Class, UCLA School of Law (‘‘UCLA’’).
63 We believe that an eligible well-known 68 See, e.g., letters from ABA; Brinson Patrick
under these Forms, the Section 10(a)(3) update
generally occurs when the issuer files its annual seasoned issuer that can otherwise use Form S–3 or Securities Corporation (‘‘Brinson Patrick’’); and
report on Form 10–K or Form 20–F containing the Form F–3 for registered primary offerings because S&C.
issuer’s audited financial statements for its most it has a $75 million public float should not have 69 See, e.g., letters from ABA; Alston; Cleary;
recently completed fiscal year by the due date of to use two different registration statements for its Fried Frank; IBA; NYSBA; and S&C.
such annual report. securities offerings for cash. 70 See, e.g., letters from NYCBA; SIA; and UCLA.
securities included in the calculation registered offering for cash during the issuers, we expect that the staff will
and whether it was appropriate to prior three years.77 Further, the offering continue to consider disclosure and
include only debt issued in registered of the security included in the other shelf issues affecting Schedule B
offerings.71 Some commenters requested calculation could have been registered issuers in the same manner that they do
that the debt calculation be based on a on any form (other than Form S–4 or today. Finally, we have recently
broader category of fixed income Form F–4) and the security need not be adopted rules and regulations covering
securities including debt securities and investment grade. In addition, a parent the offering of and reporting by asset-
non-convertible preferred securities.72 issuer may count the aggregate amount backed issuers.82 This new regulatory
Commenters suggested that non- of its registered full and unconditional structure is not yet fully operational.
investment grade debt be included in guarantees of non-convertible securities, The advantages of a reporting history
the calculation.73 These commenters other than common equity, of its under the Exchange Act that influenced
also suggested that securities issued in majority-owned subsidiaries issued for our decision to create the well-known
exchange offers, such as ‘‘Exxon cash during the three-year period. seasoned issuer category are essentially
Capital’’ exchange offers, be included in While we have not changed the dollar absent for asset-backed issuers.
the debt calculation. Some commenters amounts of the thresholds, we do agree
suggested that the debt calculation be with commenters that it would be Commenters wanted market
based on all debt and non-convertible appropriate to revisit the thresholds in participants to have greater certainty
preferred stock sold, whether or not in a few years. We, therefore, are directing that issuers were eligible as well-known
registered offerings.74 Finally, some the staff of the Division of Corporation seasoned issuers.83 We have modified
commenters requested that issuers Finance and OEA to undertake a study the timing for determination of well-
meeting the well-known seasoned issuer in three years after full implementation known seasoned issuer status to provide
definition based on their debt offerings of the rules to evaluate the operation of more certainty. We have provided
be allowed to use the automatic shelf the definition we adopt today and any generally for an approximately annual
registration procedure for registering material changes in the data upon determination of well-known seasoned
offerings of equity securities as well as which the thresholds are based and issuer status. We also are adopting a
debt securities.75 report back to us and recommend any change to Form 10–K and Form 20–F
We have retained the $700 million potential changes to the thresholds that will modify the cover page of those
public float threshold and the $1 billion based on such new data. forms to include a check box for issuers
debt threshold. As the discussion above Although some commenters had to indicate if they are considered well-
reflects, in reaching our determination suggested expanding the categories of known seasoned issuers at the time of
to use the $700 million public float eligible issuers beyond those contained the filing of the Form 10–K or Form 20–
amount, we considered trading volume, in the proposed definition,78 and others F.
institutional ownership, and market suggested narrowing the categories of
capitalization. eligible issuers or otherwise imposing B. Other Categories of Issuers
In response to comments, we have more stringent eligibility conditions,79
We also are using existing categories
clarified that the basis for determining we have adopted the definition as
of issuers, including seasoned issuers,
the public float calculation is proposed in that regard. As a result,
unseasoned Exchange Act reporting
worldwide public float of voting and well-known seasoned issuer status is
issuers, and non-reporting issuers, in
non-voting common equity. In response not available to voluntary filers, asset-
to comments,76 we also are providing an backed issuers, or Schedule B issuers.80 the new rules regarding
interpretation, as set forth above, Voluntary filers are not required to file communications and the registration
regarding the inclusion in the reports under the Exchange Act, and we process. A seasoned issuer is an issuer
calculation of certain participating believe that such issuers should be that is eligible to use Form S–3 or Form
preferred stock of non-U.S. issuers that required to register under the Exchange F–3 to register primary offerings of
is substantially economically equivalent Act, and thus become subject to all of securities pursuant to General
to common equity. the results of registration for all Instruction I.B.1 of such Forms or is
While we are not revising the dollar purposes, if they wish to avail registering securities in reliance on
amount of the thresholds for public themselves of the benefits of reporting General Instruction I.B.2, I.B.5, or I.C. of
equity float or for issued debt, the issuer, seasoned issuer, or well-known Form S–3 or General Instruction I.A.5 or
definition as adopted addresses a seasoned issuer status.81 For Schedule B I.B.2 of Form F–3.84 Majority-owned
number of the other issues that subsidiaries registering offerings of their
commenters raised. For example, we 77 We have not expanded the non-convertible securities on Form S–3 or Form F–3
have expanded the $1 billion debt security threshold to include the amount of pursuant to General Instruction I.C. of
securities issued in unregistered offerings or in Form S–3 or I.A.5. of Form F–3 also are
threshold to include any non- exchange offers.
convertible security, other than common 78 See, e.g., letters from ABA; ABA–ABS; Allied considered seasoned issuers.85 As
equity, that has been issued in a Capital Corporation (‘‘Allied’’); IBA; and TBMA. commenters requested, we are clarifying
79 See, e.g., letters from AICPA; BDO Seidman; that issuers of asset-backed securities
71 See, e.g., letters from ABA; Alston; Cleary; Deloitte; and E&Y.
80 As noted above, the definition of well-known
Davis Polk; S&C; and TBMA. 82 See Asset-Backed Securities, Release No. 33–
72 See, e.g., letters from ABA; Alston; Cleary; the seasoned issuer explicitly excludes investment
companies registered under the Investment 8518 (Dec. 22, 2004) [70 FR 1506] (the ‘‘Asset-
Society of Corporate Secretaries & Governance Backed Securities Adopting Release’’).
Company Act of 1940 and business development
Professionals (‘‘SCSGP’’); the Southern Company 83 See, e.g., letters from ABA–ABS; American
companies.
(‘‘Southern’’); and TBMA. 81 As later discussed and consistent with our Securitization Forum (‘‘ASF’’); and Richard Hall.
73 See, e.g., letters from Alston; Davis Polk; the 84 See Form S–3 and Form F–3.
proposal, an issuer not subject to the reporting
NYCBA; S&C; and TBMA. 85 We are expanding the majority-owned
requirements of Exchange Act Section 13 or Section
74 See, e.g., letters from ABA; Alston; Fried Frank;
15(d), but filing Exchange Act reports voluntarily, subsidiary eligibility in Form S–3 and Form F–3 to
IBA; and TBMA. will not be a well-known seasoned issuer or a allow majority-owned subsidiaries to use the forms
75 See, e.g., letters from Alston; Fried Frank; and
seasoned issuer. In addition, because voluntary under the same circumstances in which majority-
TBMA. filers are not required to report, they will not be owned subsidiaries may be well-known seasoned
76 See letters from Cleary and Shearman & treated as reporting issuers, for example, for issuers. For example, see General Instruction I.C. to
Sterling (‘‘Shearman’’). purposes of Rule 138, Rule 168, or Rule 433. Form S–3.
eligible for registration on Form S–3 Between the filing of the registration effective medium to communicate
also are considered seasoned issuers.86 statement and its effectiveness, offers quickly and broadly.91 The changes in
An unseasoned issuer is an issuer that made in writing (including by e-mail or the Exchange Act disclosure regime and
is required to file reports pursuant to Internet), by radio, or by television are the tremendous growth in
Section 13 or Section 15(d) of the limited to a ‘‘statutory prospectus’’ that communications technology are
Exchange Act, but does not satisfy the conforms to the information resulting in more information being
requirements of Form S–3 or Form F–3 requirements of Securities Act Section provided to the market on a more non-
for a primary offering of its securities. A 10.89 As a result, the only written discriminatory, current, and ongoing
non-reporting issuer is an issuer that is material that is permitted in connection basis. Thus, while investor protection
not required to file reports pursuant to with the offering of the securities during remains a paramount interest, the gun-
Section 13 or Section 15(d) of the the period between filing and jumping provisions of the Securities Act
Exchange Act, regardless of whether it effectiveness of a registration statement impose substantial and increasingly
is filing such reports voluntarily. is a preliminary prospectus meeting the unworkable restrictions on many
A number of commenters suggested requirements of Section 10, which must communications that would be
that the rules treat voluntary filers as be filed with us. Even after the beneficial to investors and markets and
seasoned issuers even though they are registration statement is declared would be consistent with investor
not required to file reports pursuant to effective, offering participants still may protection.
Exchange Act Section 13 or Section make written offers only through a The following factors, combined with
15(d).87 As we note above with respect statutory prospectus, except that they the advances in technology described
to eligibility for well-known seasoned may use additional written offering above, lead us to believe that investors
issuer status, voluntary filers are not materials if a final prospectus that meets and the market will benefit from access
required to file reports under the the requirements of Securities Act to greater permissible communications
Exchange Act, and we believe that such Section 10(a) is sent or given prior to or where protection for investors is
issuers should be required to register with those materials.90 Violations of maintained through the appropriate
under the Exchange Act if they wish to these restrictions generally are referred Securities Act liability standards for
avail themselves of the benefits to as ‘‘gun jumping,’’ and we use the materially deficient disclosures in
accorded seasoned issuers under the term ‘‘gun-jumping provisions’’ in this prospectuses and oral communications:
rules we are adopting today. release to describe the statutory • Much of our recent rulemaking is
provisions of the Securities Act that set intended to encourage reporting issuers
III. Communications Rules
forth these restrictions. to provide additional materially
A. Communications Requirements Prior accurate and complete information to
to Today’s Rules and Amendments B. Need for Modernization of the market on a more current basis.92
Communications Requirements The Securities Act’s constraints on
The Securities Act restricts the types
of offering communications that issuers 1. General communications during an offering,
or other parties subject to the Act’s however, have caused issuers to be
As we noted in the Proposing Release,
provisions (such as underwriters) may concerned about the treatment of their
the gun-jumping provisions of the
use during a registered public offering. ongoing communications and whether,
Securities Act were enacted at a time
The nature of the restrictions depends if they are engaged or will soon be
when the means of communications
on the period during which the engaged in capital raising, their
were limited and restricting customary disclosures will be
communications are to occur. The communications (without regard to
restrictions do not depend on the considered an impermissible offer of
accuracy) to the statutory prospectus securities; 93
accuracy of the information contained appropriately balanced available
in the communication. Before the communications and investor 91 For example, the Internet provides a medium
registration statement is filed, all offers, protection. The gun-jumping provisions through which to deliver electronic documents, to
in whatever form, are prohibited.88 were designed to make the statutorily broadcast radio and television programs, to issue
mandated prospectus the primary press releases or print advertisements, to conduct
86 Asset-backed securities (as defined in Item telephone or videoconferences with investors,
1101 of Regulation AB [17 CFR 229.1101]) may be
means for investors to obtain prospective investors, and other parties, and to send
offered and sold on Form S–3 if the issuer meets information regarding a registered personal e-mails.
the requirements of General Instruction I.A.4 of securities offering. 92 Other recent rulemaking initiatives addressing
Form S–3 and the transaction meets the The capital markets, in the United disclosure issues include those referenced in notes
requirements of General Instruction I.B.5 of such States and around the world, have 33 through 38 and those contained in Disclosure
Form, including that the asset-backed securities are Regarding Nominating Committee Functions and
investment grade. changed very significantly since those Communications Between Security Holders and
87 See, e.g., letters from ABA; Alston; Fried Frank; limitations were enacted. Today, issuers Boards of Directors, Release No. 33–8340 (Nov. 24,
and TBMA. engage in all types of communications 2003) [68 FR 66992]; and Disclosure in
88 See Securities Act Section 5(c) [15 U.S.C. Management’s Discussion and Analysis About Off-
on an ongoing basis, including, Balance Sheet Arrangements and Aggregate
77e(c)]. Securities Act Section 2(a)(3) [15 U.S.C.
77b(a)(3)] defines ‘‘offer’’ as any attempt or offer to
importantly, communications mandated Contractual Obligations, Release No. 34–47264 (Jan.
dispose of, or solicitation of an offer to buy, a or encouraged by our rules under the 28, 2003) [68 FR 5982] (the ‘‘Off-Balance Sheet
security or interest in a security, for value. The term Exchange Act, rules or listing standards Disclosure Release’’).
93 See, e.g. letter from the American Bar
‘‘offer’’ has been interpreted broadly and goes of national securities exchanges, and
beyond the common law concept of an offer. See Association Committee on Federal Regulation of
Diskin v. Lomasney & Co., 452 F.2d 871 (2d. Cir. comparable requirements in foreign Securities to the Director of the Division of
1971); SEC v. Cavanaugh, 1 F. Supp. 2d 337 jurisdictions. Modern communications Corporation Finance, Aug. 22, 2001 (available at
(S.D.N.Y. 1998). The Commission has explained technology, including the Internet, www.abanet.org); comment letters in File No. S7–
that ‘‘the publication of information and publicity 30–98 from Gerald S. Backman, et. al.; Fried Frank;
provides a powerful, versatile, and cost- Service Employees International Union Master
efforts, made in advance of a proposed financing
which have the effect of conditioning the public Trust; and S&C. See also Edward F. Greene and
89 See Securities Act Section 5(b)(1) [15 U.S.C.
mind or arousing public interest in the issuer or in Linda C. Quinn, ‘‘Building on the International
its securities constitutes an offer * * *.’’ Guidelines 77e(b)(1)] and Securities Act Section 10 [15 Convergence of the Global Markets: a Model for
for the Release of Information by Issuers Whose U.S.C.77j]. Securities Law Reform,’’ presented at A Major
Securities are in Registration, Release No. 33–5180 90 See Securities Act Section 2(a)(10) [15 U.S.C. Issues Conference: Securities Regulation in the
(Aug. 16, 1971) [36 FR 16506]. 77b(a)(10)] and Section 5(b)(1). Continued
• The multiplicity of means of purposes of the Securities Act. In this that the distinctions in the definitions
communication has led us to recognize manner, we intend to encompass new we are adopting today are appropriate
that restricting written offers to a technologies. Accordingly, we are updatings of the Securities Act’s
statutory prospectus inhibits desirable adopting new definitions of ‘‘graphic distinctions between oral and written
methods of timely communication of communication’’ and ‘‘written communications.
information; communication’’ to promote consistent As adopted, ‘‘written
• There are many more offerings of understanding of what constitutes such communication’’ means any
increasingly complex securities where a communication in view of the communication that is written, printed,
written communications, such as technological developments since the or television or radio broadcast
detailed descriptions of securities and enactment of the Securities Act and to (regardless of the transmission means),
offerings, would enhance significantly significantly reduce remaining or a graphic communication. All
the offering process for the benefit of uncertainty regarding the permitted communications that fall outside the
investors; 94 and means for delivery of information under definition are oral communications,
• The continuing trends towards the Securities Act. including for purposes of Securities Act
globalization of securities markets and We are adopting the proposed Section 12(a)(2). It also excludes live
multinationalization of issuers and revisions to the definition of ‘‘graphic telephone calls (through whatever
offerings and corresponding increase in communication’’ with some means by which they are transmitted,
information and information modifications. As adopted, the including the Internet) and, as discussed
requirements increase the need for a definition of ‘‘graphic communication’’ above, other live, in real-time
regulatory framework that includes any form of electronic media, communications to a live audience
accommodates more flexible such as audiotapes, videotapes, transmitted by graphic means. The
communications. facsimiles, CD–ROM, electronic mail, definition as adopted clarifies that
As we discussed in the Proposing Internet web sites, and computers, television or radio broadcasts will be
Release, in view of the many recent computer networks, and other forms of covered regardless of the transmission
changes to the Exchange Act reporting computer data compilation.96 means.
system that are designed to produce The definition of graphic We thus make a clearer distinction
more timely and extensive disclosures communication does not include a between communications that are
and greater scrutiny of, and confidence communication that, at the time of the broadcast and those that are graphic
in, those reports, it is appropriate at this communication, originates live, in real- communications. We have clarified that
time to adopt communications and time, to a live audience and does not a television or radio broadcast in
originate in recorded form or otherwise Securities Act Section 2(a)(10) and in
offering reforms.95
as a graphic communication.97 Any our definition of written communication
2. Definition of Written Communication such communication is not a graphic encompasses all radio or television
a. ‘‘Written Communication’’ and communication even if it is transmitted broadcasts, regardless of the means of
‘‘Graphic Communication’’ through a means of graphic transmission of the signals. For
communication. A basic concept of the example, a cable television show will be
As a starting point for reform, we are considered a television broadcast that is
definition we adopt today is that
defining all methods of communication, a written communication, and a
communications that are graphic
other than oral communications, as television show or radio program that
communications when they are
written communications for purposes of may be seen or heard through the
transmitted are treated as graphic
the Securities Act. While we have Internet on a computer will also be
communications under the definition
addressed the issue of electronic considered a television or radio
and communications that are live, in
communications in a number of broadcast that is a written
real-time communications to a live
different contexts, at this time we are communication. A communication may
audience when they are transmitted are
adopting rules making it clear that all fall outside the definition of graphic
not treated as graphic communications.
electronic communications (other than communication because it originates
We believe that live, in real-time
telephone and other live, in real-time live, in real-time to a live audience but
communications to a live audience,
communications to a live audience, as such communication (for example, a
including those transmitted by graphic
discussed below) are graphic and, live business news program broadcast
means, have less of the permanence of
therefore, written communications for by traditional means or on cable) may be
communications that originate in
graphic form or that appear on the a television or radio broadcast. On the
Global Internet Economy, Washington, D.C., Nov. other hand, a live, in real-time
14–15, 2001 (available at printed page. Accordingly, we believe
www.law.northwestern.edu). communication that is transmitted by
94 For example, we and the staff have already 96 The forms of media that are described in the graphic means to a live audience would
recognized the usefulness of descriptions of definition encompass the forms of media that are be an oral communication. Given the
securities and related materials in offerings of asset- addressed in our interpretive guidance on the use potentially unlimited and uncontrolled
backed securities. See the Asset-Backed Securities of electronic media. See, e.g., Use of Electronic
Adopting Release, note 82. Media, Release No. 33–7856 (Apr. 28, 2000) [65 FR
nature of dissemination of broadcast
95 We have considered communications reform in 25843] (the ‘‘2000 Electronics Release’’). In communications and the language of the
other contexts for a number of years. With our recognition of continuing developments in Securities Act, we believe that this is an
adoption of the communications reforms for technology, the forms of electronic media described appropriate distinction.
business combination transactions in 1999, we in the definition are intended to be illustrative The following are examples of the
reduced the regulation of offers and brought the rather than exhaustive.
regulatory structure closer to the practices in those 97 Written communications will not include application of these definitions:
offerings while ensuring continued investor individual telephone voice mail messages from live • A live telephone call is not a
protection. See Regulation of Takeovers and telephone calls but will include broadly written communication;
Security Holder Communications, Release No. 33– disseminated or ‘‘blast’’ voice mail messages, • A live telephone call that is
7760 (Oct. 22, 1999) [64 FR 61408] (the ‘‘Regulation including those that originate in graphic form. The recorded by the recipient is not a
M–A Release’’). We recently have adopted latter is included in the definition because we
communications reforms for asset-backed securities believe they are not to a live audience and therefore written communication;
offerings as well. See the Asset-Backed Securities more closely resemble graphic communications • E-mails, facsimiles, and electronic
Adopting Release, note 82. than oral communications. postings on web sites, by their nature,
originate in graphic form and, therefore, communication by the recipient when it We believe that the modifications that
are graphic communications; is re-transmitted; and we made to the definitions of graphic
• A live, in-person road show to a • An interview with an issuer’s chief communication and written
live audience is not a written executive officer conducted live as part communication will address
communication; of a television program is a written commenters’ issues regarding live, in
• A live, in real-time road show to a communication regardless of how the real-time communications, including
live audience that is transmitted television signal is transmitted (whether telephone calls, conference calls,
graphically is not a graphic over the airwaves, or through cable, videocasts, and live webcasts.
communication; satellite, or Internet) and regardless of
C. Overview of Communications Rules
• A live, in real-time road show to a how it is received by the recipient
live audience that is transmitted to an (whether a television set or a computer). Today, we are adopting rules that
‘‘overflow room’’ is not a graphic With respect to road shows, as relate to the following:
communication; explained below, we also have added a • Regularly released factual business
Note to Rule 433 that states that a
• A webcast or video conference that information;
communication that is provided or
originates live and in real-time at the
transmitted simultaneously with a road • Regularly released forward-looking
time of transmission and is transmitted information;
show and is provided or transmitted in
through video conferencing facilities or • Communications made more than
a manner designed to make the
is webcast in real-time to a live 30 days before filing a registration
communication available only as part of
audience is not a graphic statement;
the road show and not subsequently is
communication;
deemed to be part of the road show. • Communications by well-known
• The ability of a member of the
b. Comments Regarding Proposals seasoned issuers during the 30 days
audience to record a webcast or video
before filing a registration statement;
conference that is presented live and in Commenters raised several questions
real-time to a live audience would not • Written communications made in
about the proposed definitions,
affect the status of that webcast or video accordance with the safe harbor in
particularly as the definitions affected
conference; Securities Act Rule 134; and
live audio transmissions, live telephone
• A live telephone call or video or calls, and live road shows transmitted • Written communications (other
webcast conference that is recorded by over the Internet.98 Commenters were than a statutory prospectus) by any
or on behalf of the originating party or concerned that the definitions of written eligible issuer after filing a registration
parties and then transmitted, or is communication and graphic statement.
otherwise transmitted other than live communication did not explicitly The following table provides a brief
and in real-time, will be a graphic address the treatment of live telephone overview of the operation of the new
communication and therefore a written calls, regardless of the medium of and amended rules. While the table
communication; transmission, although the Proposing clearly does not include the level of
• A live telephone call or video or Release provided that live telephone detail necessary to explain the rules, we
webcast conference that is recorded by calls (other than blast voice mails) have included it to help readers in
the recipient and then re-transmitted by would not be considered written understanding the basic scope of the
the recipient is a graphic communications.99 new communications scheme.
Is it a prohibited pre-filing Is it a prohibited

Could it be an ‘‘offer’’ as Is it a ‘‘prospectus’’ as de- offer for purposes of prospectus for purposes of
defined in Section 2(a)(3)? fined in Section 2(a)(10)? Section 5(c)? Section 5(b)(1)?
Regularly Released Fac- Yes .................................... No ...................................... Rule defines it as not an Section 5(b)(1) relates only
tual Business Informa- offer for Section 5(c) to ‘‘prospectuses’’—it is
tion. purposes. not applicable.
Regularly Released For- Yes .................................... No ...................................... Rule defines it as not an Section 5(b)(1) relates only
ward-Looking Informa- offer for Section 5(c) to ‘‘prospectuses’’—it is
tion. purposes. not applicable.
Communications Made Yes .................................... Possibly, based on facts Rule defines it as not an Section 5(b)(1) does not
More than 30 Days Be- and circumstances. offer for Section 5(c) apply in the pre-filing pe-
fore Filing of Registration purposes. riod—it is not applicable.
Statement.
Well-Known Seasoned Yes .................................... No ...................................... Is exempted from prohibi- Section 5(b)(1) does not
Issuers—Oral Offers tion of Section 5(c). apply in the pre-filing pe-
Made Within 30 Days of riod—it is not applicable.
Filing of Registration
Statement.
Well-Known Seasoned Yes .................................... Yes. It also is a free-writ- Is exempted from prohibi- Section 5(b)(1) does not
Issuers—Written Offers ing prospectus. tion of Section 5(c). apply in the pre-filing pe-
Made Within 30 Days of riod—it is not applicable.
Filing of Registration
Statement.
99 See, e.g., letters from Citigroup; Merrill Lynch

98 See, e.g., letters from Citigroup; Cleary; Davis
& Co., Inc. (‘‘Merrill Lynch’’); S&C; and SIA.
Polk; S&C; and SIA.
Is it a prohibited pre-filing Is it a prohibited

Could it be an ‘‘offer’’ as Is it a ‘‘prospectus’’ as de- offer for purposes of prospectus for purposes of
defined in Section 2(a)(3)? fined in Section 2(a)(10)? Section 5(c)? Section 5(b)(1)?
Well-Known Seasoned Yes .................................... Yes .................................... Is exempted from prohibi- Section 5(b)(1) does not
Issuers—Free Writing tion of Section 5(c). apply in the pre-filing pe-
Prospectuses Used Be- riod—it is not applicable.
fore Filing of Registration
Statement.
Identifying Statements in Yes .................................... No ...................................... Section 5(c) is not applica- Section 5(b)(1) relates only
Accordance with Rule ble, as Rule 134 relates to ‘‘prospectuses’’—it is
134. only to the period after not applicable.
the filing of a registration
statement.
All Eligible Issuers—Free Yes .................................... Yes .................................... Section 5(c) is not applica- Section 5(b)(1) will be sat-
Writing Prospectuses ble, as it does not apply isfied, as the free writing
Used After Filing of Reg- in the post-filing period. prospectus will be a per-
istration Statement. mitted Section 10(b) pro-
spectus.
The communications rules we are give to issuers and other offering offerings, and procedural matters, such
adopting recognize the value of ongoing participants.100 as communications about the schedule
communications as well as the The cumulative effect of the rules for an offering or about account-opening
importance of avoiding unnecessary under the gun-jumping provisions is the procedures, are excluded from the
restrictions on offers during a registered following: definition of ‘‘prospectus.’’ 107
offering. In particular, the new and • Well-known seasoned issuers are
permitted to engage at any time in oral • The exemptions for research reports
revised rules will eliminate are expanded.108
requirements that can interrupt and written communications, including
use at any time of a free writing As discussed below, a number of
unnecessarily an issuer’s normal and
prospectus,101 subject to enumerated these rules include conditions of
routine communications into the market
conditions (including, in specified eligibility. Most of the new and
while an issuer is engaging in a
cases, filing with us).102 amended rules, for example, are not
securities offering, and will enhance the • All reporting issuers are permitted, available to blank check companies,
ability of issuers and other offering at any time, to continue to publish penny stock issuers, or shell
participants to make written offers regularly released factual business companies.109
outside the statutory prospectus. information and forward-looking
information.103 The rules we are adopting today
The new and revised rules we are
• Non-reporting issuers are permitted, ensure that appropriate liability
adopting establish a communications
at any time, to continue to publish standards are maintained. For example,
framework that, in some cases, will
regularly released factual business all free writing prospectuses have
operate along a spectrum based on the
information that is intended for use by liability under the same provisions as
type of issuer, its reporting history, and
persons other than in their capacity as apply today to oral offers and statutory
its equity market capitalization or recent
investors or potential investors.104 prospectuses.110 Written
issuances of fixed income securities.
Thus, under the rules we are adopting, • Communications by issuers more communications not constituting
than 30 days before filing a registration prospectuses will not be subject to
eligible well-known seasoned issuers
statement are not prohibited offers so disclosure liability applicable to
will have freedom generally from the
long as they do not reference a securities prospectuses 111 under Securities Act
gun-jumping provisions to communicate offering that is or will be the subject of Section 12(a)(2). This result will not
at any time, including by means of a a registration statement.105 affect their status for liability purposes
written offer other than a statutory • All issuers and offering participants under other provisions of the federal
prospectus. Varying levels of are permitted to use free writing
restrictions will apply to other prospectuses after the filing of the 107 Seeamendments to Securities Act Rule 134.
categories of issuers. We believe these registration statement, subject to 108 Seeamendments to Securities Act Rules 137,
distinctions are appropriate because the enumerated conditions (including, in 138, and 139.
market has more familiarity with large, specified cases, filing with us).106 109 We have adopted rules that contain a
more seasoned issuers and, as a result • A broader category of routine definition of shell company. See Use of Form S–8,
of the ongoing market following of their communications regarding issuers, Form 8–K, and Form 20–F by Shell Companies,
activities, including the role of market Release No. 33–8587 (July 15, 2005) (‘‘Shell
100 See, e.g., Regulation FD, Regulation G [17 CFR Company Release’’). For purposes of the rules we
participants and the media, these are adopting today, we have excluded business
244.100 et seq.], and Form 8–K [17 CFR 249.308].
issuers’ communications have less 101 A ‘‘free writing prospectus’’ is defined in combination related shell companies from the
potential for conditioning the market for Securities Act Rule 405. This definition is restrictions otherwise applicable to shell
the issuers’ securities to be sold in a discussed in Section III.D.3 below under companies. Therefore, all references to shell
registered offering. Disclosure ‘‘Definition of Free Writing Prospectus.’’ companies in this release excludes business
102 See Rule 163. combination related shell companies.
obligations and practices outside the 103 See Rule 168. Certain asset-backed issuers and 110 These liability provisions include Securities
offering process, including under the non-reporting foreign private issuers also will be Act Section 12(a)(2) and 17(a), Exchange Act
Exchange Act, also determine the scope able to rely on the Rule. Section 10(b) [15 U.S.C. 78j(b)], and Exchange Act
of communications flexibility the rules 104 See Rule 169. Rule 10b–5 [17 CFR 240.10b–5].
105 See Rule 163A. 111 See Securities Act Section 2(a)(10) and Rule
106 See Rules 164 and 433. 134.
securities laws, including the anti-fraud b. Exception for Regularly Released As we note above, voluntary filers are
provisions.112 Factual Business and Forward-Looking not required to report under the
Information—Available to Reporting Exchange Act and therefore do not fall
D. Communications Rules Issuers within Rule 168. Voluntary filers will
1. Permitted Continuation of Ongoing We are adopting substantially as have available to them the safe harbor
Communications During an Offering proposed the safe harbor for reporting for non-reporting issuers in new Rule
issuers, as well as asset-backed issuers 169.121 We also note above that
a. Overview
and certain non-reporting foreign registered investment companies and
We are adopting substantially as private issuers, from the gun-jumping business development companies are
proposed two separate, non-exclusive provisions for continued publication or subject to a separate framework
safe harbors from the gun-jumping dissemination of communications of governing communications with
provisions for continuing ongoing regularly released factual business and investors, and we believe that it would
business communications. The first safe forward-looking information.116 This be more appropriate to consider
harbor permits a reporting issuer’s safe harbor is a ‘‘use’’ safe harbor in that investment company issues in the
continued publication or dissemination it applies to communications of factual context of a broader reconsideration of
of regularly released factual business business and forward-looking this separate framework.
and forward-looking information at any information that have been regularly
released in the ordinary course by or on i. Factual Business Information
time, including around the time of a
registered offering.113 The second safe behalf of a reporting issuer.117 (A) Scope of the Safe Harbor
harbor permits a non-reporting issuer’s Commenters supported the proposed
safe harbor with certain suggested We believe it is important to provide
continued publication or dissemination
changes to its scope.118 Commenters increased certainty regarding when the
of regularly released factual business
suggested that the safe harbor should be gun-jumping provisions will be
information that is intended for use by
available to voluntary filers, non- inapplicable to the continuing ongoing
persons other than in their capacity as
reporting foreign private issuers, asset- communication of specified factual
investors or potential investors.114 The backed issuers, registered investment business information. We are adopting
safe harbors are not exclusive and do companies, and business development Securities Act Rule 168, which provides
not create a presumption that any companies.119 As adopted, the rule is a non-exclusive safe harbor that such a
communication that falls outside the available to non-reporting foreign communication is not an impermissible
safe harbor is an offer. Accordingly, private issuers meeting certain prospectus and does not violate the
reliance on one of the safe harbors does conditions and to asset-backed issuers prohibition on pre-filing offers.122 We
not affect the availability of any other (and to a depositor, sponsor, servicer, or want to encourage reporting issuers and
exemption or exclusion under the affiliated depositor, whether or not the other issuers eligible to rely on the safe
Securities Act. Further, attempted issuer) with regard to registered harbor to continue to provide this
compliance with one of the safe harbors offerings of asset-backed securities.120 information. For purposes of Rule 168,
does not act as an exclusive election. We believe that non-reporting foreign
For example, attempted reliance on one private issuers qualifying under the safe 121 These issuers may, of course, continue to rely
of the exemptive rules or exclusions we harbors, like reporting issuers in the on existing Commission interpretations concerning
adopt today will not preclude reliance United States, are providing information ongoing business disclosures. See the discussion at
on another available exemption or to the markets even though they are not note 122 below regarding the interpretive releases
reporting companies in the United on factual business information.
exclusion. In particular, it will not 122 Rule 168 is a safe harbor from the definition
preclude reliance on the argument that States. Similarly, asset-backed issuers
of ‘‘prospectus’’ in Securities Act Section 2(a)(10)
under general securities law principles and issuers that are affiliated depositors and, therefore, prevents the application of the
and our earlier interpretive guidance the provide and are encouraged to provide prohibition in Securities Act Section 5(b)(1) on the
communication in question is not an information on an ongoing basis in a use of a prospectus that is not a statutory
manner consistent with that covered by prospectus. The Rule also is a safe harbor from the
offer under Securities Act Section prohibitions on pre-filing ‘‘offers’’ in Securities Act
2(a)(3). Rule 168. The reference to depositors, Section 5(c).
sponsors, servicers, and affiliated In general, as we recognized many years ago,
Investment companies registered depositors, whether or not the issuer, is ordinary factual business communications that an
under the Investment Company Act of intended to permit communication of issuer regularly releases are not considered an offer
1940 and business development information regarding pre-existing of securities. See, e.g., the guidelines contained in
the 2000 Electronics Release, note 96 at Section
companies are ineligible to use the safe transactions or asset pools within the II.B.2; Guidelines for the Release of Information by
harbors for factual business information safe harbor where its conditions are Issuers Whose Securities are in Registration, Release
and forward-looking information. These satisfied. No. 33–5180 (Aug. 16, 1971) [36 FR 16506];
issuers are subject to a separate Publication of Information Prior to or After the
Filing and Effective Date of a Registration
framework governing communications 116 The safe harbor also covers communications
Statement Under the Securities Act of 1933, Release
with investors.115 that incorporate regularly released factual business No. 33–5009 (Oct. 7, 1969) [34 FR 16870]; Offers
or forward-looking information. and Sales by Underwriters and Dealers, Release No.
117 See Rule 168.
33–4697 (May 28, 1964) [29 FR 7317]; and
118 See, e.g., letters from ABA; Cleary; Davis Polk;
Publication of Information Prior to or After the
112 See, e.g., Securities Act Section 17(a), Fried Frank; NYSBA; and SCSGP. Effective Date of a Registration Statement, Release
Exchange Act Section 10(b) and Exchange Act Rule 119 See, e.g., letters from ABA; ABA–ABS; Allied; No. 33–3844 (Oct. 8, 1957) [22 FR 8359]. The non-
10b–5. Alston; the Commercial Mortgage Securities exclusive safe harbors we are adopting today will
113 See Rule 168. Association (‘‘CMSA’’); Davis Polk; Fried Frank; not affect in any way the Securities Act analysis
114 See Rule 169.
Richard Hall; NYCBA; NYSBA; and S&C. regarding ordinary course business communications
120 The eligibility conditions for non-reporting that are not within the safe harbors and we have
115 See, e.g., Securities Act Rules 156, 482, and
foreign private issuers will be the same as the made that clear in the Preliminary Note to the Rule.
498 [17 CFR 230.156; 17 CFR 230.482; 17 CFR eligibility conditions for such issuers contained in Such communications will not be presumed to be
230.498]; Investment Company Act Rule 34b–1 [17 Securities Act Rules 138 and 139 as we are offers, and whether they are offers will depend on
CFR 270.34b–1]. amending them today. the facts and circumstances.
factual business information is defined be satisfied. In addition, in response to Where an issuer regularly releases
as: 123 commenters’ concerns, we have made forward-looking information in the
• Factual information about the clear in a preliminary note that the safe ordinary course, we indicated in the
issuer, its business or financial harbor addresses use and relates to a Proposing Release that we believe that
developments, or other aspects of its communication, and, therefore, that the purpose of such communication is
business; another communication of the to keep the market informed about the
• Advertisements of, or other information in an offering-related issuer and its future prospects and, thus,
information about, the issuer’s products manner will not affect the ability to rely the continued release or dissemination
or services; and on the safe harbor for the protected of this information in the ordinary
• Dividend notices. communication. course is not for the purpose of offering
This information includes without ii. Forward-Looking Information securities or conditioning the market for
limitation in each case such factual new issuances of the issuer’s securities.
business information contained in (A) Scope of the Safe Harbor Many issuers disclose earnings forecasts
reports or materials filed with, As we stated in the Proposing Release, and other forward-looking information
furnished to, or submitted to us our view of the value of forward-looking publicly to provide more information to
pursuant to the Exchange Act.124 information in the market has evolved the markets and to enable them to
through the years. Through the 1970’s continue to have discussions to which
(B) Comments on the Scope of the Safe
we were most concerned with the Regulation FD applies. We do not
Harbor
potentially misleading effect that believe that it is beneficial to investors
Some commenters suggested forward-looking information could have or the markets to force reporting issuers
broadening the categories of factual on investors.127 Since the 1980’s, we to suspend their ordinary course
business information,125 including the have encouraged issuers to disclose communications of regularly released
suggestion that only offering-related forward-looking information and, in information that they would otherwise
information be excluded from the some situations (such as the disclosures choose to make because they are raising
definition of factual business in MD&A), required them to do so.128 capital in a registered offering.
information.126 We are adopting the The existing safe harbors for the content We are adopting the definition
definition of factual business of forward-looking statements are substantially as proposed to provide for
information that in substantive respects designed to encourage the provision of the use of such a communication a safe
is substantially as proposed. The forward-looking information.129 harbor from being an impermissible
simplification of the definition in the prospectus and from violating the
Rule as adopted does not narrow the 127 Until the 1970’s, the Commission prohibited prohibitions on pre-filing offers. As
information included in the definition. disclosure of forward-looking information in any adopted, the safe harbor in Rule 168
We believe that the purpose of the safe disclosure document. In 1979, the Commission
adopted a safe harbor for release of forward-looking
will apply to the release or
harbor is to permit reporting issuers to information. See Statement by the Commission on dissemination of communications
continue their ordinary course factual the Disclosure of Projections of Future Economic containing some or all of the following
business communications, not to define Performance, Release No. 33–5362 (Feb. 2, 1973) forward-looking information if the
when an offer is considered to occur in [38 FR 7220]; Safe Harbor Rule for Projections,
Release No. 33–6084 (June 25, 1979) [44 FR 38810].
release or dissemination satisfies the
all cases. As we have noted, whether or See also, the Wheat Report, note 21, at 94. other conditions of the Rule: 130
not a communication that is outside the 128 See Item 303 of Regulation S–K and • Projections of the issuer’s revenues,
safe harbor would be an offer is a facts Regulation S–B [17 CFR 229.303 and 17 CFR income (loss), earnings (loss) per share,
and circumstances determination. 228.303]. In our 2003 MD&A Release discussed at capital expenditures, dividends, capital
note 38, we issued interpretive guidance on MD&A
We have modified the definition from which stated:
structure, or other financial items;
the proposal to make clear that factual In addressing prospective financial condition and • Statements about the issuer
business information may be operating performance, there are circumstances, management’s plans and objectives for
communicated within the safe harbor by particularly regarding known material trends and future operations, including plans or
including it in any report or material uncertainties, where forward-looking information is objectives relating to the products or
required to be disclosed. We also encourage
filed with, furnished to, or submitted to companies to discuss prospective matters and services of the issuer;
us. The other conditions of the safe include forward-looking information in
harbor, for example, the ‘‘regularly circumstances where that information may not be with us, including in registration statements and
released,’’ condition of course also must required, but will provide useful material periodic reports.
information for investors that promotes 130 The listed categories of forward-looking
understanding * * * information in the safe harbor are essentially the
123 Under the Rule as adopted, regularly released
[M]aterial forward-looking information regarding same categories of statements that are defined as
factual business information does not include the known material trends and uncertainties is required forward-looking statements under the safe harbor in
release of information about the registered offering to be disclosed as part of the required discussion Securities Act Section 27A(i)(1) [15 U.S.C. 77z–
or the release of information as part of the offering of those matters and the analysis of their effects. In 2(i)(1)]. The safe harbor covering the release or
activities in the registered offering. addition, forward-looking information is required in dissemination is available for the regular release of
124 As we discuss below, some commenters
connection with the disclosure in MD&A regarding earnings expectations and guidance information.
expressed concern about the treatment of off-balance sheet arrangements. Rule 168 provides a safe harbor for the use of such
information contained in Exchange Act reports at 129 See Securities Act Section 27A [15 U.S.C. 77z– information, not the content of the communication.
the time they are originally filed with, furnished to, 2] and Securities Act Rule 175 [17 CFR 230.175]. An issuer’s communications of forward-looking
or submitted to us. See, e.g., letters from ABA and Section 27A provides a safe harbor for certain information made in reliance on the safe harbor will
Fried Frank. We believe this modification will make forward-looking statements. See also, the Off- still have to satisfy the conditions of Securities Act
clear that all covered information within Exchange Balance Sheet Disclosure Release at note 92 (stating Section 27A if the issuer wishes to rely on the
Act filings will be covered by the safe harbor. that any forward-looking information required statutory safe harbor for the content of the
Factual business information that reporting pursuant to the off-balance sheet arrangement information.
issuers release or disseminate will continue to be disclosure in Items 303(a)(4) and (a)(5) of The comments on the definition of forward-
subject to the provisions of Regulation FD, Regulation S–K and Regulation S–B would be looking information related primarily to the
Regulation G, Item 10 of Regulation S–K and subject to the statutory safe harbor contained in interplay between such information and the
Regulation S–B [17 CFR 229.10 et seq. and 17 CFR Sections 27A of the Securities Act and 21E of the exclusion of offering-related information from the
228.10 et seq.], and Item 2.02 of Form 8–K. Exchange Act [15 U.S.C. 78u–5]). Rule 175 provides scope of the safe harbor and the way in which
125 See, e.g., letters from ABA and SCSGP.
a limited safe harbor for the content of forward- newer issuers would establish a history of regular
126 See, e.g., letters from Davis Polk and SCSGP. looking statements contained in documents filed release of such information. See letter from ABA.
• Statements about the issuer’s future We have considered these suggestions We are adopting the regularly released
economic performance, including carefully and have made some revisions condition substantially as proposed.
statements of the type contemplated by to the definition of ‘‘by or on behalf of’’ Under Rule 168, information will be
MD&A described in Item 303 of the issuer. We have determined not to considered regularly released or
Regulation S–K and Regulation S–B, or provide a single definition, instead disseminated if the issuer has
Item 5 of Form 20–F; and including an appropriate definition in previously released or disseminated the
• Assumptions underlying or relating each relevant rule. We also have not same type of information in the ordinary
to any of the foregoing information. taken the suggestions that the Rule course of its business, and the release or
As with factual business information, provide that issuers are responsible only dissemination is consistent in material
we have clarified that any such for communications made by authorized respects in timing, manner, and form
information may be communicated by or approved speakers. The with the issuer’s similar past release or
including it in a report filed with, or circumstances under which issuers are dissemination of such information.137
furnished to, or submitted to us. The responsible for the acts of individuals The method of releasing or
safe harbor for forward-looking may be determined in accordance with disseminating the information, thus,
information also addresses ‘‘use,’’ and principles not addressed in today’s also must be consistent in material
the preliminary note discussed above rules. In addition, we have not defined respects with prior practice. These
applies. further who may be considered an agent conditions seek to ensure that the
iii. Conditions of Safe Harbor in Rule or representative of the issuer, other information is not being released to
168 than to specifically exclude offering condition the market for the registered
participants who are underwriters and offering of the issuer’s securities.
(A) ‘‘By or on Behalf of’’ the Issuer dealers. The definition could cover While the Rule does not establish or
(1) Definition legitimate representatives or agents of require any minimum time period to
the issuer such as, for example, satisfy the regularly released element,
Under the Rule as adopted, factual
advertising agencies and public the safe harbor requires the issuer to
business and forward-looking
relations companies who normally have some track record of releasing the
information will be considered released
release or disseminate product particular type of information. One prior
or disseminated by or on behalf of an
advertising or promotional release or dissemination could establish
issuer if the issuer or an agent or a
communications containing such this track record. Issuers should
representative of the issuer, other than
information on behalf of an issuer. We consider the frequency and regularity
an offering participant who is an
also have modified the definition to with which they have released the same
underwriter or dealer, authorizes or
provide that the communication does type of information. For example, an
approves the release or dissemination of
not have to be both approved and issuer’s release of new types of financial
the communication before it is made.131
authorized for it to be considered to be information or projections just before or
Satisfaction of this condition is separate
made by or on behalf of the issuer. during a registered offering will likely
from the ‘‘regularly released’’ condition.
A few commenters suggested that the prevent a conclusion that the issuer
The safe harbor is not available for
Rule not include the preliminary note regularly released that type of forward-
information released in a manner
that contains the ‘‘scheme to evade’’ looking or financial information in the
intended to circumvent either the
language because they believed it would ordinary course of its business.
conditions to use or the permitted
manner of use of the information. cause uncertainty about the ability to (2) Comments on Regularly Released
rely on the safe harbors.135 The Condition
(2) Comments on Definition preliminary note to the Rule is
substantially the same preliminary note Commenters on the regularly released
Commenters supported the concept of
contained in a significant number of condition suggested that we further
‘‘by or on behalf of’’ the issuer.132
exemptions under the Securities Act clarify the concept of regularly released
Commenters also supported placing the
upon which market participants have information by elaborating on the
definition of the term in a single rule,
relied and we are adopting the Rule meaning of timing, manner, and
rather than a separate definition in each
with the preliminary note regarding the form.138 Some of these commenters
safe harbor.133 Some commenters
‘‘scheme to evade’’ language as were concerned about the availability of
suggested further clarifications of the
proposed.136 the safe harbor for non-scheduled
definition, such as identifying the
releases of information and information
persons authorized or approved to speak (B) Regularly Released Information distributed using new or different
on behalf of the issuer, eliminating any
(1) Regularly Released Condition technologies.139 Other commenters on
issuer responsibility for
communications by unauthorized this point, however, desired greater
As we discussed in the Proposing flexibility with no definition of
persons, and providing that the Release, the purpose of the safe harbor
communication either be authorized or ‘‘ordinary course.’’ 140
is to enable a reporting issuer to
approved but not both.134 continue its past ordinary course 137 In the case of asset-backed issuers, the
131 We are using a similar definition as contained

practice of releasing or disseminating regularly released requirement will be tested against
publicly factual business and forward- the previous communications of those persons
in Securities Act Rule 146 [17 CFR 230.146]. included in the Rule’s provisions, taken together.
As we note above, for asset-backed securities looking information. Communications 138 See, e.g., letters from Davis Polk; the
offerings, the safe harbor is available to asset-backed of both factual business information and Investment Company Institute (‘‘ICI’’); and TBMA.
issuers, depositors, affiliated depositors, sponsors, forward-looking information must 139 See Id.
and servicers. We have included a provision satisfy the same conditions regarding 140 Some commenters also expressed concern
regarding communication by or on behalf of such about offshore communications. See, e.g., letters
persons. regular release.
from ABA and Fried Frank. Communications that
132 See, e.g., letters from ABA; Cleary; S&C; and
are considered not to be offers because they are
William J. Williams, Jr. 135 See, e.g., letters from ABA and William J.
made offshore and meet other criteria we have
133 See Id. Williams, Jr. previously discussed would be treated in the same
134 See, e.g., letters from ABA; Alston; Cleary; 136 See, e.g., Regulation D [17 CFR 230.501 et seq.] manner as they are today. See Statement of the
Davis Polk; and S&C. and Rule 155 [17 CFR 230.155]. Continued
We have not changed the ‘‘regularly in determining whether the manner or the availability of the safe harbor for any
released’’ language from the proposal form is consistent in material respects. other release or dissemination of a
because we do not believe that a bright- communication containing the same
(C) Exclusion for Offering-Related
line test of ‘‘regularly released’’ is information that is (or was) within the
Information
appropriate. We believe that it is more scope of the safe harbor.
appropriate to provide issuers the (1) Scope of Exclusion Some commenters requested that we
flexibility to use the means and timing We are adopting as proposed the define ‘‘offering-related’’ or ‘‘part of the
they believe is appropriate for their exclusion from the safe harbor of any offering activities.’’ 143 We decline to do
ongoing business communications. We information about the registered offering so. An issuer must determine, based
would note, however, that there are itself. Publication of information about upon the particular facts and
circumstances in which a registered offering outside the circumstances, whether or not a
communications made outside a registration statement or a prospectus is communication contains information
predetermined schedule or not at limited to statements allowed under about the registered offering or is being
regular intervals would be covered by other exemptions or exclusions, used as part of the offering activities.
the safe harbor. The Rule is not including Rule 134 and Rule 135.141 Certain commenters requested that we
intended to cover only scheduled As we discussed in the Proposing clarify the impact Rule 168 and Rule
releases of information but also could Release, because the safe harbor is a 169 (as discussed below) would have on
cover communications, such as product ‘‘use’’ exemption intended to facilitate our guidance regarding the filing
advertising and product release continued release or dissemination of requirement for ordinary or routine
information or earnings guidance regularly released ordinary course business communications that refer to a
changes, that are made on an factual business and forward-looking business combination transaction in a
unscheduled or episodic basis, provided communications, it also excludes the non-substantive way.144 We believe that
that the issuer has previously provided release of that information as part of the guidance is unaffected by the adoption
such communications containing factual offering activities in the registered of the safe harbors of Rule 168 and Rule
business and forward-looking offering. For example, while the safe 169, regardless of whether the
information in that manner. Thus, for harbor could be available for factual communication falls within the scope of
unscheduled or episodic releases, the business information contained in an such safe harbors or our other
nature of the event triggering the Exchange Act report at the time it is interpretive guidance regarding ongoing
communication would be taken into initially filed, the safe harbor will not be factual and business
account in determining whether the available for the distribution of that communications.145
regularly released condition is satisfied. information to investors or potential
For example, if an issuer only gives investors as part of offering activities, c. Exception for Regularly Released
guidance upon the occurrence of certain such as incorporation by reference into Factual Business Information—
types of developments, a release of a prospectus that is part of a registration Available to Non-Reporting Issuers
guidance when a materially similar statement, disclosure at a road show, or i. Scope of the Safe Harbor
event occurs could be materially disclosure in a free writing prospectus.
consistent, even if not done at regular We are adopting substantially as
As another example, as permitted by the
intervals. As another example, if an proposed a non-exclusive safe harbor
‘‘regularly released’’ condition, an issuer
issuer launches a product only from the gun-jumping provisions for
could rely on the safe harbor for the
episodically, disclosure or advertising of regularly released factual business
publication of an earnings release
a product launch still could be information that, unlike Rule 168, is
consistent with past practice, including
materially consistent. the posting of and maintaining the available to all eligible issuers,
Merely using new or different release on an issuer’s web site, whether including non-reporting issuers.146 The
technologies will not be necessarily or not located in a separate section of Rule provides a non-exclusive safe
inconsistent in material respects under the web site for historical information. harbor for the issuer’s release or
the conditions of the Rule. An issuer The distribution of that earnings release, dissemination of regularly released
will have to determine whether its use however, as part of the marketing ordinary course factual business
of new or different technologies to activities to potential investors will be information intended for use by persons
release information falls within the safe outside the scope of the safe harbor. other than in their capacity as investors
harbor, including whether the release or or potential investors, such as customers
(2) Comments on Exclusion and suppliers.147 Under the safe harbor,
dissemination is consistent in material
respects with how the issuer is already Commenters requested further a non-reporting issuer’s release or
releasing or disseminating its clarification that release of a dissemination of factual business
communications containing factual communication containing information
143 See, e.g., letters from Davis Polk and SCSGP.
business or forward-looking information in reliance on the safe harbor will not
144 See, e.g., letters from ABA; Alston; and S&C.
using analogous methods. For example, be affected by release of the same 145 See the Regulation M–A Release, note 95, at
whether the new or different technology information in offering-related footnote 45.
makes a material difference in terms of communications.142 We have made 146 See Rule 169. Because Rule 168 is available to
the breadth of dissemination to clear in a preliminary note in the reporting issuers and some non-reporting issuers
investors or other reach of the adopted Rule that the release of (including asset-backed issuers and certain non-
communications containing information reporting foreign private issuers), the principal
communication to investors is relevant practical relevance of Rule 169 is to other non-
outside the safe harbor will not affect reporting issuers.
Commission Regarding Use of Internet Web Sites to 147 The fact that a customer also may be a
141 See 17 CFR 230.135. Our other rules address
Offer Securities, Solicit Securities Transactions or potential investor in the issuer’s securities or that
Advertise Investment Services Offshore, Release No. communications in the offering context. For the information may be received by other persons
33–7516 (Mar. 27, 1998) [63 FR 14806]; Offshore example, we are amending Rule 134 to increase the will not affect the availability of the safe harbor if
Press Conferences, Meetings with Company amount of communication allowed under that rule the conditions are otherwise satisfied. For purposes
Representatives Conducted Offshore and Press- about a registered offering without it being of the safe harbor, the communication must be
Related Materials Released Offshore, Release No. considered a prospectus. intended for use by an audience that is other than
33–7470 (Oct. 17, 1997) [62 FR 53948]. 142 See, e.g., letters from Fried Frank and SCSGP. an investor audience.
information that satisfies the conditions condition the market for the issuer’s statements in the Rule 169 safe harbor
of the Rule would not be an securities outweighs the legitimate we are adopting today or to extend the
impermissible prospectus and would utility to the issuer of the safe harbor. safe harbor for forward-looking
not violate the prohibition on pre-filing statements in Securities Act Section
ii. Comments on the Safe Harbor
offers.148 As we noted in the Proposing 27A to initial public offerings.
Release, because a condition of the safe Commenters supported the proposed
safe harbor and suggested certain 2. Other Permitted Communications
harbor involves the manner and timing
expansions and clarifications.151 Prior to Filing a Registration Statement
of the communication, the same issuer
employees or agents who historically Commenters wanted us to clarify that Beyond the continuing ongoing
have been responsible for providing the information that was directed to release of information discussed above,
information for intended use by customers, suppliers, etc., would be there is an increased amount of
customers and suppliers must covered by the safe harbor even if the information disseminated to the market
communicate the information provided information became available to other about issuers, including through the
in reliance on this safe harbor. persons, including investors or potential Internet. We believe that the availability
Under the safe harbor, factual investors.152 As we discuss above, the of this information should be
business information is defined as: Rule is aimed at assuring that the encouraged, subject to appropriate
• Factual information about the communication is intended for use by standards of liability. At times when the
issuer, its business or financial an audience that is other than an risk of conditioning the market for a
developments, or other aspects of its investor audience, not at ensuring that securities offering is sufficiently remote,
business; and the communication is not received by or it is important to provide issuers with
• Advertisements of, or other available to an investor or potential greater certainty that the release of
information about, the issuer’s products investor. We have modified the Rule to information will not be considered an
or services.149 clarify this point. For example, a widely impermissible offer under the Securities
As with the safe harbor for reporting disseminated communication (such as a Act. Such an approach will avoid
issuers, the safe harbor requires that the press release) intended for use by a non- hindering issuer communications
information be regularly released in the investor audience and otherwise except where necessary for investor
ordinary course of business, released or meeting the conditions of the safe protection. We are, therefore, adopting
disseminated by or on behalf of the harbor will not lose protection if it is rules that clarify the Securities Act
issuer, and not include information available to or received by investors or application to communications that
about the registered offering or potential investors. might not fall within the safe harbors for
information released or disseminated as We had requested comment in the regularly released factual business and
part of the offering activities in the Proposing Release as to whether the safe forward-looking information.
registered offering. We have made the harbor also should cover forward-
same modifications to these conditions a. 30-Day Bright-Line Exclusion From
looking information and whether the the Prohibition on Offers Prior to Filing
and to the preliminary note to Rule 169 safe harbor for forward-looking
as in new Rule 168 for reporting issuers. a Registration Statement—All Issuers
statements contained in Securities Act
As we discussed in the Proposing Section 27A should be extended to i. Scope of Exclusion
Release, because non-reporting issuers initial public offerings. We further We are adopting, substantially as
generally are not releasing information requested comment on whether we proposed, Rule 163A to provide all
in connection with securities market should require projections or other issuers a bright-line time period, ending
activities, we believe it is appropriate to forward-looking information to be 30 days prior to filing a registration
limit the scope of the safe harbor to the included in initial public offering statement, during which issuers may
specified regularly released ordinary registration statements. In response, communicate without risk of violating
course factual business information.150 some commenters supported extending the gun-jumping provisions. Such
Further, we are not adopting a safe the Section 27A safe harbor for forward- communications will be excluded from
harbor for forward-looking information looking statements to initial public the definition of offer for purposes of
for non-reporting issuers because of the offerings but did not support requiring Securities Act Section 5(c).155 As we
lack of such information or history for projections to be included in noted in the Proposing Release, a bright-
these issuers in the marketplace. In registration statements.153 Some line test will provide greater certainty in
those circumstances, we believe that the commenters were concerned that, the offering process and avoid
potential for abuse in permitting a safe because of the relatively untested nature unnecessary limitations on issuer
harbor for the continued release of of companies engaging in initial public
forward-looking information as a way to offerings, there was limited basis to 155 While communications made in reliance on
assess the reasonableness of the Rule could, depending on the particular facts,
148 Rule 169 is a safe harbor from the definition be an ‘‘offer’’ as defined in Securities Act Section
of ‘‘prospectus’’ in Securities Act Section 2(a)(10)
assumptions underlying the projections 2(a)(3), the Rule provides that the communication
and therefore disapplies the prohibition in about the issuer’s business.154 We is not an ‘‘offer’’ for purposes of Securities Act
Securities Act Section 5(b)(1) on the use of a appreciate commenters’ input on these Section 5(c). See Rule 163A.
prospectus that is not a statutory prospectus. The points and, in light of the fact that these As Rule 163A provides a safe harbor from the
Rule also is a safe harbor from the prohibitions on application of Securities Act Section 5(c), it
pre-filing ‘‘offers’’ in Securities Act Section 5(c).
companies are generally untested, as
necessarily applies only prior to the filing of a
149 We have not included dividend notices within commenters noted, we have determined registration statement. This exclusion will thus not
the definition because the communications covered not to include forward-looking apply to issuers offering securities off a shelf
by the Rule are those intended for use by persons registration statement on file, whether or not
other than in their capacity as investors or potential 151 See, e.g., letters from ABA; NYCBA; NYSBA; effective, as to which the prohibition in Section 5(c)
investors. and Reuters. does not apply to the offering of the securities
150 These issuers will still be able to rely on our 152 See, e.g., letters from ABA and NYSBA. covered by such shelf registration statement.
interpretive positions for the release of factual 153 See, e.g., letters from AICPA; E & Y; KPMG See also Harold Bloomenthal and Samuel Wolff,
business information. See note 122. In addition, LLP (‘‘KPMG’’); and PricewaterhouseCoopers LLP Emerging Trends in Securities Laws [2003–2004
these issuers may still be able to rely on Securities (‘‘PwC’’). ed.], ‘‘Securities Act Reform—Déjà Vu All Over
Act Rules 134 and 135 and new Securities Act Again,’’ Commissioner Roel C. Campos (the
Rules 163A and 164. 154 See, e.g., letters from AICPA and E & Y. ‘‘Campos Article’’) at § 1:28.
communications more than 30 days information about a securities offering investment company or a business
prior to the filing of the registration that is or will be the subject of a development company.
statement. Further, we believe that the registration statement, the
ii. Comments on 30-day Bright-Line
30-day timeframe adequately assures communications made in reliance on Exclusion
that these communications will not the Rule are less likely to be used to
condition the market for a securities condition the market for the issuer’s Commenters expressed strong support
offering by providing a sufficient time securities. In addition, the for the Rule and suggested certain
period to cool any interest in the communications are still subject to expansions and clarifications.161 Some
offering that might arise from the provisions addressing deficient commenters wanted the Rule to provide
communication.156 disclosure, including the anti-fraud an exemption from the definition of
As adopted, the 30-day bright-line provisions.158 Finally, the safe harbor is offer for all purposes under the
exclusion from the gun-jumping available only for communications Securities Act.162 We do not believe that
provisions is subject to the following made by or on behalf of the issuer so it is appropriate to exclude from the
conditions: that other potential offering participants definition of offer for all purposes any
• A communication made in reliance cannot use the exemption. communications occurring more than 30
on the Rule cannot reference a securities Communications within the scope of days from the date of filing the
offering that is or will be the subject of Rule 163A made prior to the 30 days registration statement. The Rule
a registration statement; 157 before filing are protected by the safe contains no content restriction, other
• A communication made in reliance harbor. Communications made during than a prohibition against referencing a
on the Rule will have to be made ‘‘by securities offering that is or will be the
the 30 days before the filing are outside
or on behalf of the issuer’’; and subject of a registration statement. The
the safe harbor. Because of these factors
• The issuer will have to take and the bright-line nature of the Rule,
intent of the Rule is to provide certainty
reasonable steps within its control to that an issuer will not be considered to
we have eliminated the proposed
prevent further distribution or be ‘‘gun jumping’’ by engaging in
preliminary note that indicated that the
publication of the communication communications more than 30 days
exemption was not available for
during the 30-day period immediately before it files its registration statement,
schemes to evade the registration
before the issuer files the registration not to provide certainty that it will not
requirements of the Securities Act
statement. be liable for material disclosure
because we do not believe it is
We have made minor revisions to the deficiencies in its communications.163
necessary. Commenters also suggested that we
Rule from the proposals. We have made
clear that the exemption is non- The 30-day bright-line exclusion is provide more guidance as to what
exclusive. In addition, we have revised not available for enumerated categories actions will constitute ‘‘reasonable steps
the definition of ‘‘by or on behalf of’’ the of offerings and for specified issuers that within the issuer’s control,’’ particularly
issuer in the same manner as in Rules pose the greatest risk of abuse of that with respect to information posted on
168 and 169 to explicitly exclude exclusion. Specifically, Rule 163A is not web sites prior to 30 days before the
offering participants who are available to communications made in filing of the registration statement.164
underwriters or dealers from being connection with: The ‘‘reasonable steps’’ condition is
considered agents or representatives of • Offerings by a blank check already contained in Rule 165 for
the issuer for purposes of the Rule. We company; business combination transactions. We
have narrowed the restriction on do not believe that it is appropriate to
• Offerings by a shell company; or provide bright lines as to when an issuer
references to securities offerings to
apply to a securities offering that is or • Offerings of penny stock by an will be considered to have taken
will be the subject of a registration issuer.159 reasonable steps within its control to
statement. The Rule as adopted also excludes prevent further dissemination of the
The Rule is designed to preclude communications regarding business communication.165 As to the treatment
issuers and offering participants from combination transactions from being 161 See, e.g., letters from ABA; Davis Polk; Fried
circumventing the registration able to rely on the exclusion, as those Frank; IBA; ICI; NYCBA; NYSBA; and Reuters.
requirements of the Securities Act. communications are regulated 162 See, e.g., letters from ABA; Alston; Cleary; and
Because the Rule does not permit separately.160 The Rule also is not NYSBA.
available for communications regarding 163 Commenters also asked that we clarify further
156 We chose a 30-day timeframe because it is
offerings made by a registered that information released during the 30 days before
consistent with the timeframe in Securities Act the registration statement filing in reliance on
Rule 155 regarding integration of abandoned another exemption would not affect the ability of
158 Communications made in reliance on Rule the issuer to rely on the 30-day safe harbor. See,
offerings and Securities Act Rule 254 regarding pre-
filing solicitations of interest in Regulation A 163A safe harbor also would not be made in e.g., letters from ABA; Alston; Cleary; Fried Frank;
offerings [17 CFR 230.254]. connection with a registered securities offering for and TBMA. We have clarified that the Rule is a non-
157 Securities Act Rule 155, relating to integration purposes of the exclusion in Regulation FD. See exclusive safe harbor and issuers can rely on other
of abandoned offerings, permits issuers to register Rule 100(b)(2)(iv) of Regulation FD. available exemptions, exclusions, or safe harbors
a securities offering immediately following the 159 See Securities Act Rule 419(a)(2) [17 CFR from the gun-jumping provisions for the
abandonment of a private offering made to 230.419(a)(2)], Exchange Act Rule 3a51–1 [17 CFR communications. Conversely, reliance on other safe
accredited or sophisticated persons and not 240.3a51–1], and amendments to Rule 405 defining harbors, exemptions, and exclusions during the 30-
involving general solicitation and general ‘‘shell’’ company. See the Shell Company Release, day period does not preclude reliance on the 30-
advertising. The 30-day exclusion, on the other note 109. The Rule also excludes issuers who were day safe harbor.
hand, applies to public communications made prior or any of whose predecessors in the prior three 164 See, e.g., letters from ABA; Alston; Cleary; and
to a registered offering. Because Rule 155 treats any years were blank check companies, shell companies Fried Frank.
private offers made in the abandoned private (other than business combination related shell 165 The Rule as adopted limits the exclusion to
offering as not part of the subsequent registered companies), or issuers that issued penny stock. issuers. While we do not expect an issuer to be able
offering, issuers relying on Rule 155 in connection Other than for well-known seasoned issuers, Rule to control the republication or accessing of
with a subsequently registered offering would 163A also excludes offerings registered on Form S– previously published press releases, we expect
continue to rely on Rule 155 and need not rely on 8 [17 CFR 239.16b]. issuers and persons acting on their behalf to be able
the 30-day bright-line exclusion for public 160 See the Regulation M–A Release, note 95. The to control their own involvement in any subsequent
communications before a registration statement is Rule excludes any business combination redistribution or publication and, therefore, believe
filed. transaction, including an exchange offer. that it is an appropriate condition to the ability to
of information posted on an issuer’s web ii. Exemption for Pre-Filing Offers other exemptions, exclusions, and safe
site, we do not expect that an issuer will To address communications made in harbor rules we are adopting today, we
necessarily remove the information from the 30 days prior to filing a registration have made clear that the exemption is
the Web site and, provided that the statement that are not otherwise non-exclusive.
information is appropriately dated, excluded from the gun-jumping We also have modified the Rule to
otherwise identified as historical provisions and to complete the set of eliminate the preliminary note regarding
material, and not referred to as part of rules permitting all communications by the unavailability of the exemption if it
the offering activities, we will not object well-known seasoned issuers under the is part of a scheme to avoid or evade the
to an issuer maintaining the information gun-jumping provisions, we are requirements of the gun-jumping
on the Web site. adopting essentially as proposed an provisions. We have not included this
exemption from the prohibition on preliminary note in the adopted Rule
Commenters also suggested that because we believe that the Rule
registered investment companies and offers before the filing of a registration
statement for offers made by or on provides an exemption for the
business development companies communication from the gun-jumping
behalf of eligible well-known seasoned
should be permitted to rely on Rule provisions only for well-known
issuers.168 The exemption permits these
163A.166 We are not adopting this seasoned issuers and because the
issuers to engage in unrestricted oral
suggestion because we believe that it and written offers before a registration disclosure liability and anti-fraud
would be more appropriate to consider statement is filed without violating the provisions of the federal securities laws
changes to our requirements as they gun-jumping provisions. These continue to apply.
apply to registered investment communications, while exempt from the In view of the automatic shelf
companies and business development gun-jumping provisions, are still registration process we describe below,
companies in the context of a broader considered offers and subject to liability we expect that well-known seasoned
reconsideration of the separate standards applicable to such offers.169 issuers usually will have a registration
framework applicable to such issuers. The exemption is available only for statement on file that it can use for any
communications made ‘‘by or on behalf of its registered offerings. Consequently,
b. Permitted Pre-Filing Offers for Well- it generally will be unusual for these
of’’ the issuer.170 Moreover, any
Known Seasoned Issuers issuers to make offers prior to the filing
communication for which disclosure is
i. Overview required under Securities Act Section of a registration statement;172 however,
17(b) will be deemed to be a we have provided this exemption from
The rules we are adopting today, communication that is an offer for the prohibition on pre-filing offers to
when taken together, provide purposes of the Rule and, if written, the liberalize communications for these
exemptions generally from the communication will be a free writing issuers to the appropriate extent. A
applicability of the gun-jumping prospectus of the issuer.171 As with the written offer made by or on behalf of a
provisions for eligible well-known well-known seasoned issuer under the
seasoned issuers. The safe harbors for 168 See Rule 163. The exemption is not available exemption will, however, meet our
regularly released factual business and to communications involving registered business definition of ‘‘free writing prospectus’’
combination transactions or communications in and will need to include a legend and
forward-looking information and the offerings by registered investment companies or
exemption from the prohibition on business development companies.
be filed promptly by the issuer when
offers for purposes of Securities Act 169 Any written offer will be a prospectus under and if the issuer files its registration
Section 5(c) for communications more Securities Act Section 2(a)(10) relating to a public statement.173 We also have provided in
offering of the securities to be covered by the the Rule as adopted that filing is not
than 30 days prior to filing of a registration statement to be filed. All oral
registration statement are available to communications that are offers and all prospectuses
required if the communication has
well-known seasoned issuers. In will be subject to liability under Securities Act previously been filed with or furnished
addition, as discussed below, the Section 12(a)(2). The communications also will be to us (for example pursuant to
subject to other provisions addressing deficient Regulation FD on Form 8–K). The Rule
broadened exemption for routine disclosure, including Securities Act Section 17(a),
as adopted also provides that filing is
offering-related communications and Exchange Act Section 10(b), and Exchange Act Rule
10b–5. not required if filing would not be
the availability of an exemption for
Communications made in reliance on the Rule required under Rule 433 regarding free
eligible issuers from the gun-jumping also will not be considered to be in connection with
provisions for free writing prospectuses, a registered securities offering for purposes of the 172 See the discussion in Section V.B.2 below
in both cases after filing of a registration exclusion from Regulation FD. See Rule under ‘‘Automatic Shelf Registration for Well-
statement, also are available to well- 100(b)(2)(iv) of Regulation FD. Known Seasoned Issuers,’’ with regard to the
The Rule is different from Securities Act Rule availability of an ‘‘automatic shelf’’ registration
known seasoned issuers. However, 254. Securities Act Rule 254 permits solicitations of process for these issuers.
because the gun-jumping provisions interest in Regulation A offerings provided the 173 The legend is similar to the one we are
prohibit all offers—written or oral— conditions of the rule, including pre-use providing as a condition for free writing
before the filing of a registration submission of the materials to the Commission, are prospectuses used after a registration statement is
satisfied, and does not treat the materials as filed. We have made minor modifications to the
statement, we believe well-known prospectuses. Rule 163 does not require pre-filing legend, including eliminating issuer-specific
seasoned issuers could be unnecessarily of the communications and written offers will be language and references to risk factors. We also
constrained in their capital formation prospectuses. have provided that the legend may include an e-
170 In addition, as with the other exemptions and
activities.167 mail address and web site where the prospectus can
safe harbors that are available only to the issuer, the be requested or is available. See the discussion in
definition of by or on behalf of the issuer explicitly Section III.D.3 below under ‘‘Legend Condition’’
rely on the exclusion. For example, if an issuer or excludes offering participants who are underwriters with regard to the conditions for use of a ‘‘free
its representative gives an interview to the press or dealers. writing prospectus.’’ Under Rule 163 and Rule 433,
prior to the 30-day period, it will not be able to rely 171 See Rule 163(d). Securities Act Section 17(b) all issuer free writing prospectuses must be filed
on the exclusion if the interview is published [15 U.S.C. 77q(b)] generally requires persons who unless exempt from the filing condition. Under
during the 30-day period. We have addressed the make statements describing an issuer’s securities to Rule 163 as adopted, free writing prospectuses must
same issues in the context of free writing disclose the receipt (and the amount) of be filed only if the issuer files a registration
prospectuses discussed below. consideration given, directly or indirectly, by an statement or amendment to the registration
166 See letters from ABA; Allied; and Fried Frank.
issuer, underwriter, or dealer in exchange for statement covering the securities offered by the free
167 See Securities Act Section 5(c). making the statements. writing prospectus.
writing prospectuses, discussed below, to all seasoned issuers. The level of public notices about an offering made
if the communication was a free writing following of well-known seasoned after an issuer files its registration
prospectus used after filing of the issuers by market participants lessens statement.184 The Rule was intended
registration statement. Finally, the filing our concerns that these issuers, in originally to provide an ‘‘identifying
conditions of Rule 163 will be satisfied general, will use the exemption to evade statement’’ that could be used to locate
if the filing conditions of Rule 433 the registration requirements of the persons that might be interested in
(other than timing of filing) are satisfied. Securities Act. Accordingly, we are receiving a prospectus. All issuers,
As a result, for example, the limiting this exemption to well-known including well-known seasoned issuers,
accommodations provided in Rule 433 seasoned issuers. are precluded from relying on Rule 134
regarding media publications that are We have not made any revisions to until the issuer files a registration
free writing prospectuses also will apply the provisions of Rule 163 regarding the statement that includes a statutory
under Rule 163.174 applicability of Regulation FD to prospectus.185
Any written communication used in offering-related information. Well-
known seasoned issuers thus must i. Expansion of Permitted Information
reliance on this exemption will be
subject to the same provisions comply with the provisions of We are modifying and expanding the
applicable to free writing prospectuses Regulation FD with regard to information permitted under Rule 134
used after a registration statement is communications made pursuant to Rule to include information that issuers,
filed with regard to the ability to ‘‘cure’’ 163 to which Regulation FD would underwriters, and investors will find
a failure to meet the legend or filing apply.182 helpful and to permit the types of
condition in reliance on our rules In response to commenters’ written communications during an
governing free writing prospectuses suggestions, we have clarified the filing offering that we do not consider raise
discussed below.175 condition to apply only when and if a the risk of offering abuses. We are
registration statement or amendment adopting a limited expansion of the
iii. Comments on Exemption for Pre- covering the offered securities is filed. information permitted in the notice
Filing Offers Accordingly, if no such registration about the issuer and the registered
Commenters broadly supported the statement or amendment is filed, a free offering. The amendments to Rule 134
proposed exemption for pre-filing offers writing prospectus used pursuant to will:
by well-known seasoned issuers.176 One Rule 163 does not have to be filed. • Permit increased information about
commenter thought the exemptions Finally, media publications that are an issuer and its business, including
should be expanded to cover all permissible free writing prospectuses where to contact the issuer;
seasoned issuers, not just well-known pursuant to Rule 433 will be treated the • Permit more information about the
seasoned issuers.177 Some commenters same as other communications under terms of the securities being offered; 186
Rule 163, and will therefore only be • Expand the scope of permissible
suggested that the filing condition for
subject to filing if a registration factual information about the offering
free writing prospectuses apply only
when and if the registration statement is statement is filed.
184 The safe harbor operates by excluding such
filed.178 In addition, commenters 3. Relaxation of Restrictions on Written notices from the definition of prospectus under
wanted clarification that the availability Offering-Related Communications Securities Act Section 2(a)(10). See Rule 134 and
of the exemption does not depend on Adoption of Rules 134 and 135, Release No. 33–
the issuer filing the free writing The rules we are adopting today will 3568 (Aug. 29, 1955) [20 FR 6523]. Rule 134 does
expand the amount and types of not apply to communications relating to a registered
prospectus within a particular time investment company or a business development
frame.179 Finally, commenters requested permitted written offering-related company. See Rule 134(e) [17 CFR 230.134(e)].
communications that may be made by
clarification that media publications, as 185 Rule 134 is not available until a preliminary
offering participants under the gun- prospectus, or in the case of shelf registration, a
with other free writing prospectuses, do
jumping provisions after a registration base prospectus, has been filed. This does not
not need to be filed until the registration mean, however, that a final prospectus meeting the
statement is filed.183 The two main
statement is filed.180 One commenter requirements of Securities Act Section 10(a),
also suggested that Regulation FD elements of these rules are expansion of including a price, is required as a condition to Rule
should not apply to offering-related information that Securities Act Rule 134 134. Further, the prospectus required for reliance
permits to be communicated and the on Rule 134(d) is a statutory prospectus that
information communicated in reliance satisfies the requirements of Securities Act Section
on the exemption.181 permitted use of free writing 10, including a price range where required (other
We believe it is appropriate at this prospectuses in connection with a than a free writing prospectus), and it need not be
time to limit the exemption for pre- registered offering. a prospectus that satisfies Section 10(a).
If a well-known seasoned issuer makes a written
filing offers to well-known seasoned a. Rule 134 communication of information of the type covered
issuers only and not expand the benefits Rule 134 provides a safe harbor from by Rule 134 prior to filing its registration statement,
and that communication constitutes an offer, the
174 For example, the issuer could satisfy its filing
the gun-jumping provisions for limited communication will be a free writing prospectus
condition under Rule 163 for a media publication and the issuer will need to look to the Rule 163
182 We note the recent cases regarding private exemption of pre-filing offers from the gun-jumping
for which an issuer could file an interview
transcript under Rule 433 by similarly filing such investment in public equity (PIPE) offerings that provisions.
a transcript, as described below. have involved trading on the basis of inside 186 For example, for fixed income securities, the
175 See discussion in Section III.D.3 below under information, including the existence of a private changes will allow greater information about final
‘‘Cure for Unintentional or Immaterial Failure to offering. See Hilary L. Shane, Lit. Rel. 19227 (May interest rates and yield information, including yield
Include a Legend’’ and ‘‘Unintentional Failures to 18, 2005); SEC v. Hilary L. Shane, Civ. Action No. information on fixed income securities with
File’’ regarding Rules 164 and 433 with respect to 05 CIVIL 4772 (S.D.N.Y.). See also Guillaume comparable maturities and credit ratings. We
the cure provisions. Pollet, Lit. Rel. 19199 (Apr. 21, 2005); SEC v. believe that yield disclosure also covers disclosure
176 See, e.g., letters from ABA, Cleary; NYSBA, Guillaume Pollet, Civ. Action No. 05–CV–1937 of the anticipated spread over a benchmark. We also
(SLT/RLM) (E.D.N.Y.). have revised the Rule to allow issuers to disclose
S&C: SIA; and TBMA. 183 As noted previously, Securities Act Section
177 See letter from ABA. whether securities are convertible, exercisable, or
178 See, e.g., letters from Fried Frank and NYSBA.
5(b)(1) limits the means by which written offers exchangeable, and the ranking of the securities. The
may be made following the filing of a registration revised Rule also allows disclosure of the
179 See, e.g., letters from ABA and Davis Polk.
statement. Section 5(b)(1) does not include a permissibility or status of the investment under the
180 See, e.g., letters from Davis Polk and NYSBA.
limitation on oral offers after the filing of a Employee Retirement Income Security Act of 1974
181 See letter from ABA. registration statement. [29 U.S.C. 1001 et seq.] (‘‘ERISA’’).
itself, including underwriter ii. Section 10 Prospectus Requirement proceeds is included in the filed
information, more details about the We have modified the changes to Rule registration statement.193 Rule 134(d)
mechanics of and procedures for 134 from the proposals in one continues to require that a price range
transactions in connection with the significant regard. We had proposed that be included where required. We are not
offering process, the anticipated Rule 134 explicitly condition the modifying the provisions of Rule 134(d).
schedule of the offering, and a availability of the Rule on the issuer The procedures that market participants
description of marketing events; 187 filing a statutory prospectus meeting the have developed with the staff of the
• Allow more factual information requirements of Securities Act Section Division of Corporation Finance to
about procedures for account opening 10 which, in the case of an initial public facilitate offerings of securities using
and submitting indications of interest offering, would include a bona fide Internet facilities are not affected by the
and conditional offers to buy the offered estimate of the initial offering price amendments to Rule 134 that we are
securities; 188 adopting today.
range and the maximum amount of
• Allow more factual information
securities to be offered. While iii. Changes to Required Information
regarding procedures for directed share
commenters recognized that the We are modifying the information that
plans and other participation in
registration statement had to be filed, a must be included in a Rule 134 notice,
offerings by officers, directors, and
number of commenters were concerned as proposed. First, we are eliminating
employees;
• Permit the correction of that including an explicit requirement the reference in the legend to state
inaccuracies in permissible information of a bona fide price range and maximum securities laws, as we believe that other
previously disclosed pursuant to the amount of securities to be offered would provisions of the Rule already address
Rule; change current practice and would not any state securities law requirements, as
• Expand the disclosure permitted permit a number of communications, applicable.194 Second, we are
regarding credit ratings to include the including press releases announcing the eliminating the requirement to specify
security rating that is reasonably filing of the registration statement and whether the financing is a new
expected to be assigned. naming underwriters, or even lead financing or refunding, as we believe
While we have expanded the amount managers, and other notices that would that such information is no longer
of information regarding the terms of an be appropriate before the necessary because it will be provided
offering that may be included in a Rule commencement of marketing efforts.191 where appropriate by the issuer’s
134 notice, the expansion does not These commenters noted that, in many disclosure of the use of the proceeds of
permit use of a Rule 134 notice to cases, the bona fide price range is not the offering.
provide a detailed description of included in registration statements for One commenter suggested that the
securities being offered. There is initial public offerings until a later point Rule 134 requirement that issuers alert
increased ability under our rules to in time that is closer to the investors where they can obtain a copy
provide such a detailed description, commencement of marketing activities of the statutory prospectus should
such as a term sheet, as a free writing for the offering.192 include a means for receipt of a
prospectus, as discussed below. We are modifying the Rule to provide prospectus by electronic delivery.195
Commenters suggested a number of that much of the information permitted Several commenters also suggested that
additional items of information that under the Rule may be disclosed under we allow issuers to satisfy the
they believed should be included in the the Rule before the inclusion of a bona requirement that certain Rule 134
Rule 134 safe harbor.189 This additional fide price range in the registration notices be accompanied or preceded by
information generally focused on more statement. This modification does not a statutory prospectus through the
extensive information about the terms of mean, however, that the prospectus in inclusion of a hyperlink in the Rule 134
the securities being offered. As we have an initial public offering satisfies notice to the statutory prospectus.196
noted, Rule 134 is not intended as a Section 10 without the bona fide price While we are not expanding ‘‘access
substitute for a detailed description of range. Rather, the purpose of the equals delivery’’ to Rule 134, we are
the securities, such as a term sheet, or modification is to permit notices to amending Rule 134(c)(1) to allow
information included in a prospectus. contain information that is not persons providing notices relying on
We have expanded the information dependent on the price range or amount Rule 134 to include a uniform resource
categories from those in the proposal to of securities being offered prior to locator (‘‘URL’’) address to the statutory
include items that provide more inclusion of that information. In prospectus that alerts investors where
procedural information about the addition, information related to the they can obtain a statutory
offering or the securities.190 pricing and rating of the security can be prospectus.197 For purposes of Rule 134,
provided only if a price range is
187 The information on marketing events, such as included where required. 193 The Rule also provides that identities of
road shows, can include greater detail on the date, The amended Rule also provides that selling security holders and the type of
time, location, and procedures for attending or the Rule is available for certain other underwriting can be provided if the information has
otherwise accessing the events. been included in the registration statement.
188 For example, a broker or dealer can inform
information only if it also is disclosed 194 See paragraphs (a)(13) and (a)(16) of the
investors of the procedural aspects of an auction or at that time in the filed registration amendments to Rule 134.
a directed share program. The changes will not statement. For example, notices 195 See letter from NYCBA.
include written notices of allocations of securities, including information about the use of 196 See, e.g., letters from ABA; Alston; Cleary; and
including those delivered electronically. These proceeds of the offering can be provided S&C.
notices will be a type of written confirmation of sale 197 Rule 134 requires in some cases that the notice
and, thus, prospectuses. The rules we are adopting only after information about the use of
must be accompanied or preceded by a written
regarding prospectus delivery reforms, as discussed prospectus meeting the requirements of Section 10
later, will apply to these notices. communication falls outside of the safe harbor it of the Securities Act, which may be satisfied in an
189 See, e.g., letters from ABA; ABA–ABS; Alston; still may, depending on the facts and electronic notice by including an active hyperlink
ASF; Citigroup; Cleary; CMSA; Fried Frank; Merrill circumstances, not be deemed an ‘‘offer.’’ to such a prospectus. The notice itself cannot,
Lynch; Morgan Stanley; NYCBA; S&C; SIA; and 191 See, e.g., letters from ABA; Citigroup; Cleary;
however, include information beyond that
TBMA. Davis Polk; Fried Frank; Merrill Lynch; Morgan permitted by the Rule, and, as such, the notice
190 Rule 134 and the other communications safe Stanley; NYCBA; NYSBA; and SIA. cannot include a hyperlink or URL for an address
harbors are non-exclusive; therefore, if a 192 See, e.g., letters from ABA and SIA. Continued
including a URL address to the statutory adopting will allow offering participants summary prospectuses or prospectuses
prospectus that is not an active to use free writing prospectuses in subject to completion;
hyperlink in an electronic conjunction with most registered • A communication made in reliance
communication does not mean that the primary and secondary offerings, on the special rules for asset-backed
prospectus has been delivered. although we do not treat all issuers and issuers permitting the use of ABS
However, an active hyperlink to a offerings the same.203 informational and computational
statutory prospectus in an electronic The issuer and any other offering materials; 205 or
Rule 134 notice will satisfy the participant in an eligible issuer’s • A prospectus because a final
requirement that the prospectus registered securities offering satisfying prospectus meeting the requirements of
accompany or precede that notice.198 the conditions of our rules can use a free Section 10(a) was sent or given with or
writing prospectus after a registration prior to the written communication.206
b. Permissible Use of Free Writing statement is filed to communicate Further, the definition makes clear that,
Prospectuses information about a registered offering although a free writing prospectus will
i. Overview of securities.204 This will permit not be filed as part of a registration
After the filing of a registration affiliates, underwriters, dealers, and statement, it will still be considered to
statement, the gun-jumping provisions others acting on behalf of the parties to relate to a registered public offering of
permit issuers and other offering the transaction to use a free writing securities that is or will be the subject
participants to make written offers only prospectus without violating the gun- of a registration statement, regardless of
in the form of a statutory prospectus. jumping provisions. The conditions to the method of its use or distribution.
the use of a free writing prospectus will A written communication will be a
After effectiveness of a registration
depend on the nature of the issuer and free writing prospectus only where it
statement, written offers other than a
the offering. A free writing prospectus constitutes an offer by an offering
statutory prospectus may be made only
can take any form and is not required participant of a security under the
if a final prospectus meeting the
to meet the informational requirements Securities Act. Whether a particular
requirements of Securities Act Section
otherwise applicable to prospectuses. communication constitutes such an
10(a) is sent or given prior to or at the
offer will continue to be determined
same time as the written offer.199 We ii. Definition of Free Writing Prospectus based on the particular facts and
believe that written communications
(A) Scope of Definition circumstances.207 While the definition
during the offering process are
of ‘‘offer’’ is broad, not all
unnecessarily restricted, even with the We are adopting the proposed communications relating to an offering
substantial relaxations in restrictions on definition of ‘‘free writing prospectus.’’ are offers or offers by an offering
communications resulting from the A free writing prospectus is, except as participant. As a non-exclusive
rules we discuss above. The rules we are otherwise provided specifically or illustration, the gun-jumping provisions
adopting permit written offers, otherwise required by the context, a have been administered in a manner
including electronic communications, written communication that constitutes that excludes from categorization as an
outside the statutory prospectus beyond an offer to sell or a solicitation of an offer a media publication or television
those currently permitted by the offer to buy securities that are or will be or radio broadcast that is based solely
Securities Act, if certain conditions are the subject of a registration statement
met. We are defining such a written and is not: 205 See Rules 167 and 426 [17 CFR 230.167 and
offer outside of the statutory prospectus • A prospectus satisfying the 17 CFR 230.426]. Asset-backed issuers also may use
as a ‘‘free writing prospectus.’’200 requirements of Securities Act Section free writing prospectuses as discussed below. We
Under the rules we are adopting 10(a); have excluded free writing prospectuses used in
reliance on Rule 164 and Rule 433 (including the
today, a free writing prospectus that • A prospectus satisfying our rules filing requirements) from the filing requirements for
satisfies specified conditions can be permitting the use of preliminary or ABS informational and computational materials.
used by a well-known seasoned issuer at See the amendments to Rule 426. The content of
any time.201 Further, a free writing prospectus used other than in accordance with our ABS free writing prospectuses may include, but is
new rules will continue to be a prospectus. not limited to, the same information as material
prospectus that satisfies the specified used pursuant to Rule 167 and Rule 426.
203 The rules do not extend to business
conditions can be used by any other
combination transactions, for which we have 206 See clause (a) of Securities Act Section
eligible issuer or offering participant already adopted rules. See Securities Act Rule 162 2(a)(10). After effectiveness of a registration
after a registration statement has been [17 CFR 230.162], Rule 165, Rule 166, and Rule 425 statement, any written offer that is accompanied or
filed.202 In general, the rules we are [17 CFR 230.425]. Rule 162 relates to submission of preceded by a final prospectus that meets the
tenders in registered exchange offers. requirements of Securities Act Section 10(a) (such
Communications relating to business combinations as sales literature used after effectiveness) will
containing information beyond that permitted by
are covered by Rule 165 and Rule 166. Rule 425 continue to be permitted without having to satisfy
Rule 134. See the 2000 Electronics Release, note 96,
relates to the filing of certain prospectuses and the requirements of any safe harbor or other rule
at II.B.2.
198 See example (19) under Section II.D. of Use of
communications in connection with business permitting its use or Rule 433. Such a written offer
combination transactions. See also the Regulation is excluded from the definition of ‘‘prospectus’’
Electronic Media for Delivery Purposes, Release No. M–A Release note 95; and Cross-Border Tender and under the Securities Act by reason of clause (a) of
33–7233 (Oct. 6, 1995) [60 FR 53458] (the ‘‘1995 Exchange Offers, Business Combinations and Rights Securities Act Section 2(a)(10) if a final prospectus
Electronics Release’’), which states that a URL Offerings, Release No. 33–7759 (Oct. 22, 1999) [64 meeting the Section 10(a) information requirements
address can be included in an electronic Rule 134 FR 61382] (exemptive rules for cross-border tender is sent or given before or at the same time as the
notice. and exchange offers, business combinations, and written offer. A base prospectus included in a shelf
199 See Securities Act Section 2(a)(10).
rights offerings relating to the securities of foreign registration statement that omits information is not
200 We are adding this definition to Securities Act
issuers). Where appropriate, we have included a final prospectus meeting the requirements of
Rule 405. provisions that are intended to ensure consistency Section 10(a).
201 As we discuss above, a free writing prospectus among the rules and, with respect to filing 207 In addition, communications that are not
can be used by a well-known seasoned issuer prior conditions, permit a single filing to satisfy the considered offers or prospectuses for purposes of
to filing the registration statement pursuant to Rule conditions under both regulatory schemes. See Rule the gun-jumping provisions, such as Rule 134
163. 425 and Rule 433. notices, Rule 135 communications, regularly
202 The rules provide that such a free writing 204 Prior to filing a registration statement, only a released factual business information and forward-
prospectus is a permitted prospectus for purposes well-known seasoned issuer will be able to use a looking information falling within the new safe
of Securities Act Section 10(b) [15 U.S.C.77j(b)] free writing prospectus. This use of a free writing harbors, and research reports falling within the safe
and, as such, can be used without violating prospectus by a well-known seasoned issuer is harbors provided by our rules, will not be free
Securities Act Section 5(b)(1). A free writing permitted by Rule 163. writing prospectuses.
on information that is filed with us or iii. Permitted Use of a Free Writing • Reporting issuers who are not
available on an unrestricted basis or on Prospectus After the Filing of a current in their Exchange Act reports
other information the dissemination of Registration Statement Under Rule 433 and other materials required to be filed
which did not represent an offer by an (A) Overview during the prior 12 months (or such
issuer or other offering participant, shorter period that the issuer was
where there is no other involvement or We are adopting Rule 164 and Rule
required to file such reports and
participation by an offering participant. 433 substantially as proposed. Rule 164
materials), other than reports on Form
On that basis, for example, a newspaper will permit the use of a free writing
prospectus where an eligible issuer has 8–K required solely pursuant to an item
article about an initial public offering specified in General Instruction I.A.3(b)
that is based on the filed registration filed a registration statement, the other
requirements of Rule 164 are met, and of Form S–3; 216
statement, on a press release that is filed
with or furnished to us, on a filed free the conditions of Rule 433 are • In the case of asset-backed issuers,
writing prospectus, or on filed issuer satisfied.212 The Rules permitting the the depositor, or any issuing entities
information where the issuer and other use of free writing prospectuses are not previously established, directly or
offering participants have refused to available for any communication that, indirectly by the depositor who are not
comment and not otherwise been while in technical compliance with the current in their Exchange Act reports
involved, would not be categorized as Rule, is part of a plan or scheme to and other materials required to be filed
an offer under the gun-jumping evade the requirements of Securities Act during the prior 12 months (or such
provisions. Section 5.213 shorter period that the issuer was
(B) Comments on Definition (B) Issuer Eligibility required to file such reports and
materials), other than reports on Form
Commenters supported the concept of For any offering participant to use free
8–K required solely pursuant to an item
free writing prospectuses.208 writing prospectuses, other than free
writing prospectuses that consist only of specified in General Instruction I.A.4 of
Commenters suggested that we exclude
offshore communications and rating descriptions of the securities in the Form S–3; 217
agency reports from the scope of the offering or of the offering, the issuer • Issuers who are or during the prior
definition.209 We are not including any may not be an ineligible issuer.214 We three years were or any of their
specific provision in the rules regarding have modified the consequences of predecessors were:
offshore communications and, as such, ineligibility in the context of use of free Æ Blank check companies;
the treatment of offshore writing prospectuses to permit ineligible
communications under the free writing issuers, other than blank check Æ Shell companies (other than
prospectus rules will be no different companies, shell companies, and penny business combination related shell
than the treatment of any offshore stock issuers, to use free writing companies);
communication prior to the Rules we prospectuses that are limited to Æ Issuers for an offering of penny
adopt today.210 We also have not descriptions of the terms of the stock;
revised the Rule in response to securities being offered and the offering • Issuers who are limited
commenters’ request for clarification of because we believe that the permitted partnerships offering and selling their
the treatment of rating agency reports. use of such free writing prospectuses
Our treatment of NRSROs is currently securities other than through a firm
can provide advantages to investors that
the subject of rulemaking and other commitment underwriting; 218
justify the risks of use of such materials
consideration.211 by some classes of ineligible issuers.
good cause to provide the waiver. We are adopting
Such use would be subject to all of the rules today delegating authority to the Division of
208 See, e.g., letters from Cleary; NYSBA; and SIA. other requirements of the new rules. Corporation Finance to grant or deny waivers from
209 See, e.g., letters from ABA; ABA-ABS; ASF;
We have revised the definition of any of the ineligibility provisions. See revisions to
Fried Frank; NYSBA; S&C; SIA; and TBMA. But see
letter from State Street Global Advisors (‘‘SSGA’’). ineligible issuer from the proposals in Rule 30–1 of the Rules of Organization and Program
210 Whether an offshore communication is response to comments. As adopted, Management Governing Delegations of Authority to
the Director of the Division of Corporation Finance
considered an offer in the United States subject to ineligible issuers are, as of the relevant [17 CFR 200.30–1].
the federal securities laws will depend on when date of determination: 215 216 The exception for reports solely for specified
and how the communication is made and the
availability of other exemptions, such as those for items of Form 8–K from the requirement that
offshore press conferences. See Rule 135e [17 CFR the preparation of the information. See the Asset- issuers be current effectively applies only for
230.135e] and note 140 above. See also Rule Backed Securities Adopting Release, note 82, at part purposes of the ineligible issuer definition in the
902(c)(3)(vii) [17 CFR 230.902(c)(3)(vii)]. III.C.3. context of the use of free writing prospectuses. In
211 In addition, as we have said previously,
212 The discussion in this section relates to the the context of the determination of status as a well-
use of free writing prospectuses after the filing of known seasoned issuer, the requirement that the
whether information prepared and distributed by
a registration statement. For a discussion of the use issuer be current at the determination date applies
third parties that are not offering participants is
of free writing prospectuses by well-known separately (without the Form 8–K exceptions) by
attributable to an issuer or other offering participant
seasoned issuers prior to filing a registration virtue of the requirement that the issuer be eligible
depends upon whether the issuer or other offering
participant has involved itself in the preparation of statement, see the discussion in Section III.D.2 for Form S–3. (The Form 8–K exceptions in the
the information or explicitly or implicitly endorsed above under ‘‘Permitted Pre-Filing Offers for Well- Form S–3 requirements apply in determining
or approved the information. The courts and we Known Seasoned Issuers.’’ whether an issuer is timely for purposes of Form
have referred to the first line of inquiry as the
213 As with certain of the safe harbors and other S–3 eligibility, but not in determining whether it is
entanglement theory and the second as the adoption exemptions we are adopting today, we have current.)
theory. See the 2000 Electronics Release, note 96, included language in the Preliminary Note to Rule 217 The requirements for Form S–3 eligibility for
at fn. 48 and accompanying text. We think these 164 making clear that the exemption in that Rule asset-backed issuers include not only this
theories are equally applicable with respect to is non-exclusive. condition, but also the condition that filings be
issuer or offering participant involvement regarding 214 These descriptions cannot be used in any case timely, and extend the requirements to reports of
rating agency reports. For example, if an issuer or if the issuer is or it or any of its predecessors in affiliated depositors regarding the same asset class.
underwriter distributes the rating agency report in the last three years was a blank check company, a The timeliness condition and extension to affiliated
connection with an offering of the securities, it is shell company (other than a business combination depositors do not apply here.
appropriate to conclude that such party has adopted related shell company), or a penny stock issuer. 218 These issuers are subject to our interpretations
that report and should be liable for its contents. 215 We have adopted as proposed a waiver in Limited Partnership Reorganizations and Public
Liability under the entanglement theory depends provision that will allow us to grant or deny a Offerings of Limited Partnership Interests, Release
upon the level of pre-publication involvement in request to waive an issuer’s ineligibility if we find No. 33–6900 (June 17, 1991) [56 FR 28979].
• Issuers who have filed for may give rise to disclosure abuses.224 In registration statement covering the
bankruptcy or insolvency during the addition, Congress determined not to offering at which the issuer, or in the
past three years; 219 extend the safe harbors for forward- case of an underwritten offering the
• Issuers who have been or are the looking statements to issuers of blank issuer or another offering participant,
subject of refusal or stop orders under check and penny stock securities, as makes a bona fide offer, including
the Securities Act during the past three well as issuers previously convicted of without limitation through the use of a
years, or are the subject of a pending certain felonies and misdemeanors and free writing prospectus, in the offering;
proceeding under Securities Act Section issuers subject to a decree or order or
8 220 or Section 8A; 221 or involving a violation of the anti-fraud • Otherwise at the time of filing of a
• Issuers who, or whose subsidiaries provisions of the federal securities registration statement covering the
at the time they were subsidiaries of the laws.225 offering.
issuer, have been convicted of any We are adopting as proposed the This timing of determination as to
felony or misdemeanor described in exclusion of registered investment eligibility to use a free writing
certain provisions of the Exchange Act, companies and business development prospectus (with the enumerated
have been found to have violated the companies from eligibility for use of exceptions from the prohibition) applies
anti-fraud provisions of the federal Rules 164 and 433 because they are to all issuers, including well-known
securities laws, or have been made the already subject to separate rules seasoned issuers. The timing of
subject of a judicial or administrative permitting use of a Section 10(b) determination of whether an issuer is a
decree or order (including a settled prospectus.226 Securities Act Rule 482 well-known seasoned issuer, described
claim or order) prohibiting certain permits investment companies to above, is different and is made on an
conduct or activities regarding the anti- advertise investment performance data approximately annual basis.
fraud provisions of the federal securities and other information, and Securities (1) Comments on Ineligible Issuer
laws 222 during the past three years. The Act Rule 498 permits open-end Definition
definition as adopted provides that management investment companies to
use a profile. We also are adopting as Commenters expressed a number of
ineligibility of an issuer based on a concerns about the ineligibility
settlement will be prospective only and proposed the exclusion of offerings that
are business combination transactions conditions, including those relating to
thus arise only for settlements entered prior securities law violations and
into after the effective date of the new subject to Regulation M–A. We also are
excluding all offerings registered on settlements,227 going concern opinions
rules.223 in audit reports covering financial
The categories of ineligible issuers Form S–8, except for those by well-
known seasoned issuers. statements,228 and certain involuntary
include issuers that at the time of the bankruptcy petitions.229 Commenters
eligibility determination are not current We have revised the Rules from the
proposal to change the time of also requested clarification of the time
(with specified Form 8-K exceptions) for frame for which the issuer must be
12 months in their Exchange Act determination of status as an ineligible
issuer. We have concluded that current in its reports for purposes of the
reporting obligations, issuers that may definition.230 Commenters did not
raise greater potential for abuse, and eligibility, in most cases, should not be
determined at the time of reliance on believe that issuers should be ineligible
issuers that have violated the anti-fraud based on disclosure of material
provisions of the federal securities laws. our new Rules for each free writing
prospectus. We have adopted an weaknesses in internal controls over
Certain of these issuers have been financial reporting.231 Commenters also
viewed historically as unsuited for approach to eligibility determination
that generally looks to the stated that offering participants should
short-form registration or ineligible for be able to rely on the various
disclosure-related relief. For instance, commencement of an offering and will
exemptions based on a reasonable belief
we have repeatedly stated our belief that not result in a change of status during
that the issuer was not an ineligible
blank check companies, shell an offering. As adopted, eligibility
issuer.232
companies, and penny stock issuers determinations will be made: With regard to the ineligibility based
• If the offering is registered pursuant
on securities law violations or
219 Ineligibility based on an involuntary to Rule 415, our shelf registration rule,
settlements of alleged violations,
bankruptcy filing arises on the earlier of 90 days the earliest time after the filing of the
commenters believed that the
after the date of filing of an involuntary petition (if
the case was not earlier dismissed) or the 224 See, e.g., Penny Stock Definition for Purposes
disqualifying violations were too broad
conversion of the case to a voluntary proceeding of Blank Check Rule, Release No. 33–7024 (Oct. 25, and should be limited to violations of
under federal bankruptcy or state insolvency laws. 1993) [58 FR 58099] (the Commission stated that the anti-fraud provisions, not any
As a result, issuers will not immediately be Congress found blank check companies to be provision of the federal securities
considered ineligible because an involuntary common vehicles for fraud and manipulation in the
bankruptcy petition has been filed. In addition, laws.233 Moreover, commenters stated
penny stock market, and concluded that the
ineligibility tied to bankruptcy will no longer apply Commission’s disclosure-based regulation and
after an issuer files an annual report with audited review of such offerings protects investors); Delayed 227 See, e.g., letters from ABA; Alston; the
financial statements after emergence from Pricing for Certain Registrants, Release No. 33–7393 Business Roundtable (‘‘BRT’’); Citigroup; Credit
bankruptcy. (Feb. 20, 1997) [62 FR 9276] (blank check and Suisse First Boston, LLC (‘‘CSFB’’); Davis Polk;
220 15 U.S.C. 77h.
penny stock issuers would be ineligible to use rule Merrill Lynch; Morgan Stanley; NYSBA; Paul,
221 15 U.S.C. 77h–1. providing for delayed pricing because of ‘‘prior Weiss, Rifkind, Wharton & Garrison LLP (‘‘Paul
222 The covered decrees or orders (including substantial abuses’’); and the Shell Companies Weiss’’); S&C; and SCSGP.
228 See, e.g., letters from ABA; AICPA; Davis Polk;
settlements) are prohibitions on future violations of Release, note 109.
the anti-fraud provisions of the federal securities 225 See Securities Act Section 27A and Exchange Deloitte; E & Y; and KPMG.
229 See, e.g., letters from Davis Polk and TBMA.
laws, orders requiring issuers to cease and desist Act Section 21E.
230 See, e.g., letters from ABA–ABS; ASF; CMSA;
from violating the anti-fraud provisions of the 226 Two commenters suggested that business
federal securities laws, and determinations of development companies should be permitted to rely Davis Polk; and TBMA.
231 See, e.g., letters from ABA; AICPA; E & Y; and
violations of the anti-fraud provisions of the federal on the rules permitting the use of a free writing
securities laws. The settlements include settlements prospectus. See letters from Allied and Fried Frank. KPMG.
in which the issuer or its subsidiary neither admits A third commenter suggested that Securities Act 232 See, e.g., letters from ABA–ABS and ASF.
nor denies that it violated the anti-fraud provisions Rule 482 should be conformed to Rule 433 for 233 See, e.g., letters from ABA; Alston; BRT;
of the federal securities laws. registered investment companies and business Citigroup; Richard Hall; Merrill Lynch; Morgan
223 See amendments to Securities Act Rule 405. development companies. See letter from ABA. Stanley; the NYSBA; Paul Weiss; SCSGP; and SIA.
that the disqualification based on settled concern opinion covering the issuer’s issuer’s most recently filed statutory
allegations of violations of the securities most recent audited financial prospectus.
laws should be prospective only, statements. In addition to the revisions
(a) Prospectus Delivery Conditions for
because the settling parties would not to the specific ineligibility provisions,
Non-Reporting Issuers and Unseasoned
have known, at the time of the we also have revised Rule 164 and Rule
Issuers
negotiated settlement, also to negotiate 433 to provide that persons relying on
a waiver of the ineligible issuer those Rules, other than issuers, must In an offering of securities of an
disqualifications.234 Commenters did have a reasonable belief that an issuer eligible non-reporting issuer, including
not believe that the settlement of an is not ineligible.238 We also have an initial public offering, or securities of
alleged violation should be a provided that ineligibility based on an eligible unseasoned issuer, the use by
disqualification.235 Other commenters settlements will apply only to judicial an offering participant of free writing
did not believe that a securities law or administrative decrees or orders prospectuses is conditioned on:
violation or settlement by a subsidiary entered into after the effective date of • Filing of the registration statement
should affect the eligibility of an issuer the new rules. for the offering; and
to use the various exemptions and safe • The free writing prospectus being
harbors that we proposed.236 (C) Conditions to Permitted Use of a preceded or accompanied by the most
Commenters addressing ineligibility Free Writing Prospectus recent statutory prospectus that satisfies
based on bankruptcy were concerned Rule 164 as adopted provides that, the requirements of Section 10 if: 240
that an involuntary bankruptcy after the filing of a registration Æ The free writing prospectus is
disqualification could disadvantage statement, a free writing prospectus that prepared by or on behalf of or used or
issuers in their relationships with their meets the requirements of Rule 164 and referred to by an issuer or prepared by
creditors.237 They were concerned that satisfies the conditions of Rule 433 will or on behalf of or used or referred to by
a creditor could cause an issuer to be an be a permitted prospectus under Section other offering participants;
ineligible issuer by filing an involuntary 10(b) for purposes of Securities Act Æ Consideration has been or will be
bankruptcy petition against the issuer. Section 5(b)(1). The Rule 433 conditions given by the issuer or an offering
These commenters suggested that the on the use of free writing prospectuses participant for the dissemination (in any
involuntary bankruptcy petition be a format) 241 of any free writing
relate to:
disqualification only after the lapse of a prospectus (including any published
period of time or conversion of the • The delivery or availability of the article, publication, or advertisement);
petition to a voluntary petition, enabling statutory prospectus at the time the free or
issuers to attempt to resolve the issues writing prospectus is used; Æ Securities Act Section 17(b) 242
with their creditors. • The information contained in the requires disclosure that consideration
We have revised the definition of free writing prospectus; has been or will be given by the issuer
‘‘ineligible issuer’’ to address many of • The legend that is to be included in or an offering participant for any
commenters’ concerns. Under the the free writing prospectus; activity described therein in connection
definition we are adopting, an issuer with the free writing prospectus.
• Filing of the free writing
must be current, but not necessarily In these cases, issuers and offering
prospectus; and
timely, in its required filings under the participants must assure that the most
Exchange Act for the past twelve • Record retention for the free writing recent statutory prospectus is actually
months or such shorter period that the prospectus. provided to anyone who might receive
issuer is subject to the Exchange Act (1) Prospectus Delivery or Availability a free writing prospectus. Accordingly,
reporting requirements. We have limited the use of broadly disseminated free
the ineligibility condition for securities The ability of any person participating writing prospectuses in registered
law violations to those involving the in the offer and sale of the securities to offerings by these types of issuers and
anti-fraud provisions and have use free writing prospectuses under offering participants in these offerings
eliminated the separate provision Rules 164 and 433 generally is may not be feasible unless they are in
regarding settlements because they are conditioned on the filing of a electronic form and contain a hyperlink
subsumed within the ineligibility registration statement that includes a to the statutory prospectus. We believe
provision based on a settled judicial or prospectus satisfying the requirements that this is an appropriate result, as
administrative decree or order. In of Securities Act Section 10.239 Further, conditioning the use of the free writing
addition, we have provided that in specified cases, Rule 433 conditions prospectus on its being preceded or
ineligibility based on actions of a the use of a free writing prospectus on accompanied by the statutory
subsidiary must have arisen at the time prior or concurrent delivery of the
that the entity was a subsidiary of the 240 For purposes of the prospectus delivery
issuer. We also have eliminated the 238 In addition, we believe that the new check box condition, Rule 433 provides that a prospectus will
on the Form 10–K and Form 20–F for issuers to be deemed to accompany a free writing prospectus
ineligibility condition based on a going that is an electronic communication if the free
indicate whether they are well-known seasoned
issuers should facilitate an offering participant’s writing prospectus contains an active hyperlink to
234 See, e.g., letters from ABA; Alston; BRT;
ability to develop such a reasonable belief with the statutory prospectus. In initial public offerings,
Citigroup; Cleary; CSFB; Davis Polk; Intel respect to an issuer’s status as a well-known a preliminary prospectus that does not contain a
Corporation (‘‘Intel’’); Morgan Stanley; NYSBA; seasoned issuer. price range does not satisfy our rules or, therefore,
SCSGP; S&C; SIA; and TBMA. 239 Base prospectuses, preliminary prospectuses, the requirements of Section 10.
235 See, e.g., letters from Richard Hall; Paul Weiss; 241 ‘‘In any format’’ is meant to encompass all
summary prospectuses, and prospectuses subject to
and TBMA. completion that are permitted under our rules are means of dissemination of the materials, including
236 See, e.g., letters from Alston; Morgan Stanley; graphic, television or radio broadcast, or written.
not prospectuses that satisfy the requirements of
NYSBA; Paul Weiss; S&C; and SIA. Some Securities Act Section 10(a), but they are statutory 242 The rules we are adopting provide that written
commenters were concerned that acquired prospectuses that satisfy the requirements of materials for which Securities Act Section 17(b)
subsidiaries that had securities law violations prior Securities Act Section 10. Rule 433 makes clear that requires disclosure will be treated as free writing
to the acquisition would cause the acquiring issuer the prospectus condition may be satisfied by any prospectuses of the issuer or other offering
to be ineligible. See, e.g., letters from Alston; Intel; Section 10 prospectus, other than a summary participant on whose behalf the payment has been
NYSBA; S&C; and SCSGP. prospectus permitted by Securities Act Rule 431 [17 or will be made or consideration has been or will
237 See, e.g., letters from Davis Polk and TBMA. CFR 230.431] or a free writing prospectus. be given.
prospectus will assure that an investor final prospectus, as revised or (c) Comments on Prospectus Delivery or
has a balanced disclosure document of supplemented, must precede or Availability Conditions
an issuer with no or limited reporting accompany any free writing prospectus Some commenters believed that the
history against which to evaluate the provided after such availability, requirement that a statutory prospectus
free writing prospectus and to place the whether or not an earlier statutory precede or accompany a free writing
statements made in context. The prospectus has been previously prospectus in offerings of securities of
condition that the statutory prospectus provided to the recipient.245 non-reporting or unseasoned issuers
precede or accompany the free writing (b) Prospectus Availability Condition for should be able to be accomplished by
prospectus will not require that it be Seasoned Issuers and Well-Known the availability of the prospectus on our
provided through the same means, so Seasoned Issuers Electronic Data Gathering, Analysis, and
long as it is provided at the required Retrieval system (‘‘EDGAR’’),249 while
time. Referring to its availability will In offerings of securities of eligible
others thought it should be limited only
not satisfy this condition. seasoned issuers (including asset-
to non-reporting companies engaging in
In the following situations, for backed issuers eligible to use Form S–
their initial public offerings 250 or that
example, the most recent statutory 3) and eligible well-known seasoned
there should be cure provisions for
prospectus must precede or accompany issuers, we are adopting as proposed the
failure to provide timely a statutory
the free writing prospectus or the provision that these issuers and other
prospectus.251 We do not believe that it
communication cannot be made in offering participants in their offerings
is appropriate at this time to have access
reliance on Rules 164 and 433: 243 can use a free writing prospectus after
or filing of a registration statement on
• A direct written communication by the filing of a registration statement
EDGAR satisfy this delivery obligation
an issuer or offering participant; containing a statutory prospectus.246 For
for statutory prospectuses in all cases. In
• A written communication or a shelf offerings, this statutory prospectus
addition, as we note above, we believe
television or radio broadcast prepared can be a base prospectus.247 For
that investors should have the statutory
by or on behalf of or used or referred to offerings of securities of eligible
prospectus for unseasoned issuers when
by an issuer or an offering participant; seasoned issuers (including eligible
they evaluate free writing prospectuses
• The dissemination, in any format well-known seasoned issuers), the Rule
involving offerings of securities of such
including publication or broadcast, of does not condition use of the free
issuers.
any free writing prospectus (including writing prospectus on actual delivery of
any published article, publication, or the most recent statutory prospectus. (2) Information in a Free Writing
advertisement) for which Instead, the user of the free writing Prospectus
Æ Consideration is or will be given by prospectus must notify the recipient, (a) Information Conditions
the issuer or an offering participant; or through a required legend, of the filing
Æ Securities Act Section 17(b) of the registration statement and the We are adopting substantially as
requires disclosure of a payment made URL for our web site where the proposed the provisions that will permit
or consideration given by an issuer or recipient can access or hyperlink to the a free writing prospectus meeting the
other offering participant; or preliminary or base prospectus. The conditions of Rule 433 to be a Section
• A paid published or broadcast Rule as adopted permits the use of a 10(b) prospectus without having line-
advertisement by an issuer or offering generic rather than an issuer-specific item disclosure requirements or
participant. legend. The legend must contain a toll- otherwise requiring that the free writing
Once the required statutory free telephone number, and may contain prospectus contain any particular
prospectus is provided to an investor, an e-mail address, through which the information, other than the legend. The
additional free writing prospectuses can statutory prospectus may be Rule permits information in a free
be provided to that investor without requested.248 writing prospectus to go beyond
having to provide an additional information the substance of which is
statutory prospectus, unless there is a 245 If a final prospectus is given or sent prior to contained in the prospectus included in
material change in the most recent or with a written offer, under the exception in the registration statement. However, the
clause (a) of Securities Act Section 2(a)(10), the information in the free writing
statutory prospectus from the provided written offer is not a prospectus and therefore will
prospectus.244 For example, once an not be a free writing prospectus and Rules 164 and
prospectus must not conflict with the
investor has been sent a preliminary 433 will not apply. information in the registration
prospectus, absent a material change,
246 Under Rule 433 as adopted, the following statement, including Exchange Act
offerings are included in this category: reports incorporated by reference into
the Rule permits subsequent e-mail (a) Offerings of securities registered on Form S–
communications to that investor by an the registration statement. We believe
3 pursuant to General Instruction I.B.1, I.B.2, I.B.5,
offering participant that constitute free I.C., or I.D. thereof; that exempting free writing
writing prospectuses without the user (b) Offerings of securities registered on Form F– prospectuses meeting the conditions of
3 pursuant to General Instruction I.A.5, I.B.1, I.B.2,
having to hyperlink to or otherwise or I.C. thereof; While it will be exempt from the requirements of
redeliver a statutory prospectus with (c) Any other offering not excluded from reliance Section 5(c), a written offer made under the
each communication. After effectiveness on Rule 164 and Rule 433 of a well-known seasoned exemption in Rule 163 will fall within our
and availability of a final prospectus issuer; and definition of ‘‘free writing prospectus.’’ Rule 163
meeting the requirements of Securities (d) Any other offering not excluded from reliance conditions the Section 5(c) exemption for that free
on Rule 164 and Rule 433 of an issuer eligible to writing prospectus on the satisfaction of the
Act Section 10(a), no earlier statutory use Form S–3 or Form F–3 for primary offerings conditions in Rule 163 including filing and legend
prospectus may be provided, and such pursuant to General Instruction I.B.1 of such forms. conditions. As discussed above, the filing
247 See Rule 430B, described in Section V.B.1 conditions of Rule 163 apply only if a registration
243 See the discussion below regarding the below, which is intended, among other things, to statement is filed and otherwise are largely
treatment of media publications. See Section III.D.3 locate within one rule the information requirements determined by those set forth under Rule 433 if the
below under ‘‘Media Publications and Broadcasts.’’ for a base prospectus in a shelf registration communication was a free writing prospectus used
244 If there are material changes in a preliminary statement. after filing a registration statement.
249 See, e.g., letters from ABA; Alston; and Cleary.
prospectus, or preliminary prospectus supplement, 248 In the event that a well-known seasoned issuer
250 See, e.g., letters from NYSBA and S&C.
the issuer and offering participants generally will does not have a registration statement on file, Rule
recirculate the revised preliminary prospectus or 163 provides that an eligible well-known seasoned 251 See, e.g., letters from ABA; Cleary; Merrill
supplement to potential purchasers. issuer’s written offers are exempt from Section 5(c). Lynch; S&C; and SIA.
Rule 433 from limitations on any Treating a free writing prospectus believe this modification should assist
particular content should not diminish satisfying the conditions of Rule 433 as issuers and offering participants in
investor protection. In that regard, we a Section 10(b) prospectus provides for including a legend in a free writing
believe that the liability provisions additional continuing Commission prospectus without much added cost.259
applicable to free writing prospectuses, oversight and enforcement authority
(ii) Cure for Unintentional or Immaterial
particularly Securities Act Section over the contents and use of the free Failure To Include a Legend
12(a)(2) and the anti-fraud provisions of writing prospectus. As we discussed in
the federal securities laws, provide the Proposing Release, we will retain Rule 164 permits a user to cure an
protection against material the ability to halt the use of any unintentional or immaterial failure to
misstatements in and material materially false or misleading free include the specified legend in any free
omissions from information contained writing prospectus in accordance with writing prospectus, as long as a good
in such free writing prospectus. Section 10(b). Under the amendments to faith and reasonable effort is made to
Although the proposal stated that the Securities Act Rule 418 we are adopting comply with the condition and the free
information in the free writing today, our staff will be able to request writing prospectus is amended to
prospectus did not have to be in the any free writing prospectus that has include the specified legend as soon as
registration statement, some been used in connection with a practicable after discovery of the
commenters requested further securities offering. omitted or incorrect legend.260 In
clarification of the proposed condition addition, if a free writing prospectus has
that the free writing prospectus cannot (b) Amendment to Rule 408 been transmitted to potential investors
contain information that is Finally, we are amending Securities without the specified legend, the free
‘‘inconsistent’’ with the information in Act Rule 408 as proposed to make clear writing prospectus must be
the prospectus filed as part of the that not including information that is retransmitted, with the appropriate
registration statement.252 In revising the included in a free writing prospectus in legend by substantially the same means
provision to preclude information that a prospectus filed as part of a as and directed to substantially the same
‘‘conflicts’’ with that in the registration registration statement will not, solely by investors to whom it was originally
statement, we have clarified that virtue of inclusion of the information in transmitted.261
information in the free writing a free writing prospectus, be considered The legend condition is intended to
prospectus may be different from or an omission of material information identify more clearly materials as free
additional or supplemental to that in the required to be included in the writing prospectuses used in relation to
registration statement, so long as it does registration statement. a registered offering. We believe that
not ‘‘conflict’’ with the latter. this legend will put investors on notice
Commenters requested clarification as (c) Legend Condition and assist them in evaluating the
to how information in the free writing (i) Discussion content of the free writing prospectus.
prospectus would be treated in relation (iii) Impermissible Legends or
We are not adopting any content
to other information that was filed with Disclaimers
requirement for free writing
us or was otherwise publicly
prospectuses other than to condition the As we discussed in the Proposing
available.253 Commenters believed that
liability for free writing prospectuses use of a free writing prospectus on Release, we understand that issuers or
should not be considered in isolation inclusion of a legend indicating where other users of written communications
but should take into account other a prospectus is available for the offering may sometimes include legends or
information that is conveyed for to which the communication relates and disclaimers in offering materials that
purposes of the total mix of information recommending that potential investors may be inappropriate. In particular,
available.254 Free writing prospectuses read the prospectus (including disclaimers of responsibility or liability
may incorporate or refer investors to Exchange Act documents incorporated that are impermissible in a statutory
other information, so that investors will by reference).256 In addition, the legend prospectus or registration statement also
be advised to consider the information also advises investors that they can are impermissible in free writing
presented in the free writing prospectus obtain the registration statement prospectuses. Examples of
in context. We note that the legend that including the prospectus and any impermissible legends or disclaimers,
must be included in a free writing incorporated Exchange Act documents which are not exclusive, that will cause
prospectus will direct investors to the for free through the Commission’s web the materials not to be permissible free
filed prospectus contained in the site at www.sec.gov, and that they may writing prospectuses or not to be
registration statement. As we discuss request the prospectus from the issuer,
below, a free writing prospectus cannot any underwriter or any dealer by calling 259 For example, a single toll-free telephone
a toll-free number.257 The legend also number could be used to request a copy of the
include language that deems an investor prospectus.
to have read or have knowledge of or indicates that the free writing 260 See Rule 164(c).
rely on the content of other documents prospectus relates to a registered public 261 Rule 163 contains similar cure provisions.
incorporated in or referred to in the free offering. As suggested by commenters, Some commenters were concerned that the cure
writing prospectus. Whether such other we are adopting a generic, rather than provision would require the redelivery of the free
issuer-specific legend condition.258 We writing prospectus with the correct legend to all
information is conveyed to the investor potential purchasers. See letters from ABA and
will be determined based on the facts Fried Frank. While the proposal did not require that
256 See Rule 433(c). We have eliminated any
and circumstances.255 the free writing prospectus be delivered to all
issuer-specific information as well as the reference potential purchasers, we have revised the language
to risk factors. to clarify that the free writing prospectus with the
252 See, e.g., letters from ABA; Merrill Lynch; and 257 Rules 163 and 433 permit offering participants
specified legend must be retransmitted by
S&C. to include an e-mail address at which the substantially the same means as and directed to
253 See, e.g., letters from ABA; Citigroup; Cleary;
documents can be requested, a statement that the substantially the same prospective purchasers to
CSFB; Davis Polk; Deloitte; Goldman, SachS&Co. documents are available on the issuer’s web site, whom it was originally transmitted. For example,
(‘‘Goldman Sachs’’); ICI; Morgan Stanley; and SIA. and the Internet address and particular location if a free writing prospectus without a legend was
254 Id. where the documents can be found. sent by e-mail to a distribution list, it would have
255 See, e.g., Starr v. Georgeson Shareholder, Inc., 258 See, e.g., letters from Citigroup; Cleary; CSFB; to be retransmitted with the specified legend by e-
2005 U.S. App. LEXIS 11250 (2d Cir. 2005). Morgan Stanley; S&C; and SIA. mail to the same distribution list.
effective as to any purchaser for liability distributed by or on behalf of such the selling security holder is an affiliate
purposes include: offering participant in a manner of the issuer and the selling security
• Disclaimers regarding accuracy or reasonably designed to lead to its broad holder prepares, uses, or refers to a free
completeness or reliance by investors; unrestricted dissemination, the offering writing prospectus, it should consider,
• Statements requiring investors to participant shall file the free writing in addition to underwriter status,
read or acknowledge that they have read prospectus; and whether it is acting by or on behalf of
or understand the registration statement • Where a free writing prospectus or the issuer. Further, the issuer and such
or any disclaimers or legends; portion thereof prepared by or on behalf
• Language indicating that the affiliated selling security holder should
of the issuer or other offering participant evaluate whether the selling security
communication is neither a prospectus comprises a description of the final
nor an offer to sell or a solicitation or holder has access to material
terms of the issuer’s securities in the information about the issuer and
an offer to buy; and offering or of the offering, the issuer
• For information that must be filed whether it is including such material
must file such free writing prospectus or
with us, statements that the information issuer information in that free writing
portion thereof after such terms have
is confidential.262 prospectus.268
been established for all classes of the
(3) Filing Conditions offering.266 (ii) Conditions Specific to Final Terms
In most cases, there is no condition of the Securities or Offering
(a) General Conditions
that underwriters and dealers file the
(i) Scope of General Conditions free writing prospectuses that they We also have adopted with
We are adopting substantially as prepare, use, or refer to. This includes modifications the provision that a
proposed the provisions conditioning information prepared by underwriters description of the final terms of the
use of a free writing prospectus on the and others on the basis of or derived securities in the offering or of the
filing of that prospectus or information from, but not containing, issuer offering contained in a free writing
contained in that prospectus,263 unless information. Such information can be, prospectus must be filed by the issuer,
exempt from filing, in the following but is not limited to, information that is regardless of whether it was prepared by
circumstances: 264 proprietary to the preparer. or on behalf of the issuer or other
• Where a free writing prospectus is We are adopting as proposed the offering participant prepared or used it.
prepared by or on behalf of, or used or exception to the general principle that As modified, the provision applies to
referred to by, the issuer, known as an underwriter free writing prospectuses final terms of the securities in the
‘‘issuer free writing prospectus,’’ the do not need to be filed where a free offering and of the offering, whether or
issuer shall file that free-writing writing prospectus is used or referred to not they are the only matters included
prospectus; by and distributed by or on behalf of an in the free writing prospectus. Terms are
• Where a free writing prospectus offering participant, other than the required to be filed only if they reflect
prepared by or on behalf of or used by issuer, in a manner that is reasonably the final terms of the securities or of the
an offering participant other than the designed to lead to its broad offering. The issuer has to file the
issuer contains material information unrestricted dissemination. description of the terms contained in
about the issuer or its securities that has Accordingly, such use of a free writing the free writing prospectus within two
been provided by or on behalf of an prospectus is conditioned on such days after the later of the date such
issuer, known as ‘‘issuer information,’’ person filing the free writing prospectus
terms became final for all classes of the
that is not already included or on or before the date of first use. For
offering or the date of first use.269 We
incorporated in the prospectus or a filed example, the filing condition applies
believe this filing condition is
free writing prospectus, the issuer shall where:
• An underwriter includes a free appropriate for the final terms of a
file the issuer information; 265
• Where a free writing prospectus writing prospectus on an unrestricted security or offering contained in a free
used or referred to by an offering web site or hyperlinks from an writing prospectus. Preliminary term
participant other than the issuer is unrestricted web site to information that sheets and other descriptive material
would be a free writing prospectus; 267 containing only the terms of the
262 Language indicating that the material is not a
or securities or the offering that do not
prospectus or offer would make the material not a • An underwriter sends out a press reflect final terms of securities or
permitted prospectus allowed pursuant to Rule 164 transactions are not subject to filing. All
and thus preclude reliance on Rules 164 and 433. release regarding the issuer or the
See also the Asset-Backed Securities Adopting offering that is a free writing prospectus. such written offering materials, whether
Release., note, at III.C.1.d. Offering participants include selling or not filed, are, however, free writing
263 See Rule 433(d). Under Rule 433, Rule 134
security holders. A selling security prospectuses. As we note above, we
notices and Rule 135 notices are not considered free have revised the Rule as adopted to
writing prospectuses and, therefore, are not subject
holder who is unaffiliated with the
to the conditions to use in the Rule. This differs issuer and who uses a free writing permit most issuers, whether or not
from Securities Act Rule 425, which is applicable prospectus is treated for purposes of ineligible issuers, to use free writing
to business combination transactions and covers all Rule 164 and Rule 433 as any other prospectuses that consist only of
communications, including Rule 135 notices.
264 Under Rule 433, electronic road shows that are
offering participant who may be an descriptions of the terms of the issuer’s
written communications are not subject to the filing underwriter of the issuer’s securities. If
condition in certain circumstances. See Section 268 While an unaffiliated selling security holder
III.D.3 below under ‘‘Electronic Road Shows.’’ 266 The

description of the final terms of the could, depending on the facts and circumstances,
265 This condition only provides that the issuer issuer’s securities and of the offering will either be be acting on behalf of an issuer or have access to
information contained in the offering participant’s contained in an issuer free writing prospectus or, material information about the issuer, those
free writing prospectus be filed, not necessarily the if contained in another party’s free writing situations would be more likely to arise with
free writing prospectus itself. In addition, this prospectus, will be issuer information. affiliates.
condition does not apply where a free writing 267 Conversely, a web site with access restricted 269 This is essentially the same timing for filing
prospectus prepared by or on behalf of an offering to customers or a subset of customers will not for final term sheets as we adopted for asset-backed
participant, other than the issuer, contains require filing, nor will an e-mail by an underwriter securities. The filing condition under this provision
information prepared on the basis of or derived to its customers, regardless of the number of of Rule 433 will not be satisfied by the timely filing
from issuer information but not issuer information. customers. of a prospectus supplement under Rule 424.
securities in the offering or of the Under Rule 426, filing is required for descriptions of terms of securities and
offering.270 ABS informational and computational offerings. Rule 164 provides that for
materials provided to prospective offerings of asset-backed securities,
(iii) Asset-Backed Issuers
investors after final terms of all classes ineligible issuers may use free writing
Asset-backed issuers and other parties of securities in the offering have been prospectuses limited to certain
to asset-backed transactions specified in established. Filing also is required of categories of ABS informational and
Rule 167(c) potentially have two sets of such materials relating to a class of computational materials.272 There is no
rules on which they may rely in using securities, whether or not final terms of such ineligible issuer restriction on the
written offering materials. Under the all classes had been established, as to use of ABS informational and
special rules for asset-backed securities which a prospective investor had computational materials under Rules
we adopted in December 2004, if the indicated an interest. Filing is required 167 and 426.
offering is registered on Form S–3, these by the later of the due date for filing the To coordinate the operation of the two
persons may use ABS informational and final prospectus with us under Rule available approaches to use of written
computation materials as defined in 424(b) or two days after the date of first offering communications, Rule 433 as
Item 1101 of Regulation AB as permitted use. adopted today provides that a free
by Rule 167 and Rule 426. Rule 426 in Under Rule 433, the issuer must file writing prospectus or portion thereof
particular includes filing conditions for a free writing prospectus or portion required to be filed under Rule 433
the use of such materials using a Form thereof comprising a description of final containing only ABS informational and
8–K. The filed materials become part of terms of securities in the offering or of computational materials, as defined in
the registration statement for the the offering within two days after the Item 1101(a) of Regulation AB, may be
offering of asset-backed securities in later of the date final terms have been filed under Rule 433 but within the time
question. established for all classes of the offering frame required for satisfaction of the
These persons may also use free or the date of first use. Filing is not conditions of Rule 426, and that such
writing prospectuses as permitted by required of descriptions of securities or filing will satisfy the conditions of Rule
Rules 164 and 433 that we are adopting of the offering that do not reflect final 433.
today. Use of free writing prospectuses terms, even if a prospective investor had
is not limited to offerings registered on indicated an interest. 272 In asset-backed offerings by ineligible issuers,
Form S–3. Free writing prospectuses are Under Rule 164, ineligible issuers free writing prospectuses used by ineligible issuers
may not use free writing prospectuses, are limited to the following information:
prospectuses subject to the provisions of
(1) Factual information regarding the asset-backed
Section 12(a)(2) of the Securities Act but except that most categories of ineligible securities being offered and the structure and basic
are not filed as part of or included in the issuers may use free writing parameters of the securities, such as the number of
registration statement. The contents of prospectuses comprising only classes, seniority, payment priorities, terms of
free writing prospectuses are not limited payment, the tax, ERISA or other legal conclusions
payment, the tax, ERISA or other legal conclusions of counsel, and descriptive information relating to
to ABS informational and each class (e.g., principal amount, coupon,
of counsel, and descriptive information relating to
computational materials. Rule 433 each class (e.g., principal amount, coupon, minimum denomination, anticipated price, yield,
requires filing by issuers of free writing minimum denomination, price or anticipated price, weighted average life, credit enhancements,
prospectuses prepared by or on behalf of yield, weighted average life, credit enhancements, anticipated ratings, and other similar information
anticipated ratings, and other similar information relating to the proposed structure of the offering);
or used or referred to by, issuers or, (2) Factual information regarding the pool assets
relating to the proposed structure of the offering);
depositors, sponsors, servicers, or (2) Factual information regarding the pool assets underlying the asset-backed securities, including
affiliated depositors, whether or not the underlying the asset-backed securities, including origination, acquisition and pool selection criteria,
issuer, but not by underwriters or origination, acquisition and pool selection criteria, information regarding any prefunding or revolving
information regarding any prefunding or revolving period applicable to the offering, information
dealers, unless they contain issuer regarding significant obligors, data regarding the
period applicable to the offering, information
information or are distributed in a regarding significant obligors, data regarding the contractual and related characteristics of the
manner reasonably designed to lead to contractual and related characteristics of the underlying pool assets (e.g., weighted average
its broad unrestricted dissemination. underlying pool assets (e.g., weighted average coupon, weighted average maturity, delinquency
coupon, weighted average maturity, delinquency and loss information and geographic distribution)
Issuers also must file issuer information and other factual information concerning the
and loss information and geographic distribution)
contained in other free writing and other factual information concerning the parameters of the asset pool appropriate to the
prospectuses.271 parameters of the asset pool appropriate to the nature of the underlying assets, such as the type of
nature of the underlying assets, such as the type of assets comprising the pool and the programs under
270 The issuers who are not permitted to use these assets comprising the pool and the programs under which the loans were originated;
free writing prospectuses are issuers who are, or which the loans were originated; (3) Identification of key parties to the transaction,
during the prior three years were or any of their (3) Identification of key parties to the transaction, such as servicers, trustees, depositors, sponsors,
predecessors were, blank check companies, shell such as servicers, trustees, depositors, sponsors, originators and providers of credit enhancement or
companies (other than business combination related originators and providers of credit enhancement or other support, including a brief description of each
shell companies), and penny stock issuers. Issuers other support, including information about any such party’s roles, responsibilities, background and
registering business combination transactions also such party; experience;
may not use these free writing prospectuses. (4) Static pool data, as referenced in Item 1105 (4) Static pool data;
Registered investment companies and business of Regulation AB [17 CFR 229.1105], such as for the (5) The names of underwriters participating in the
development companies may not use these sponsor’s and/or servicer’s portfolio, prior offering of the securities, and their additional roles,
descriptions as free writing prospectuses. transactions or the asset pool itself; and if any, within the underwriting syndicate;
271 In the case of asset-backed issuers certain (6) The anticipated schedule for the offering
(5) To the extent that the information is provided
information comprehended within the definition of by the issuer, depositor, affiliated depositor, or (including the approximate date upon which the
ABS informational and computational material is sponsor, statistical information displaying for a proposed sale to the public will begin) and a
analogous to the terms of securities and is therefore particular class of asset-backed securities the yield, description of marketing events (including the
issuer information. For example, we would expect average life, expected maturity, interest rate dates, times, locations, and procedures for attending
that the following categories of such material, sensitivity, cash flow characteristics, total rate of or otherwise accessing them); and
which are derived from the definition of ABS return, option adjusted spread or other financial or (7) A description of the procedures by which the
informational and computational materials, are statistical information relating to the class or classes underwriters will conduct the offering and the
generally issuer information: under specified prepayment, interest rate, loss or procedures for transactions in connection with the
(1) Factual information regarding the asset-backed other hypothetical scenarios. (Where such offering with an underwriter or participating dealer
securities being offered and the structure and basic information is prepared by an underwriter or (including procedures regarding account-opening
parameters of the securities, such as the number of dealer, it is not issuer information, even when and submitting indications of interest and
classes, seniority, payment priorities, terms of derived from issuer information.) conditional offers to buy).
Rule 433 as adopted today also for free writing prospectuses.274 Other capital formation transaction. The rules
provides that where a free writing commenters did not believe that filing we are adopting today applicable to
prospectus is used in reliance on Rules should be a condition to the use of a free registered capital formation transactions
164 and 433 and the conditions of those writing prospectus because the failure to generally will apply to registered capital
Rules (including the special filing comply with the filing requirements formation transactions even if they have
election for free writing prospectuses or would give rise to a Section 5 violation some connection to or are proximate in
portions thereof comprising ABS with related rescission rights.275 Some time to a business combination
informational and computational commenters requested further transaction. As a result, if an issuer
materials) are satisfied, the conditions of clarification of the cure provisions, undertakes a registered capital
Rules 167 and 426 do not need to be including what constitutes formation transaction that is related to,
satisfied. It similarly provides that ‘‘unintentional,’’ a ‘‘good faith and or takes place at around the same time
where ABS informational and reasonable effort’’ to comply with the as, a business combination transaction,
computational materials are used in filing conditions, and a ‘‘discovery’’ of then the issuer can, if the conditions to
reliance on Rules 167 and 426 and the a failure to file a free writing the applicable rules are satisfied, rely on
conditions of those Rules are satisfied, prospectus.276 We have retained the the rules we adopt today that apply to
the conditions of Rules 164 and 433 do filing condition and cure provisions as the registered capital formation
not need to be satisfied. noted. We have not provided further transaction and Rules 165 and 166 for
elaboration of the terms in the cure the business combination transaction.
Special considerations apply with
provisions which also are contained in This is true whether the two
respect to providing static pool
the rules affecting business combination transactions are connected (for example,
information in offerings of asset-backed
transactions and asset-backed securities the purpose of the capital formation
securities. Rule 312 of Regulation S–
offerings.277 transaction is to finance a
T 273 provides that static pool With regard to filing descriptions of
information provided on an Internet contemporaneous business combination
the final terms of the securities in the
web site can be included in the transaction) or independent of each
offering or of the offerings, some
prospectus included in the registration other. If a communication relates to both
commenters expressed concern that
statement if certain conditions are a capital formation and business
issuers and offering participants would
satisfied, including the inclusion of the combination transaction, then the
not know when the terms were final to
specific web site address in the communication may be subject to both
be able to file the final term sheet in a
prospectus. Rules 425 and 433.281 We have revised
timely manner.278 We believe that
Static pool information also can be the filing condition of Rule 433 to
because a description of the final terms
provided on an Internet web site as part provide that the filing condition of the
of the securities or the offering does not
of ABS informational and Rule will be satisfied if a filing is made
have to be filed until after the deal terms
computational materials if certain pursuant to Rule 425 and the Rule 425
are final for all classes, there will not be
conditions are satisfied, including filing includes the Rule 433 legend and
a situation where there is uncertainty
provision of the specific web site indicates on the cover page the
when a description of the final terms is
address in the materials. Those registration statement number for the
a final term sheet. In addition, some
materials are filed on Form 8–K and capital formation transaction and that it
commenters thought that only issuer
become part of the registration also is being filed pursuant to Rule 433.
prepared term sheets should have to be
statement pursuant to Rule 167. filed.279 Because the final terms Some commenters addressed issues
In addition, static pool information represent the description of the issuer’s regarding asset-backed securities
provided on an Internet web site can be securities and of the offering, we have offerings. Some commenters questioned
included in a free writing prospectus. retained the condition that the issuer the interplay between the free writing
The web site address can be referred to must file the final terms, regardless of prospectus rules and rules affecting
in a written communication, and in the who has prepared it. communications in asset-backed
case of an electronic communication an Commenters also requested offerings, particularly as it affected the
active hyperlink can be provided. In clarification of the interplay between use of informational and computational
either case the static pool information new Rule 433 and the rules applicable materials and final term sheets.282 These
will be part of the free writing in business combination transactions commenters were concerned about
prospectus. Where filing is required where there is a capital formation filing deadlines and the treatment of
under Rule 433, the Rule provides that transaction occurring at the same time certain disclosures, such as static pool
filing of the free writing prospectus as a business combination transaction, data disclosed on a website, under the
containing the address or hyperlink whether or not related.280 Rule 165,
satisfies the filing requirement. Where which is applicable to communications 281 In 2001, the staff of the Division of
in connection with business Corporation Finance provided guidance as to how

static pool information provided in a to analyze communications made in connection
free writing prospectus is separately combination transactions, is not with contemporaneous capital raising and business
included in the prospectus included in available for a communication whose combination transactions in order to determine
the registration statement, the filing in primary purpose or effect relates to a whether reliance on the provisions of Regulation
M–A was appropriate. See Question C.1 (Scope of
the prospectus included in the Rule 165) of Section I (Regulation M–A) from the
274 See, e.g., letters from ABA; Alston; and
registration statement is accomplished Third Supplement, dated July 2001, of the Division
NYSBA.
pursuant to Rule 312 of Regulation 275 See, e.g., letters from ABA and S&C. of Corporation Finance’s Manual of Publicly
S–T. 276 See, e.g., letters from ABA; Citigroup;
Available Telephone Interpretations. http://
www.sec.gov/interps/telephone
Goldman Sachs; Merrill Lynch; S&C; and SIA.
(iv) Comments on Filing Condition 277 See Rules 165(e) and 167(e).
/phonesupplement3.htm. Such guidance may
continue to be helpful to this analysis. Of course,
278 See, e.g., letters from ABA–ABS; ASF; the
Some commenters did not believe the issuer or other offering participant can
Bond Market Association’s comment letter on asset- determine to comply with both Rule 425 and Rule
there should be any filing requirements backed securities (‘‘BMA–ABS’’); and CMSA. 433.
279 See, e.g., letters from Cleary and Davis Polk. 282 See, e.g., letters from ABA–ABS; ASF; BMA–
273 17 CFR 232.312. 280 See, e.g., letters from ABA and Alston. ABS; CMSA; and FMR.
definition of free writing prospectus.283 adopted, Rule 433 conditions the use of effort. We also have modified the record
As noted above, we are revising Rule a free writing prospectus on issuers and retention condition so that it does not
433 and have provided additional offering participants retaining for three apply in cases where the free writing
guidance as appropriate to address these years any free writing prospectuses they prospectus is filed with us.
issues. have used from the date of the initial (D) Road Shows
(b) Immaterial or Unintentional Failures bona fide offering of the securities in
question that have not been filed with (1) Definition of Electronic Road Show
To File
us. This record retention condition Issuers and underwriters frequently
(i) Scope of Cure Provision applies to all offering participants.288 conduct presentations known as ‘‘road
We are adopting as proposed the The three-year retention period is shows’’ to market their offerings to the
ability to cure any unintentional or consistent with retention periods for public. These road shows are a primary
immaterial failure to file free writing brokers and dealers to retain securities means by which issuers are involved
materials.284 Rule 164 provides that the sale confirmations.289 directly and actively in a selling effort
material must be filed as soon as We believe this record retention to investors. Historically, these
practicable after discovery of the failure condition is appropriate for several presentations were conducted in person
to file. reasons. First, it will give us the ability and limited to institutional investors.
Rule 164 provides an issuer and any to review free writing prospectuses used Today, due to advances in electronic
other person relying on the Rule the in reliance on Rules 164 and 433 under media, road shows also are being
ability to cure any immaterial or our authority in Securities Act Section conducted or re-transmitted over the
unintentional failure to file or delay in 10(b) and the amendments to Rule 418, Internet or other electronic media and in
filing the free writing prospectus, among other rules. Second, offering some cases to broader audiences.
without losing the ability to rely on the participants and purchasers will benefit We indicated in the Proposing Release
Rule. This cure provision is available if from the availability of the free writing that we intended to clarify the treatment
a good faith and reasonable effort is prospectuses. of all electronic communications,
made to comply with the filing including electronic road shows, as
condition and the free writing (b) Immaterial or Unintentional Failure graphic communications under the
prospectus is filed as soon as practicable To Retain a Free Writing Prospectus Securities Act. Under the proposed
after the discovery of the failure to file. Some commenters were concerned rules, all electronic road shows would
As in the business combination rules, that the lack of a cure provision for have been written offers and
we are including the cure provision to failure to retain free writing prospectuses, but also would have been
avoid potential chilling of prospectuses could cause retroactive permitted subject to conditions, as free
communications due to uncertainty over violations of Securities Act Section 5 for writing prospectuses.
filing status. three years.290 In response to these As discussed above, we have revised
concerns, we have included a provision the definition of graphic communication
(ii) Comments on Cure Provision
in Rule 164 that provides that solely for from the proposal to exclude a
Some commenters requested further purposes of that Rule, but not any other communication that, at the time of the
clarification of the cure provisions, record retention obligation of any issuer communication, originates live, in real-
including what constitutes or other offering participant, an time to a live audience and does not
‘‘unintentional,’’ a ‘‘good faith and immaterial or unintentional failure to originate in recorded form or otherwise
reasonable effort’’ to comply with the retain a free writing prospectus will not as a graphic communication, although it
filing conditions, and a ‘‘discovery’’ of result in a violation of Securities Act may be transmitted through graphic
a failure to file a free writing Section 5(b)(1) or the loss of the ability means. This revision applies in the
prospectus.285 The filing cure to rely on the exemption so long as a context of road shows. Under the
provisions are the same as those good faith and reasonable effort was definition, a live, in real-time road show
contained in the asset-backed rules we made to comply with the record to a live audience that is transmitted
adopted in 2004 and in the business retention condition. Whether or not graphically will not be a graphic
combination rules, which have operated there has been a good faith and communication, and therefore not a
without further elaboration on these reasonable effort to comply with the written communication, or a free
issues since we adopted the rules in record retention condition will be a writing prospectus. It will still,
1999.286 As we discuss above under facts and circumstances determination. however, be an offer subject to
Rule 163, we are not including any We have included this provision Securities Act Section 12(a)(2) and the
further clarification of what constitutes because we believe that there can be other liability provisions of the federal
the elements of the cure provisions.287 circumstances in which a free writing securities laws.291 Thus, as we discuss
(4) Record Retention Condition prospectus is inadvertently not retained below, information that is presented as
even after a good faith and reasonable part of the live, in real-time road show
(a) Discussion
to a live audience will not be a free
We are adopting, with some 288 For example, the record retention policy
writing prospectus. As discussed below,
modifications, the proposed record applies to free writing prospectuses prepared by we have added a note to the effect that
retention condition in Rule 433. As underwriters and not containing issuer information
and descriptions of the terms of securities or of the where a communication (such as slides
offering not reflecting final terms not required to be or other visual aids) is provided or
283 See letter from ABA–ABS. filed. To the extent the record retention
284 Such a ‘‘cure’’ provision is included in requirements of Exchange Act Rule 17a–4 [17 CFR 291 In addition, while we have revised the
Regulation M–A. See Securities Act Rule 165(e). 240.17a–4] apply to free writing prospectuses definition of graphic communication to exclude
See also the Campos Article, note 155, at § 1:30. required to be retained by broker-dealers under certain presentations that originate live, in real-time
285 See, e.g., letters from ABA; Citigroup; Rule 433, such free writing prospectuses are to a live audience, we have retained in the
Goldman Sachs; Merrill Lynch; S&C; and SIA. required to be retained in accordance with such definition of written communications the statutory
286 See also Regulation D. requirements. concept of radio or television broadcasts, regardless
287 See discussion in Section III.D.2 above under 289 See Exchange Act Rule 17a–3(a)(8) [17 CFR
of the transmission means. Thus, a communication
‘‘Permitted Pre-Filing Offers for Well-Known 240.17a–3(a)(8)]. that is a television or radio broadcast, whether or
Seasoned issuers.’’ 290 See, e.g., letters from ABA; Cleary; and TBMA. not live, would still be a written communication.
transmitted simultaneously as part of a discussed in the Proposing Release, the in question readily available without
live road show that is not a written electronic road show no-action letters restriction electronically to any
communication, including a live, in for registered public offerings are potential investor. If there is more than
real-time graphically transmitted road withdrawn as of the effective date of one version of a road show that is a
show, and that communication is Rule 433.296 written communication, the
provided or transmitted in a manner For road shows that are free writing unrestrictedly available bona fide
designed to make it available only as prospectuses, the filing conditions of electronic road show must be available
part of the road show and not Rule 433 do not apply, with one no later than the other versions.
separately, that communication is exception. In the case of an issuer that We also have modified the filing
deemed part of the road show. Such a is not required to file reports under conditions from the proposal to
communication is thus deemed also not Exchange Act Section 13 or Section eliminate the specific obligation to file
to be a written communication.292 15(d) at the time of filing the registration any material issuer information
Road shows that do not originate live, statement and is registering an offering provided at an electronic road show.
in real-time to a live audience and are of common equity or convertible equity The filing condition for electronic road
graphically transmitted are electronic securities, the filing condition applies to shows is as described above. We have
road shows that will be considered a road show that is a free writing added a note that a where a
written communications and, therefore, prospectus unless the issuer makes at communication that is provided or
free writing prospectuses. Under our least one version of a bona fide transmitted simultaneously with a live
new Rules, they are, of course, electronic road show 297 for the offering road show that is not a written
permitted if the conditions of our new communication and that
Rules for free writing prospectuses are prospectuses, the road show audience does not communication is provided or
satisfied. As we noted in the Proposing have to be limited in any way, and the road show transmitted in a manner designed to
does not have to be the re-transmission of a live
Release, issuer involvement or presentation in front of an audience and the
make it available only as part of the road
participation in an electronic road show electronic road show may be edited. In addition, show and not separately, that
that is a written communication will those distributing the road show do not have to communication is deemed to be part of
make it an issuer free writing limit viewers to seeing it either within a 24-hour the road show.298 Therefore, as
period or twice. They also can allow viewers to
prospectus.293 copy, print or download the road show. Multiple
discussed above, if the road show is not
versions of the electronic road show are permitted. a written communication, such a
(2) Treatment of Electronic Road Shows
Each will be a separate free writing prospectus. communication, such as slides or visual
Electronic road shows have to date 296 See discussion of Staff no-action letters in note
aids, even if it would otherwise be a
proceeded in reliance on a series of no- 182 of the Proposing Release. graphic or other written communication
297 We are adding a definition of ‘‘road show’’ and
action letters granted by the staff of the is deemed to be part of the road show
adopting substantially as proposed the definition of
Division of Corporation Finance.294 The and thus not to be written. This
‘‘bona fide electronic road show.’’ For purposes of
rules we are adopting today permit the Rule 433, a ‘‘road show’’ is an offer (other than a provision also would cover, for
use of electronic road shows without statutory prospectus or a portion of a statutory example, a communication of visual
many of the conditions in the electronic prospectus filed as part of a registration statement) aids provided in a separate feed from a
road show no-action letters.295 As we that contains a presentation regarding an offering by
one or more members of the issuer’s management live, in real-time road show to a live
and includes discussion of one or more of the audience transmitted by graphic means,
292 In-person road shows will continue to be
issuer, such management, and the securities being where the separate communication is
considered oral communications. As we note, we offered. In the case of asset-backed offerings, road
have excluded road shows that originate and are
provided or transmitted in a manner
shows can include presentations by management
presented live, in real-time to a live audience from involved in the securitization or servicing by the
such that the separate communication
the definition of graphic communication. The depositor, sponsor, or servicers. For purposes of can only be seen as part of the road
exclusion for presentations to a live audience that Rule 433, a ‘‘bona fide electronic road show’’ is a show. If the road show is written and
originate live, in real-time also covers overflow road show that is a written communication
rooms at live, in-person road shows. The rules we
not required to be filed, such a
transmitted by graphic means that contains a
are adopting today do not affect the treatment of presentation by one or more officers of an issuer or
simultaneous communication is also not
written communications or road shows regarding other persons in an issuer’s management and, if the required to be filed. This provision also
business combination transactions to which Rule issuer is using or conducting more than one road would cover visual aids transmitted in
425 and Regulation M–A apply. show that is a written communication, includes
293 We recognize that road shows may be used in
a manner designed to make them
discussion of the same general areas of information
marketing the issuer’s securities in certain private regarding the issuer, such management, and the
available simultaneously only as part of
placement transactions, as well. Our rules do not securities being offered as such other issuer road an electronic road show. If the
address these offerings, although the treatment of show or road shows for the same offering that are electronic road show is not subject to
electronic communications in the definitions of written communications. To be bona fide, the filing, neither are the visual aids.
graphic communication and written version need not address all of the same subjects
communication apply to private placement
Otherwise, graphic or other written
or provide the same information as the other
transactions. For example, in an offering made in versions of an electronic road show. It also need not communications provided separately,
reliance on Securities Act Rule 505 or Rule 506 of provide an opportunity for questions and answers for example by graphic means in a
Regulation D [17 CFR 230.505 and 17 CFR 230.506], or other interaction, even if other versions of the separate file designed to be available to
an electronic road show or other communication electronic road show do provide such
that is a written communication would implicate
be copied or downloaded separately,
opportunities.
the provisions of Securities Act Rule 502 [17 CFR A few commenters asked for further guidance on
will be treated as a written
230.502] regarding information that must be which categories of information could be properly communication and, if an offer, will be
provided to non-accredited investors and excluded from the bona fide version. See, e.g., a free writing prospectus.
restrictions on general solicitation and general letters from Fried Frank and TBMA. One
advertising.
Whether or not road shows are
commenter thought that the bona fide electronic
294 See Division of Corporation Finance no-action
road show should be identical to the other
written communications, all road shows
letters to Private Financial Network (Mar. 12, 1997); electronic road shows that were being presented.
Net Roadshow, Inc. (July 30, 1997); Bloomberg L.P. See letter from Harrisdirect. We have not further indicated in the Proposing Release and note above,
(Oct. 22, 1997); Thompson Financial Services, Inc. revised the definition of bona fide electronic road the bona fide version must only cover the same
(Sep. 4, 1998); Activate.net Corporation (June 3, show in response to these comments as we believe general areas regarding the issuer, its management,
1999); Charles Schwab & Co., Inc. (Nov. 15, 1999); that the definition that we are adopting provides the and the securities being offered and need not
and Charles Schwab & Co., Inc. (Feb. 9, 2000). flexibility to offering participants to use different address all the same subjects or provide the same
295 For example, under the rules we are adopting versions of road shows depending on the particular information as other versions.
today for road shows that are free writing facts and circumstances of their offering. As we 298 See the Note to Rule 433(d)(8).
that are offers are subject to Securities We have addressed many of these information used at any road show,308
Act Section 12(a)(2) liability. In comments and concerns through our while two commenters thought that all
addition, all road shows that are offers modification of the definition of graphic electronic road shows should be filed
that are written communications are free communications, which as adopted and available to anyone.309
writing prospectuses, whether or not excludes communications originating We believe that our treatment of road
required to be filed. live, in real time to a live audience, even shows, including electronic road shows,
if transmitted by graphic means. The strikes the appropriate balance between
(3) Comments on Electronic Road the need to market an issuer’s securities
Shows materials presented as part of these road
shows, such as slides or PowerPoint to institutional investors and the desires
Commenters generally supported presentations will similarly not be of retail and other investors to have
permitting electronic road shows.299 graphic communications unless they are access to issuer information, such as
While commenters supported the filing separately transmitted as graphic management presentations, that are
exclusion for electronic road shows, a communications. As a result, live normally available only at road shows
significant number of commenters were communications, such as live road that often have not been open to retail
concerned about the proposed rules shows transmitted electronically investors generally. We also believe that
conditions affecting electronic road (whether to an overflow room or another the Rule as adopted addresses some of
shows.300 Most of the comments related city) are not graphic communications the concerns that important information
to the treatment of live, real-time road and thus not free writing prospectuses. about an issuer or an offering can be
shows transmitted electronically as They will be treated as oral communicated at electronic (as well as
graphic communications.301 These communications and will be subject to live) road shows, rather than in the
commenters believed that all live, real- liability under Securities Act Section statutory prospectus. In this regard, as
time road shows, including those that 12(a)(2) and the anti-fraud provisions. we noted in the Proposing Release, the
are transmitted graphically to ‘‘overflow We also have revised the filing Report and Recommendations of the
rooms,’’ should be treated as oral conditions applicable to electronic road NASD/NYSE IPO Advisory Committee
communications.302 The commenters shows in response to certain suggestions recommended that issuers be required
also argued that all materials provided of commenters. Commenters generally to make a version of their IPO road
or made available at these live supported the definition of ‘‘bona fide show available electronically to
graphically transmitted road shows, electronic road show,’’ 305 although two unrestricted audiences.310 While we are
including slides and other materials commenters suggested limiting the not requiring that road shows be made
used but not retained by participants requirement for a bona fide electronic available to unrestricted audiences,
should be treated as oral road show only to initial public issuers and underwriters are free to
communications and should not be offerings 306 and another suggested make road shows available to all
required to be filed with us under Rule limiting it to equity but not debt investors and we believe that our new
433.303 Many commenters were offerings.307 rules will encourage issuers to do so
concerned that putting greater Within the category of road shows where retail interest justifies such
restrictions on these road shows would that are graphic under our rules as unrestricted availability.
eliminate the ability of out of town adopted, we have retained the concept
investors to participate in these road (E) Treatment of Communications on
of bona fide electronic road show only Web Sites and Other Electronics Issues
shows and view PowerPoint and for initial public offerings of common
similar presentations which would, (1) General
equity or convertible equity securities.
therefore, reduce the amount of The communications rules we are
We have excluded the concept for all
information that these investors adopting will enable issuers and market
other registered securities offerings. We
receive.304 participants to take significantly greater
believe that it is appropriate to limit the
299 See, e.g., letters from ABA; Alston; filing condition to require a bona fide advantage of the Internet and other
NetRoadshow; and Thomson Financial electronic road show to initial public electronic media to communicate and
(‘‘Thomson’’). offerings of common equity or deliver information to investors. We
300 See, e.g., letters from ABA; Alston; E. Price
convertible equity securities, due to the have addressed previously the
Ambler; Kenneth Arnot; Lisa Baudot; Barry C. circumstances under which an issuer
Bruneer; Harold Candland; Matt Crouse; Rick
greater potential for involvement and
Dowdle; Robert Evans; Goldman Sachs; Marvin D. interest of the retail investor in these
308 See, e.g., letters from ABA; Alston; Lisa
Lutz; Merrill Lynch; NetRoadShow; F. Thomas types of offerings and securities of the
O’Halloran; Paul J. Rasplicka; Eric Ribner; Jeffrey A. Baudot; Citigroup; Cleary; Morgan Stanley; S&C;
issuer. We believe this change addresses SIA; David Thickens; and WR Hambrecht.
Schaffer; Alison Shatz; SIA; Bob Smith; Steve
Smart; Chris D. Wallace; WR Hambrecht + Co. (‘‘WR commenters’ concerns that an 309 See, e.g., letter from Harrisdirect and
Hambrecht’’); and Kevin Yorke. unrestricted bona fide electronic road Renaissance Capital. In addition, many commenters
301 See, e.g., letters from ABA; Alston; Bloomberg
show should not be required in what are thought that more information should be made
L.P. (‘‘Bloomberg’’); Goldman Sachs; Merrill Lynch; available to retail investors, particularly in
essentially registered institutional connection with initial public offerings. See, e.g.,
NetRoadShow; Jeffrey A. Schaffer; SIA; and
Thomson. offerings. Finally, we believe the note letters from Trevor Boswell; Lyle Fell, Sr.; Eileen
302 See, e.g., letters from Alston; Morgan Stanley; added to Rule 433(d)(8) as adopted will Fuls; Corey Gorman; Ronald Ricketts, Jr.; and Justin
S&C; and SIA. clarify the characterization and Swearingen.
303 See, e.g., letters from ABA; Alston; Lisa 310 Report and Recommendations of a Committee
treatment of materials provided or
Baudot; Citigroup; Cleary; Morgan Stanley; S&C; Convened by the New York Stock Exchange, Inc.
SIA, David Thickens; Douglas Workman; and WR
transmitted as part of or simultaneously and NASD at the Request of the U.S. Securities and
Hambrecht. with road shows, oral or written. Exchange Commission, available at
304 See, e.g., letters from ABA; Alston; E. Price Some commenters also did not www.nasdr.com/pdf-text/iporeport.pdf (May 29,
Ambler; Kenneth Arnot; Lisa Baudot; Barry C. support requiring the filing of any issuer 2003). Consistent with the Committee’s suggestion,
Bruneer; Harold Candland; Matt Crouse; Rick different versions of electronic road shows for
Dowdle; Robert Evans; Goldman Sachs; Marvin D. initial public offerings of common equity or
305 See, e.g., letters from ABA; Davis Polk; and
Lutz; Merrill Lynch; NetRoadShow; F. Thomas convertible equity securities are permitted for
O’Halloran; Paul J. Rasplicka; Eric Ribner; Jeffrey A. WR Hambrecht. different audiences under the filing exemption, so
306 See, e.g., letters from Alston and
Schaffer; Alison Shatz; SIA; Bob Smith; Steve long as at least one version of a bona fide electronic
Smart; Chris D. Wallace; WR Hambrecht; and Kevin NetRoadshow. road show, where applicable, is available to all
Yorke. 307 See letter from Bloomberg. potential investors.
retains responsibility for information investors with more readily accessible information that, while not contained in
included on its web site; 311 however, information about the issuer. We also a separate section of an issuer’s web
the rules we are adopting today expand believe that issuers in registration site, is dated or otherwise identified as
possibilities in this regard due to the should be able to maintain historical historical information and is not
ability to communicate outside the information on their web site in a referred to in connection with the
statutory prospectus, including posting manner by which that information will offering activities may not be a current
information on web sites that will be remain accessible to the public but will offer, depending on the particular facts
free writing prospectuses. not be considered to be reissued or and circumstances.
We are adopting Rule 433(e) as republished for purposes of the
(3) Comments on Treatment of
proposed to make clear that an offer of Securities Act. Communications on Web Sites and
an issuer’s securities that is contained Historical information that is not an
Other Electronics Issues
on an issuer’s web site or that is offer under the Securities Act, either
contained on a third party web site because its use and content are such Commenters supported the provisions
hyperlinked from the issuer’s web site is that it does not fall within the Securities of proposed Rule 433 clarifying the
considered a written offer of such Act definition of that term or, for treatment of information contained on
securities made by the issuer and, example, because it falls within a safe or hyperlinked to web sites of issuers
unless otherwise exempt, will be a free harbor (such as those we are adopting and offering participants.316 Some
writing prospectus of the issuer. today), will not become an offer if commenters requested that the
Accordingly, the requirements of Rule accessed at a later time, unless it is Commission provide greater explanation
433 will apply to these free writing updated or used or referred to (by of what might constitute ‘‘historical’’
prospectuses.312 hyperlink or otherwise) in connection information, including whether and
with the offering.314 We believe it is how information is archived.317
(2) Historical Information on an Issuer Commenters also desired further
appropriate, however, to provide
Web Site clarification of the treatment under the
additional certainty regarding the
As we discussed in the Proposing treatment of historical information on free writing prospectus rules of
Release, we recognize the importance of web sites as ‘‘offers’’ under the information on an issuer’s web site
an issuer’s web site as a means to Securities Act. Accordingly, Rule 433, hyperlinked from a third party’s web
communicate with the public, not just as adopted, includes an exception to its site.318
with potential investors in an offering, general standard. This exception, Rule 433(e)(2) addresses particular
about its business. In this regard, contained in Rule 433(e)(2), provides situations in which information on an
commenters on our 2000 Electronics that historical information will not be issuer’s web site will not be considered
Release expressed concerns regarding considered a current offer of the issuer’s a current offer or a free writing
the possibility that historical issuer securities and, therefore, will not be a prospectus. Whether or not other
information on an issuer’s web site that free writing prospectus, if that historical information is historical information of
is accessed at a later time would be the issuer will depend on the facts and
information is:
considered ‘‘republished’’ at that later • Separately identified as such; and circumstances. Further, we have not
date, with attendant securities law • Located in a separate section of the provided additional detail regarding the
liability.313 issuer’s web site containing historical nature of ‘‘archiving’’ information
We believe that the availability of information. because we believe that the provision in
historical issuer information provides The use of that historical information Rule 433(e)(2) regarding separately
will become a current offer if it is: located, identified historical
311 In our 2000 Electronics Release, we noted that • Incorporated by reference into or information provides issuers with the
the federal securities laws apply equally to otherwise included in a prospectus of necessary flexibility in operating their
information contained on an issuer’s web site as web sites within the federal securities
they do to other communications made by or
the issuer for the offering; or
attributed to the issuer. Web site content differs • Otherwise used or referred to in laws. Finally, information that is an
from traditional methods of distribution, however, connection with the offering. offer and is contained on the web site
in several important aspects. First, information that While Rule 433(e)(2) addresses of an offering participant or contained
is placed on a web site can be continuously particular situations in which on the web site of another person
accessed as long as the information remains posted.
Second, issuers are able to hyperlink to other
information retained on a web site will hyperlinked from the web site of an
documents, information, and web sites, thereby not be considered a free writing offering participant could be a free
allowing instant access to such documents, prospectus, other information located writing prospectus of that offering
information, and web sites. See 2000 Electronics on or hyperlinked to a web site might participant.
Release, note 96, at II.B.
similarly not be considered a current
312 In this regard, if an issuer or other offering (F) Media Publications or Broadcasts
participant includes a hyperlink within a written offer of the issuer’s securities and,
communication offering the issuer’s securities, such therefore, not a free writing prospectus, (1) Overview
as an electronic free writing prospectus, to another where it can be demonstrated that the As we discussed in the Proposing
web site or to other information, the hyperlinked information was published
information will be considered part of that written Release, we believe it is important to
communication. For example, while a research previously.315 For example, certain identify the circumstances under which
report published or distributed by a broker or dealer information released or disseminated to
around the time of an offering may not be 314 See discussion in Section III.D.1 above under
the media by an issuer or offering
considered an offer by the broker or dealer under ‘‘Permitted Continuation of Ongoing
Rule 139, an issuer hyperlinking to that research Communications During an Offering’’ regarding
report will not be able to rely on Rule 139. The Rules 168 and 169. Although such information may not be considered
research report could, therefore, be a free writing 315 See also the 2000 Electronics Release an offer and therefore not subject to liability under
prospectus of the issuer. See the 2000 Electronics regarding retention of information on a web site Section 12(a)(2), it may still be subject to the anti-
Release, note 96, at II.B.2. during an offering. The 2000 Electronics Release fraud provisions of the federal securities laws.
313 See, e.g., comment letters in File No. S7–11– 316 See, e.g., letters from ABA; Davis Polk; and
contains a list of information that we believed could
00 from the American Corporate Counsel be retained on a web site without the information S&C.
317 See, e.g., letters from Davis Polk; Merrill
Association (‘‘ACCA’’); The Council of being considered an offer and we again concur that
Infrastructure Financing Authorities; and the such information will not raise a concern. See the Lynch; and S&C.
Florida Division of Bond Finance. 2000 Electronics Release, note 96, at part II.B.2. 318 See, e.g., letters from ABA and S&C.
participant in connection with a television or radio broadcast, or interview or other media publication or
registered offering will be considered advertisement, the issuer or other television or radio broadcast where an
the use of a free writing prospectus offering participant will have to satisfy issuer or offering participant
under the new rules. We recognize that the conditions to the use of any other participates (but does not prepare or pay
the financial news media are a valuable free writing prospectus of that offering for the event or article) could be a free
source of information about issuers to participant at the time of the publication writing prospectus, but because of the
the public at large. Issuers and offering or broadcast. For example, in the case of media intervention, we conclude that its
participants use the media to a non-reporting issuer or reporting use should not be conditioned on prior
disseminate important information unseasoned issuer a statutory or simultaneous delivery of the statutory
about themselves, such as through the prospectus will have to precede or prospectus. For example, an
use of press releases and interviews. accompany the communication. As a underwriter or issuer will be permitted
The media plays an integral role, consequence of this requirement, in to invite the press to a live road show
therefore, in providing information offerings by non-reporting and or an electronic road show, but, in most
about issuers to the market. unseasoned issuers, issuers and offering cases, we will consider an article
We want to encourage the role of the participants will not be able to prepare including information obtained at that
media as an important communicator of or pay for published or broadcast road show to be a free writing
information and some media written advertisements, ‘‘infomercials,’’ prospectus of the issuer or underwriter
publications regarding an offering are or broadcast spots or similar written and subject to the rules regarding free
not categorized as offers, under the gun- communications about the issuer, its writing prospectuses.321 As another
jumping provisions, by issuers or other securities, or the offering that includes example, if a chief executive officer of
offering participants. However, we do information beyond that permitted by a non-reporting issuer gives an
not want issuers and offering Rule 134. Well-known seasoned and interview to a financial news magazine
participants to avoid responsibility for other seasoned issuers and offering without payment to the magazine for the
their offering or marketing efforts by participants will have to comply with article, the publication of the article
using the media. We, therefore, believe the other applicable conditions for the after the filing of the registration
that it is appropriate to address in our free writing prospectus. For seasoned statement will be a free writing
new rules offers that take place using issuers that are not well-known prospectus of the issuer that will be
the media as a communication vehicle. seasoned issuers and offering subject to the filing conditions by the
Under the rules we are adopting today, participants, a registration statement issuer after publication. In that case,
where an issuer or any offering including a statutory prospectus (which there will be no requirement that a
participant provides information about can be a base prospectus) will have to statutory prospectus precede or
the issuer or the offering that constitutes be on file with us. These conditions may accompany the article at the time of the
an offer, whether orally or in writing, to also include filing with us not later than publication.
a member of the media and where the the date of first use.
(b) Filing
media publication of that information is (ii) Unaffiliated Media Publications
an offer by the issuer or other offering We are adopting the filing condition
Where, however, the free writing applicable to free writing prospectuses
participant, we will consider the
prospectus is prepared and published or that are media publications or television
publication to be a free writing broadcast by persons in the media
prospectus of the issuer or offering or radio broadcasts with some
business that are unaffiliated with the modifications from the proposals in
participant in question. issuer and another offering response to comments. Rule 433(f)
(2) Application of Rule 164 and Rule participant,319 and the preparation, provides that the filing condition of
433 to Media Publications publication, or broadcast is not paid for Rule 433(d) will be satisfied where a
by the issuer or other offering free writing prospectus including
As we proposed, under the rules we
participant, our rules include certain information about the issuer, its
are adopting today, the treatment of a
accommodations. In these cases, an securities, or the offering provided,
media publication that constitutes an
issuer or offering participant would not authorized, or approved by or on behalf
offer and therefore a free writing
have to have a statutory prospectus of the issuer or an offering participant,
prospectus of the issuer or other offering
precede or accompany the media that is prepared and published or
participant will depend on whether the
communication, although a filed disseminated by persons in the media
issuer or other offering participant
registration statement including a business who are not affiliated with or
prepares the publication or television or
statutory prospectus would be paid by the issuer or an offering
radio broadcast or pays for or provides
necessary, except in the case of a well- participant (with certain exceptions for
other consideration for the publication
known seasoned issuer.320 Therefore, an issuers in the media business), is filed
or broadcast, or whether unaffiliated
media prepares and publishes or 319 We have revised the provision from the
by the issuer or offering participant
broadcasts the communication for no proposals to address concerns of issuers that are involved within four business days after
consideration or payment from an issuer media companies. See the discussion below under
or offering participant. ‘‘Issuers in the Media Business.’’ another exemption is not available, the filing
320 We believe that in a situation where a written conditions would have to be satisfied by the issuer
(a) Prospectus Delivery or Availability communication is not prepared or paid for by an promptly after filing a registration statement
offering participant but rather by independent covering the offering if one is filed.
(i) Where Media Publications Are media, it still may be an offer and thus a free 321 Assuming that the road show in question is an
Prepared or Consideration Paid by writing prospectus. There is less need in this offer, an article published based on information
Issuer or Offering Participant situation, however, to have a statutory prospectus obtained from a road show with a limited audience
precede or accompany the free writing prospectus could be a free writing prospectus depending on its
If an issuer or offering participant if a registration statement containing a statutory content. An article published based solely on
prepares, pays for, or gives prospectus is on file with us and available. A media information provided at a readily accessible
publication that is a free writing prospectus of a electronic road show open to an unrestricted
consideration for the preparation, well-known seasoned issuer may also be published audience may not be an offer as discussed above
publication or dissemination of or uses or broadcast prior to filing of the registration where there is no other involvement by an issuer
or refers to a published article, statement, as described above. In such a case, where or offering participant.
the issuer or offering participant (c) Issuers in the Media Business Additionally, some commenters
becomes aware of its publication or first In response to comments about the suggested that if the media publication
broadcast.322 Persons in the media have impact the condition that the media was based on a press release or other
no filing or other responsibilities under entity is unaffiliated with the issuer has specifically authorized communication,
these provisions.323 on issuers that are in the media then only the press release or other
We have made certain modifications business,326 we have provided a limited authorized communication should
to the filing conditions from the exclusion that would permit issuers that satisfy the filing condition.331 One
proposals. First, Rule 433 permits are in the media business to be able to commenter suggested that media
rely on the unaffiliated media condition publications based on publicly
issuers and offering participants to
if the media issuer or its affiliated media disseminated information should be
satisfy the filing condition by filing:
business: excluded from the definition of free
• The media publication; writing prospectuses.332 Commenters
• Is the publisher of a bona fide
• All of the information provided to newspaper, magazine, or business or also suggested that the filing occur after
the media in lieu of the publication; or financial publication of general and a senior officer has actual knowledge of
• A transcript of the interview or regular circulation or bona fide the publication and that the filing
similar materials that the issuer or other broadcaster of news including business deadline be extended to three business
and financial news; 327 days.333
offering participant provided to the
media, provided that all the information • Has established policies and We believe that the modifications we
provided is filed. procedures for the independence of the have made to the filing conditions and
content of the publication or broadcast other provisions of Rule 433 should
We also have provided that an issuer address most of the commenters’
from the offering activities of the issuer;
or other offering participant does not and concerns regarding unaffiliated media
have to file the media publication if the • Publishes or broadcasts the publications. We would observe first
substance of the written communication communication in the ordinary course. that, as discussed above, not every
has been previously filed with us. media publication about an offering is
Finally, the issuer or offering participant (3) Responses to Comments on an offer or a free writing prospectus of
may file, together with or after the Treatment of Media Publications the issuer or other offering participant.
media publication is filed, information Among the issues commenters raised, In particular, we have administered the
that the issuer reasonably believes is many focused on the treatment of media gun-jumping provisions so that where
necessary or appropriate to correct reports under the proposed rules there is no other involvement of an
information included in the media regarding free writing prospectuses.328 issuer or other offering participant,
publication.324 We believe that these They expressed concern as to whether media publications based on
additional provisions will give issuers the issuer or offering participants were information filed with us or available on
and offering participants the ability to obligated to monitor media releases and an unrestricted basis are not offers of the
file the publications on a timely basis, provide correcting information.329 issuer or other offering participant. This
to file the underlying materials in lieu These commenters were concerned should substantially eliminate the need
of the publication, and to file correcting about the ability to satisfy the to monitor media publications unless
materials after publication, television or conditions of the exemption if the offering participants are directly
radio broadcast, or other dissemination, media reports or publicity about the communicating offering information or
if there is concern about the accuracy of issuer or its securities occurred prior to otherwise involved with the media in
the publication.325 the filing of a statutory prospectus. connection with the offering. Further,
Commenters also suggested that the the Rule only applies to written offers
322 In media publications eligible for this filing condition be limited to the prepared, published, or disseminated by
accommodation, the inclusion of the necessary specific publication that was granted an the media where an issuer or offering
legend in the fling of the media publication will
satisfy the legend condition of Rule 433(c)(2) with
interview or, if statements from that participant provides, authorizes, or
regard to that media publication. See Rule interview were carried by different approves the information. In addition,
433(f)(1)(ii). Further, the free writing prospectus media outlets, the issuer or offering we have made the following
will have to be filed only once, regardless of the participant should be able to file a modifications:
number of publications in which the information is
included. In addition, the publication will only
representative statement.330 • Extended the filing due date to four
have to be filed if, as discussed above, it is an offer. business days after the issuer or other
323 As we note above, press releases that are offers 326 See, e.g., letters from Davis Polk and NYSBA. offering participant becomes aware of
327 This accommodation is based on the media
sent out by issuers are free writing prospectuses of the publication or first broadcast;
the issuer at the time of the issuer distribution. entity being a bona fide media entity. We are using
324 Language that, while arguably in the notice of essentially the same definition as included in • Permitted the filing of information
a correction, is in fact an impermissible disclaimer Regulation Analyst Certification [17 CFR 242.500– reasonably believed necessary or
(such as a disclaimer regarding liability or reliance) 242.505] (‘‘Regulation AC’’) and the Investment appropriate to correct information
or waiver is not permitted. Advisers Act of 1940 [15 U.S.C. 80b–1 et seq.], included in the communication;
except that we have not limited the publications to
325 The provisions of Rule 433 apply only to free
financial or business publications. See Rule 505(a) • In lieu of filing the article,
writing prospectuses, which by definition must
involve a written offer. Whether or not the media of Regulation AC (17 CFR 242.505(a)) and Section permitted the filing of the transcript of
publication is an offer and therefore a free writing 202(a)(11) of the Investment Advisers Act of 1940 the entire interview or other materials
prospectus of the issuer or the other offering (15 U.S.C. 80b–2(a)(11)) In addition, we have that formed the basis for the article; and
conditioned the accommodation on adequate
participant providing the information will depend
policies and procedures being in place that require • Provided that where the substance
as today on the facts and circumstances. In
addition, because the exception for free writing the media company’s content decisions to be of the information provided by or on
prospectuses is non-exclusive and does not independent of the issuer’s offering activities. behalf of the issuer or other offering
328 See, e.g., letters from ABA; Alston; Cleary;
preclude reliance on other exclusions or participants contained in the
exemptions from the gun-jumping provisions, Fried Frank; and NYSBA.
329 See, e.g., letters from ABA; Cleary; Fried
compliance with the conditions of Rule 433 for the
331 See, e.g., letters from Alston and NYSBA.
use of a free writing prospectus, including filing, Frank; NYSBA; and Reuters.
332 See letter from Davis Polk.
does not preclude reliance on the argument that the 330 See, e.g., letters from ABA; NYSBA; and
communication is not an offer. Reuters. 333 See, e.g., letters from ABA and Reuters.
publication is already filed with us no (3) Cross-Liability Issues referred to the free writing
filing is required. As we discussed in the Proposing prospectus.338
We also have made accommodations so Release, we provided that the filing In response to commenters’
that issuers in the bona fide media condition applied only to an issuer free continuing concerns about cross
business will be able to rely on these writing prospectus and issuer liability for free writing prospectuses
provisions. information or to information in a free used by an issuer and other offering
As in the case of the safe harbors for writing prospectus broadly participants, we have included a new
factual business information, some provision in Rule 159A that will clarify
disseminated, to address the concerns
commenters also requested that we when an offering participant, other than
that commenters on our 1998 proposals
revise the definition of ‘‘by or on behalf the issuer, is considered to offer and sell
had about cross liability under
of’’ an offering participant to include securities ‘‘by means of’’ a free writing
Securities Act Section 12(a)(2) for free
only those communications that were prospectus. Under the new provisions of
writing materials of other offering
made by specific authorized persons Rule 159A, an offering participant other
participants.336 As we discuss above, we
and to provide that the issuer or other than the issuer will not be considered to
are adopting the filing condition
offering participant is not liable for offer or sell securities to a person ‘‘by
substantially as proposed so that it does
unauthorized communications.334 For means of’’ a free writing prospectus
not extend to a free writing prospectus
the reasons noted above, we are not unless:
prepared by an underwriter, even one • The offering participant used or
modifying the definition of ‘‘by or on including information prepared on the
behalf of’’ to limit it to specified referred to the free writing prospectus in
basis of or derived from issuer offering or selling the securities to that
persons. information that does not include issuer person;
(G) Liability Issues Affecting Free information, unless the free writing • The offering participant offered or
Writing Prospectuses prospectus falls into the ‘‘broad sold the securities to that person and
(1) General dissemination’’ category. Free writing participated in planning for the use of
prospectuses sent directly to customers that free writing prospectus by other
Even when filed, a free writing of an offering participant, without
prospectus will not be part of a offering participants and such free
regard to number, are not broadly writing prospectus was used or referred
registration statement subject to liability disseminated for purposes of the Rule.
under Securities Act Section 11, unless to in offering or selling securities to that
Although we attempted in the person by one or more of such other
the issuer elects to file it as a part of the proposals to address the cross-liability
registration statement. Regardless of offering participants; 339 or
concerns by restricting the filing • Under the conditions for use of the
whether a free writing prospectus is obligations only to limited situations,
filed, any seller offering or selling free writing prospectus in Rule 433, the
commenters on our proposals continued offering participant is required to file
securities by means of the free writing to express concern about cross liability
prospectus will be subject to disclosure the free writing prospectus with us
for another participant’s free writing pursuant to Rule 433.340
liability under Securities Act Section prospectus, whether or not the The Rule, as revised, also provides
12(a)(2). A free writing prospectus also participant used that free writing
can, of course, be the basis for liability that a person will not be considered to
prospectus. Commenters requested offer or sell securities by means of a free
under the anti-fraud provisions of the clarification that use of a free writing
federal securities laws. writing prospectus solely because
prospectus by one offering participant another person has used or referred to
(2) Filed Free Writing Prospectus Not will not subject other offering the free writing prospectus or filed the
Part of Registration Statement participants who do not use the free free writing prospectus with us. As a
A free writing prospectus used after a writing prospectus to liability under result of these provisions, we believe
registration statement is filed complying Securities Act Section 12(a)(2).337 Some that offering participants will be able to
with Rule 433 will be governed by the commenters recommended that the determine when they will be considered
provisions of Securities Act Section party should be considered to have to have offered or sold securities by
10(b), which provides that a prospectus offered and sold ‘‘by means of’’ a free means of any particular free writing
permitted under that section is filed as writing prospectus, and liability for the prospectus.
part of the registration statement, but is free writing prospectus should arise,
only if a party has used, prepared, or c. Interaction of New Communications
not subject to Section 11 liability. We Rules With Regulation FD
are adopting as proposed the
modification to the Section 10(b) filing to the way in which Rule 425 filings are made. A i. Amendments to Regulation FD
free writing prospectus will not have to be filed
requirement to provide that a free under Exchange Act Form 8–K. Issuers, of course, As a consequence of our new rules to
writing prospectus filed pursuant to may file a free writing prospectus on Form 8–K if liberalize communications during the
Rule 433 must identify the registration they wish to have the information incorporated by offering process and encourage
reference into the registration statement. The free
statement to which it relates, but Rule writing prospectus also can be filed as part of the continuing ongoing regular
433 provides that it will not have to be registration statement or, where permitted, included
filed as part of the registration in an Exchange Act report incorporated by reference 338 See, e.g., letters from ABA and Goldman
statement. We believe that the modified into the registration statement. In such case, the free Sachs.
writing prospectus would be subject to Securities 339 We do not intend that the typical inter-
filing condition will enhance investor Act Section 11 liability. Once a communication or syndicate arrangement providing for sales out of the
protection because it should facilitate other document is made part of or incorporated by syndicate ‘‘pot’’ falls within this provision, unless
filing of the free writing prospectus on reference into a registration statement, Section 11 the arrangement contemplates use of free writing
a timely basis and more readily identify applies to it as part of the registration statement, prospectuses in a manner described in the
whether or not it is an offer. provision.
the filed information as a free writing 336 See, e.g., comment letters in File No. S7–30– 340 The Rule does not address when an issuer
prospectus.335 98 from ABA; Ford Motor Credit Company; ICI; offers or sells ‘‘by means of’’ a free writing
Merrill Lynch; and S&C. prospectus. The Rule does address when an issuer
334 See,e.g., letters from ABA and Alston. 337 See, e.g., letters from ABA; Citigroup; Cleary; is considered to be a seller for purposes of
335 Afree writing prospectus filed pursuant to CSFB; Davis Polk; Deloitte; Goldman Sachs; ICI; Securities Act Section 12(a)(2). See discussion in
Rule 433 will be filed as a separate filing similar Morgan Stanley; SIA; and TBMA. Section IV.B below under ‘‘Issuer as Seller.’’
communications by reporting issuers, provides for offering by selling security We have clarified the modifications to
we are revisiting the exclusions from holders. We are amending Regulation Regulation FD from the proposals. We
Regulation FD for communications FD to clarify that, as to offerings of the have not changed the types of offerings
made during a registered offering of type described in Rule 415(a)(1)(i) in which disclosures are subject to
securities.341 The communications where the registered offering also Regulation FD. The only change we are
regime that we are adopting today includes a registered offering, whether making from the current language is to
contemplates that, in connection with or not underwritten, for capital provide that disclosures made in
an offering, certain material non-public formation purposes for the account of connection with registered offerings by
issuer information can be made public the issuer, Regulation FD does not selling security holders of the type
through the prospectus filed as part of apply, unless the issuer’s offering is described in Rule 415(a)(1)(i) are
a registration statement or the issuer’s included for the purpose of evading excluded from the application of
filing of free writing prospectuses. Oral Regulation FD.343 The amendments do Regulation FD if the offering also
communications of an issuer made in not otherwise change the types of includes a registered primary offering
connection with a registered offering registered offerings that are excluded that is a capital formation transaction
after the registration statement is filed from, or subject to, the operation of the for the account of the issuer.
will continue not to be subject to any Regulation.
In view of our new rules to expand The change to Regulation FD does
filing or public disclosure requirement.
permissible communications, we not, as some commenters may have
As we stated in the Proposing Release,
believe it is appropriate to clarify that misinterpreted, mandate that all
we continue to believe that subjecting
oral communications that occur in the communications excluded from the registered securities offerings be for
connection with a registered offering in operation of Regulation FD are, in fact, capital formation purposes as a
a capital formation transaction to a those communications that are directly condition of exclusion from the
public disclosure requirement could related to a registered securities offering. operation of Regulation FD. The
adversely affect the capital formation Communications not contained in our exclusions prior to and after the change
process. enumerated list of exceptions from have the general effect of excluding
We are amending Regulation FD Regulation FD—for example, the capital formation transactions, but there
substantially as proposed to specify the publication of regularly released factual was, and after the change will be, no
circumstances, both in terms of the type business information or regularly separate ‘‘capital formation’’
of offering and the means of released forward-looking information or requirement for the exclusions. Rather,
communication, in which issuer pre-filing communications—are subject the change will provide that secondary
communications will be excluded from to Regulation FD. offerings will be excluded from
the operation of that Regulation in Regulation FD if the offering also
ii. Comments on Amendments to includes a registered capital formation
connection with a registered securities Regulation FD
offering. transaction for the account of the issuer.
First, as amended, Regulation FD will Most commenters on the proposed
changes to Regulation FD supported the 4. Use of Research Reports
not apply to disclosures made in the
following communications in inclusion of the specific enumeration of a. Current Regulatory Treatment of
connection with a registered securities communications in connection with Research Reports
offering that is of the type excluded offerings that are not subject to the
provisions of Regulation FD.344 The veracity and reliability of
from the Regulation:
Commenters expressed concern that the research reports, particularly those
• A registration statement filed under
proposed changes limited the issued by full service broker-dealers,
the Securities Act, including a
Regulation FD exclusion only to have received significant attention in
prospectus contained therein;
registered offerings involving capital recent years. The Sarbanes-Oxley
• A free writing prospectus used after
formation transactions.345 Some Act,347 Regulation AC,348 the self-
filing of the registration statement for
the offering or a communication falling commenters believed that the regulatory organization rules we
within the exception to the definition of Regulation FD exclusion should cover approved,349 and the global research
prospectus contained in clause (a) of all secondary offerings (those on behalf analyst settlement 350 have addressed
Securities Act Section 2(a)(10); of selling security holders), regardless of many of the abuses identified with
• Any other Section 10(b) prospectus; whether conducted as part of an issuer analyst research and have required
• A notice permitted by Securities capital raising transaction.346 structural reforms and increased
Act Rule 135;
issuer or its subsidiaries; (2) securities offered
• A communication permitted by
347 See Section 501 of the Sarbanes-Oxley Act [15
pursuant to dividend or interest reinvestment plans U.S.C. 78o–6(a)(2)].
Securities Act Rule 134; or or an employee benefit plan of the issuer; (3) 348 Regulation AC requires, among other things,
• An oral communication made in securities to be issued upon the exercise of that brokers, dealers and certain persons associated
connection with the registered securities outstanding options, warrants, or rights; (4) with a broker or dealer include in research reports
securities to be issued upon conversion of other certifications by the research analyst that the views
offering after filing of the registration outstanding securities; (5) securities pledged as expressed in the report accurately reflect his or her
statement for the offering under the collateral; and (6) securities registered on Form personal views, and disclose whether or not the
Securities Act. F–6. analyst received compensation or other payments in
Second, prior to our actions today, 343 This provision will cover the situation, for
connection with his or her specific
Regulation FD applied to offerings of the example, where a de minimis issuer participation recommendation or views. See Regulation AC, note
is included in what is otherwise entirely a selling 327.
types described in Rule 415(a)(1)(i) security holder offering for the purpose of 349 See Order Approving Proposed Rule Changes
through (vi).342 Rule 415(a)(1)(i) excluding communications in the offering from the Relating to Research Analyst Conflicts of Interest,
application of Regulation FD. Release No. 34–45908 (May 10, 2002) [67 FR
341 See 344 See, e.g., letters from Cleary; Fried Frank; and
17 CFR 243.100(b)(2). 34968]; Order Approving Proposed Rule Changes
342 The types of offerings under these provisions NYCBA. Relating to Research Analyst Conflicts of Interest,
345 See, e.g., letters from ABA; Merrill Lynch; and Release No. 34–48252 (Aug. 4, 2003)[68 FR 34968].
of Rule 415 are delayed or continuous offerings that
are (1) securities to be offered or sold solely by or TBMA. 350 See Lit. Rel. No. 18438 (Oct. 31, 2003); Press
on behalf of selling security holders other than the 346 See, e.g., letters from ABA and NYCBA. Release 2004–120 (Aug. 26, 2004).
disclosures.351 As a direct result of these violating the Section 5 prohibitions on i. Definition of Research Report
initiatives and actions, we expect that pre-filing offers and impermissible Based on comments, we believe it is
analyst research reports used by market prospectuses. We are adopting important to have a significant measure
participants will better disclose measured amendments that will make of consistency between Regulation AC
conflicts of interest relating to research incremental modifications to these and the research safe harbors contained
of which investors should be aware. rules.352 As adopted, the rules will, for in Rules 137, 138, and 139. We do not
The value of research reports in the first time, contain a definition of believe, however, that absolute
continuing to provide the market and research report. The rules also expand consistency is appropriate in
investors with information about the circumstances in which offering recognition of the differences in the
reporting issuers cannot be disputed. participants and persons who are not purposes of the rules. Accordingly, we
Research analysts study publicly traded offering participants will have safe are adopting a definition of research
issuers and provide information about harbor exemptions for dissemination of report that builds on the definition of
the securities of those issuers, often research reports during a registered ‘‘research report’’ in Regulation AC,
through the issuance of research reports. offering.353 while preserving the purposes of Rules
We believe it is appropriate to limit The amendments we are adopting 137, 138, and 139.
the restrictions on research under the today are designed to ensure that
gun-jumping provisions of the appropriate investor protections are (A) Definition
Securities Act to those we believe are maintained. In that regard, we have As adopted, ‘‘research report’’ is
appropriate to avoid offering abuses. maintained our current approach with defined as a written communication, as
Given the ongoing flow of information respect to liability for research, which defined in Securities Act Rule 405, that
into the market, particularly with includes general anti-fraud liability, includes information, opinions, or
respect to reporting issuers and the used in reliance on these rules.354 recommendations with respect to
enhancements to the environment for securities of an issuer or an analysis of
352 The safe harbor provisions of Securities Act
research imposed by recent statutory, a security or an issuer, whether or not
Rules 137, 138, and 139 will continue to be
regulatory, and enforcement available only to brokers and dealers. Issuers cannot it provides information reasonably
developments, we believe it is use the safe harbor provisions for research reports sufficient upon which to base an
appropriate to make measured revisions prepared or distributed by brokers or dealers in investment decision.355 This definition
to the research rules that are consistent reliance on the rules to directly or indirectly is intended to encompass all types of
communicate with potential investors about the
with investor protection but that will issuer’s offering. For example, a hyperlink on an research reports, whether issuer-specific
permit dissemination of research around issuer’s web site during its registered offering to a or industry research separately
the time of an offering under a broader research report could raise concerns in this regard. identifying the issuer.
range of circumstances. Issuers using research reports in this manner could Unlike the proposals, the definition
be deemed to have adopted the contents of such
reports and, under our rules, the reports could be
does not require that the research report
b. Amendments to Exemptions for contain sufficient information on which
considered free writing prospectuses.
Research 353 The amendments to the rules will continue to to base an investment decision. As with
Rules 137, 138, and 139 under the permit the distribution of independent research the current research rules, the definition
Securities Act describe circumstances in within the safe harbor provisions. Our research is limited to research, including
rules permit the distribution of independent
which a broker or dealer may publish research provided the distribution satisfies the information, opinions, or
research constituting an offer around the conditions of the rules. For brokers and dealers recommendations, contained in written
time of a registered offering without subject to the global research analyst settlement, communications.356
their ability to continue to distribute independent Under the definition of ‘‘research
research during a registered securities offering
351 The settlement, which involved twelve
depends on concluding that the independent report’’ we are adopting today, there
brokerage firms and two individuals, requires the research distribution by the broker or dealer could be some differences in the types
settling firms to, among other things, adopt changes satisfies the conditions of the research rule at the of communications that will constitute
designed to ensure that there is a structural time of the distribution or is otherwise not an offer.
separation between the firm’s analysts and a research report under the research safe
If a broker or dealer is not able to rely on any of
investment bankers. The firms are required to the research safe harbors for their own research, harbors as compared to Regulation AC.
include enhanced disclosures, including disclosure they similarly cannot rely on the safe harbor to In light of the different purposes of the
of potential conflicts of interests in research reports distribute independent research. For example, rules, we believe the distinctions are
and public disclosure of their analysts’ quarterly independent research that is prepared by an entity
performance. The firms also are required to pay for
appropriate and will not raise investor
not participating in an offering but paid for by a
independent research for a five-year period and to broker or dealer participating in an offering will be
make this research available to the firm’s customers. distributed by an offering participant and thus will Securities Act Section 17(a) and Exchange Act
The National Association of Securities Dealers not satisfy the requirements of Securities Act Rule Section 10(b) and Rule 10b–5 thereunder.
and the New York Stock Exchange adopted rules, 137 and cannot be used in reliance on the safe 355 The definition of ‘‘research report’’ is included
among other things, requiring separating analyst harbor. Such research may continue to be in each of Rules 137, 138, and 139.
compensation from investment banking influence, distributed by the entity not participating in the 356 The twelve brokerage firms that were part of
prohibiting analysts from issuing research reports offering that prepared it without involvement by an the global research analyst settlement agreed to
around the expiration of a lock-up agreement offering participant. A research report constituting disclose, on trade confirmations and on account
(sometimes called ‘‘booster shot’’ research reports), an offer and not falling within a safe harbor will be statements, as well as on the firms’ web sites, their
imposing quiet periods around the issuance of considered a free writing prospectus. Our research research ratings, along with the research ratings of
research reports for offering participants, rules also do not supersede the requirements of any the independent research providers who cover the
prohibiting analysts from participating in ‘‘pitches’’ applicable rule of a self-regulatory organization security. We do not believe that the continued
or other communications for the purpose of regarding the timing of the distribution of research publication of these ratings on trade confirmations
soliciting investment banking business, restricting reports. See, e.g., NYSE Rule 472(f)(1) through (4) and on account statements, as required under the
prepublication review of research reports by non- and NASD Rule 2711(f)(1) through (4). global research analyst settlement, would raise
research personnel, prohibiting retaliation by 354 Research reports published or distributed in concerns about whether the ratings were offers in
investment banking against analysts whose reports reliance on Rules 138 and 139 are not offers for that they would be provided in the ordinary course,
or public appearances may adversely affect an purposes of Securities Act Section 2(a)(10) and and as to confirmations, after the sale of the
investment banking relationship, requiring Section 5(c). Brokers or dealers publishing or securities. The continued inclusion of either the
disclosure of any compensation received from an distributing research in reliance on Rule 137 are not firm’s own ratings or those of the independent
issuer as well as client relationship with an issuer, considered underwriters of the securities under research provider on the firms’ web sites during an
and imposing additional registration, qualification, Securities Act Section 2(a)(11). Of course, the anti- offering could be an offer of the issuer’s securities
and continuing education requirements on research fraud provisions of the federal securities laws unless the safe harbors in Rules 137, 138, or 139
analysts. continue to apply to such communications. See are available to the firm at that time.
protection concerns. For example, for research or are in connection with an distribution of the issuer’s securities
purposes of Rule 139, it is possible that offering may also involve distinctions and would therefore not be an
particular documents, such as industry that are too fine to be appropriate for the underwriter in the offering. We are
reports, will be research reports under research exemptions. Whether a expanding the exemption, as proposed,
our new definition, even if they fall particular oral communication about an to apply to securities of any issuer,
outside of the definition of ‘‘research issuer or its securities by an offering including non-reporting issuers, with
report’’ under Regulation AC. participant is an offer will thus continue exceptions for blank check companies,
The definition of research report we to depend on the facts and shell companies, and penny stock
are adopting today retains the condition circumstances. issuers. Rule 137 will continue to be
that the research be in a written available only to brokers and dealers
communication. A publication element (B) Comments on Definition of Research
who:
Report
has been a condition of the research safe • Are not participating in the
harbors since the rules were first While commenters supported the registered offering of the issuer’s
contemplated and adopted. From the proposed amendments to the research securities;
earliest Commission statements in the safe harbors,359 they were concerned • Have not received compensation
1960’s, the Commission did not want to that the proposed definition of research from the issuer, its affiliates, or
discourage the ongoing publication of report would narrow the types of participants in the securities
research reports by market research that would be eligible for the distribution, among others, in
professionals, provided they were safe harbors.360 In particular, connection with the research report; and
provided within the scope of the commenters requested that the research • Publish or distribute the research
restrictions of Securities Act Section report definition not be the same as in report in the regular course of business.
5.357 The research safe harbors have Regulation AC requiring that the Commenters supported the proposed
always been aimed at written reports research report contain information changes to Rule 137 but requested that
due to the Section 5 restrictions on sufficient upon which to make an the rule make clear that the prohibition
written offers. investment decision.361 Rather, the on consideration from the issuer would
The research safe harbors are not commenters requested that, as today, apply only to consideration paid in
intended to protect oral the research safe harbors be available for connection with the publication or
communications that might be offers information, opinions, and distribution of the research report.364
from the liability provisions of recommendations about an issuer or its Other commenters suggested that the
Securities Act Section 12(a)(2).358 securities.362 Some commenters also safe harbor be expanded to permit
Similarly, in our new definition, we are requested that the definition of research dealers to rely on the safe harbor for the
not expanding the scope of the research permit the use of oral, rather than just publication and distribution of research
safe harbors to cover oral written, research in reliance on the safe reports after the effectiveness of the
communications because we believe harbors.363 registration statement.365
that the appropriate liability provisions As we discuss above, we have revised We are adopting as proposed, and as
should continue to apply to such oral the proposed definition of research is in current Rule 137, the provision
communications. Whether oral report for purposes of Rules 137, 138, prohibiting compensation in connection
communications relate to general and 139 to make clear that it continues with the publication or distribution of
357 As the Commission stated in 1983, * * *
to apply to information, opinions, or the research report. In response to
research reports containing information, opinions
recommendations contained in written commenters’ concerns regarding
or recommendations with respect to a proposed communications. We agree with compensation, however, we have
offering, under certain circumstances, may be commenters that for purposes of Rules clarified the compensation language in
considered offers to sell under Section 5(c), 137, 138, and 139 a research report does Rule 137 to provide that the prohibition
particularly when a broker-dealer is a participant in
the distribution. In addition, research reports
not have to contain information on compensation applies to
disseminated by participating broker-dealers in the sufficient to make an investment compensation for the particular research
waiting or post-effective periods which do not meet decision for the research safe harbors to report. While the safe harbor covers
Section 10 prospectus requirements or are not be available and have revised the research reports provided after
accompanied by a Section 10 prospectus may
violate Section 5(b)(1). definition accordingly. We have not, effectiveness of the registration
Research Reports, Release No. 33–6492 (Oct. 5, however, expanded the scope of the statement, it continues to be an
1983)[48 FR 46801]. See Publication of Information research safe harbors to encompass oral exemption from the definition of
and Delivery of Prospectus by Broker Dealers Prior communications. underwriter.
to or After the Filing of a Registration Statement
Under the Securities Act of 1933, Release No. 33– ii. Rule 137 iii. Rule 138
5010 (Oct. 7, 1969) [34 FR 18130]; Adoption of
Rules Relating to Publication of Information and Rule 137 provides that a broker or Rule 138 permits a broker or dealer
Delivery of Prospectus by Broker-Dealers Prior to or dealer that is not an offering participant participating in a distribution of an
After the Filing of a Registration Statement under in a registered offering but publishes or
the Securities Act of 1933, Release No. 33–5101
issuer’s common stock and similar
(Nov. 19, 1970) [35 FR 18457]; Research Reports, distributes research reports with respect securities to publish or distribute
Release No. 33–6550 (Sept. 19, 1984) [49 FR 36719]; to an issuer’s securities will not be research that is confined to that issuer’s
Amendments to Clarify Safe Harbors for Broker- considered to be engaged in a fixed income securities, and vice versa,
Dealer Research Reports, Release No. 33–7120 (Dec.
13, 1994) [59 FR 31038]; and Adoption of if it publishes or distributes that
359 See, e.g., letters from ABA; Davis Polk; Fried
Amendments to Clarify Safe Harbors for Broker- research in the regular course of its
Frank; NYSBA; Richard Hall; and S&C.
Dealer Research Reports, Release No. 33–7132 (Feb.
business. We believe it is appropriate to
1, 1995) [60 FR 6965]. See also the Wheat Report, permit research on a broader group of
note 21. Davis Polk; Merrill Lynch; NYSBA; Prudential
358 In this regard, we note that the title of each Equity Group, LLC (‘‘PEG’’); S&C; and SIA. reporting issuers under Rule 138 in
361 See, e.g., letters from ABA; NYSBA; S&C; and
safe harbor refers to ‘‘certain publications.’’ After a
registration statement is filed, oral communications SIA. 364 See, e.g., letters from Fried Frank; PEG; and
362 See, e.g., letters from ABA; Cleary; Merrill S&C.
regarding a registered securities offering are not
constrained by the gun-jumping provisions of the Lynch; PEG; and SIA. 365 See, e.g., letters from ABA; Merrill Lynch; and
Securities Act. 363 See, e.g., letters from ABA; S&C; and SIA. PEG.
view of the regulatory reforms and the type of security around the time of a industry reports covering smaller
role of independent research. Further, public offering of an issuer’s security seasoned issuers, if the broker or dealer
we believe the current limitation on the and does not have a history of complies with restrictions on the nature
type of issuers under this Rule is no publishing research on those types of of the publication and the opinion or
longer necessary to protect investors. securities, we are concerned that such recommendation expressed in that
publication or distribution might be a publication.
(A) Amendments to Rule 138
way to provide information about the
We are amending Rule 138 publicly offered securities in order to (A) Issuer-Specific Reports
substantially as proposed to expand the circumvent the provisions of Section 5 (1) Amendments Regarding Issuer-
categories of eligible issuers. As and the permissible free writing rules Specific Reports
adopted, the Rule generally will cover we are adopting today.
research reports on all reporting issuers We are adopting the amendments to
that are current in their periodic (B) Comments on Rule 138 Rule 139 to allow reports about a
Exchange Act reports on Forms 10–K, Amendments specific issuer that, at the time of
10–KSB, 10–Q, 10–QSB, and 20–F at the Commenters generally supported the reliance on the Rule, is current in its
time of reliance on the exemptions, expansion of the safe harbor to a broader Exchange Act periodic reports and:
rather than only issuers who are Form class of issuers.368 Some commenters • At the later of the time of filing its
S–3 or Form F–3 eligible, as is currently suggested that the safe harbor also be most recent registration statement on
the case. In addition, in response to available to research reports on Form S–3 or Form F–3 or the time of
commenters’ suggestions, we are voluntary filers and Schedule B issuers filing of its most recent amendment to
expanding the Rule as it applies to and that it apply to all private such registration statement for purposes
foreign private issuers to allow broker- offerings.369 A number of commenters of complying with Securities Act
dealers publishing or distributing requested a further change to the Section 10(a)(3), is eligible to register a
research reports on non-reporting existing provisions of Rule 138 to primary offering of securities on Forms
foreign private issuers that either have eliminate the foreign private issuer S–3 or F–3, based on the $75 million
had equity securities traded on a eligibility condition regarding trading minimum public float eligibility
designated offshore market or have a on a designated offshore securities provision of those forms; or
$700 million worldwide public float to market.370 Finally, some commenters • At the time of reliance on the Rule,
rely on the Rule.366 Like the requested clarification of the condition the issuer’s registration statement covers
amendments regarding Rules 137 and that the broker or dealer be publishing an offering of the issuer’s securities in
139 that we are adopting today, the Rule reports on the same types of securities reliance on General Instruction I.B.2 of
excludes research reports on issuers that to be able to rely on the safe harbor, Form S–3 or Form F–3.
have historically posed certain risks of while others recommended eliminating As with Rule 138, we are allowing
abuse, including blank check this condition.371 reports on a broader category of non-
companies, shell companies, and penny We have adopted the amendments to reporting foreign private issuers also to
stock issuers. Rule 138 substantially as proposed. We be covered by the Rule.372 Research
We also are adopting as proposed the do not believe it is appropriate at this reports on penny stock issuers, blank
condition to the Rule 138 exemption time to further expand the categories of check companies, and shell companies
that the broker or dealer must have eligible issuers under the Rule, other are excluded from Rule 139.
previously published or distributed than for certain non-reporting foreign In the amendments we are adopting
research reports on the types of private issuers that have a significant today, we are retaining the requirement
securities that are the subject of the worldwide public float. We have that the broker or dealer publish or
reports in the regular course of its clarified that the broker dealer does not distribute the research report in the
business.367 As we stated in the have to be publishing or distributing regular course of its business. We are
Proposing Release, we believe that it is research reports about a particular not retaining the requirement of
appropriate to include this condition issuer or its securities to rely on the publication with reasonable regularity.
because it is important that the broker Rule, only that the research reports As we stated in the Proposing Release,
or dealer have a history of publishing or cover the same types of securities. We we do not believe that the reasonable
distributing a particular type of have not expanded the scope of the regularity requirement has added any
research. This condition does not mean, research safe harbor to cover all private particular degree of investor protection
however, that the broker or dealer must offerings. and has raised concerns as to when the
have a history of publishing research condition is satisfied. We are, however,
iv. Rule 139
reports about the particular issuer or its requiring that the broker or dealer must,
securities. If a broker or dealer begins Rule 139 permits a broker or dealer at the time of reliance on the Rule, have
publishing research about a different participating in a distribution of distributed or published at least one
securities by a seasoned issuer or by research report about the issuer or its
366 Prior to today’s amendments, Rule 138 certain non-reporting foreign private securities, or have distributed or
required that a foreign private issuer’s securities be issuers to publish research concerning published at least one such report
traded on a designated offshore securities market the issuer or any class of its securities,
for at least twelve months. We are amending the following discontinuing coverage. This
Rule to specify that this requirement relates to the if that research is in a publication requirement, we believe, retains the
issuer’s equity securities. Current Rule 138 covers distributed with reasonable regularity in most important element of the
issuers that are Form S–2 or Form F–2 eligible as the normal course of its business. Rule ‘‘reasonable regularity’’ requirement,
well. Because we are eliminating these Forms, as 139 also provides a safe harbor for
discussed below, we have revised Rule 138 to namely that the report initiating (or re-
eliminate the reference to those forms.
368 See,
e.g., letters from ABA and S&C.
367 Prior to today’s amendments, Rule 138 372 As in the changes to Rule 138, we are
369 See,
e.g., letters from ABA; Cleary; IBA;
required that the broker or dealer publish or providing that a non-reporting foreign private issuer
distribute research in the regular course of business, Merrill Lynch; NYSBA; and SIA. must either have its equity securities be traded on
370 See, e.g., letters from ABA; Citigroup;
but did not contain a condition that the broker or a designated offshore securities market for at least
dealer have published or distributed research Goldman Sachs; and SIA. twelve months or have a $700 million worldwide
reports on the same types of securities. 371 See, e.g., letters from ABA; NYSBA; and SIA. public float.
initiating) coverage of an issuer not regarding the issuer or its securities. We modifications to the ABS safe harbor. We
benefit from an exemption under Rule are adopting as proposed the also encourage ABS market participants to
139. requirement that the research reports comment specifically on the proposals in that
release regarding any appropriate changes to
As we noted previously, we are not contain similar types of information the existing safe harbors or the ABS safe
requiring any minimum time period for about the issuer or its securities as harbor.378
the broker or dealer to have distributed contained in prior reports.
or published research reports, only that We believe that the recently adopted In light of the modifications we are
the particular broker or dealer have safeguards regarding analyst making to Rule 139 today to eliminate
initiated or re-initiated coverage. In recommendations make it appropriate to the requirement that in an industry
addition, the amendment as adopted remove the ‘‘no more favorable’’ report a recommendation regarding the
does not require that the previously recommendation conditions in current registrant or its securities can only be
published or distributed research report Rule 139. We believe the Rules, as included if a recommendation as
cover the same securities that are the amended, are consistent with our recent favorable or more favorable had
subject of the registered offering. actions affecting research analysts and appeared in the last publication of the
research reports and will result in broker-dealer, we are eliminating
(2) Comments on Issuer-Specific Reports enhanced opportunity to provide paragraph (c) of Rule 139a, which
Commenters supported extending the information to investors regarding contains a comparable provision for
safe harbor to a broader class of issuers issuers and their securities. recommendations in reports on asset-
and recommended further extension to In the instruction regarding backed securities.
projections, we are requiring that Commenters suggested the
all reporting issuers, investment
projections be provided for substantially elimination of paragraph (c) and also
companies, and business development
suggested that the ‘‘reasonable
companies.373 We have not extended all the issuers listed in the
regularity’’ requirement in Rule 139a be
the safe harbor to a broader class of comprehensive list of securities
eliminated. While we have eliminated
issuers than we proposed, other than for contained in the report.
the latter requirement in Rule 139, we
certain non-reporting foreign private
(2) Comments on Industry-Related have added a requirement that the
issuers with a significant public float.
Reports research report not represent the
Commenters also requested clarification initiation or reinitiation of research
that the proposed changes would only Commenters supported the safe
harbor for industry-related reports for coverage. In Rule 139a the ‘‘reasonable
require the publication or distribution of regularity’’ requirement extends to
one prior research report in order to be all reporting issuers and suggested
expanding the safe harbor further to reports on multiple issuers and
able to rely on the safe harbor.374 As transactions. We have therefore decided
noted above, we have clarified the Rule include all issuers, whether or not
reporting, including voluntary filers.375 to retain the ‘‘reasonable regularity’’
in this regard to require only that requirement in Rule 139a.
coverage be initiated or re-initiated. Commenters also supported the
elimination of the previous publication vi. Research Report Amendments in
(B) Industry-Related Reports condition in the safe harbor.376 Some Connection With Regulation S and Rule
(1) Amendments Regarding Industry- commenters thought that the 144A Offerings
Related Reports disqualification for research reports on We are concerned that the restrictions
blank check, shell companies, and in Regulation S on directed selling
As adopted, industry reports under
penny stock issuers should remain at efforts and offshore transactions 379 and
Rule 139 can cover issuers required to
two years, not three, and that Rules 137 in Rule 144A on offers to non-qualified
file reports pursuant to Exchange Act
and 138 should have only a two-year institutional buyers (‘‘QIBs’’) and
Section 13 or Section 15(d) and issuers
disqualification.377 general solicitation 380 have resulted in
satisfying the conditions regarding non- We have not expanded the coverage of
reporting foreign private issuers. The brokers and dealers unnecessarily
the safe harbor to all issuers or to
safe harbor for industry reports is not include voluntary filers. In addition, we 378 See Asset-Backed Securities Adopting Release,
available if the issuer is or during the have provided that the disqualification note at III.C.2.b.
last three years was or any of its for blank check companies, shell 379 Securities Act Regulation S [17 CFR 230.901
predecessors was a blank check companies (other than business through 230.905] provides a safe harbor from the
company, shell company (other than combination related shell companies),
registration requirements of the Securities Act for
business combination related shell offshore offers and sales of securities. When a
and penny stock issuers is for three, broker or dealer participates in a Regulation S
company), or penny stock issuer. As rather than two, years to be consistent offering, questions arise regarding whether research
adopted, the amendments extend the with all of the Rules we are adopting activities would conflict with the prohibition
safe harbor for industry reports to today that have similar disqualification
against directed selling efforts or the offshore
registered offerings of any reporting transaction condition. The concern stems from the
provisions. fact that the distribution or publication of research
issuer. could be viewed as conditioning the market, which
Today’s amendments remove the v. Rule 139a would constitute directed selling efforts, or offering
prohibition on a broker or dealer making the securities in the United States, which is
In the Asset-Backed Securities prohibited under the ‘‘offshore transaction’’
a more favorable recommendation than Adopting Release, we noted that we requirement.
the one it made in the last publication. were considering amendments to Rules 380 Securities Act Rule 144A provides a safe
As in the proposals, we are not 137, 138 and 139 in connection with harbor from the registration requirements of the
requiring that the research report these reform proposals and: Securities Act for resales of restricted securities to
include any prior recommendations QIBs. When a broker or dealer is selling securities
To the extent these existing safe harbors in reliance on Rule 144A, it is subject to the
are modified, we also will consider similar condition that it may not make offers to persons
373 See, e.g., letters from ABA; Citigroup; other than those it reasonably believes are QIBs.
Goldman Sachs; Morgan Stanley; NYSBA; S&C; and Where it distributes research about the issuer
375 See, e.g., letters from ABA; NYSBA; S&C; and
SIA. around the time of a Rule 144A transaction,
374 See, e.g., letters from ABA; Citigroup; Cleary; SIA. questions arise regarding whether it may be viewed
376 See, e.g., letters from ABA and S&C.
CSFB; Merrill Lynch; Morgan Stanley; S&C; and as making offers to persons that receive the
SIA. 377 See, e.g., letters from ABA and S&C. research, including those who are not QIBs.
withholding regularly published transactions registered under the we discussed in the Proposing Release,
research.381 Accordingly, we are Securities Act. we believe that we should address the
adopting as proposed amendments discrepancies in time between the time
IV. Liability Issues
providing that research reports meeting of the contract of sale for securities
the conditions of Rule 138 and Rule 139 A. Information Conveyed by the Time of (when an investor becomes committed
will not be considered offers or general Sale for Purposes of Section 12(a)(2) to purchase the securities) on the one
solicitation or general advertising in and Section 17(a)(2) Liability hand, and the later time of availability
connection with offerings relying on 1. Interpretation and Rule of a prospectus (and perhaps other
Rule 144A.382 The amendments also information) on the other hand. The
provide that these research reports will Under the Securities Act, purchasers
Securities Act registration regime
not constitute directed selling efforts or of an issuer’s securities in a registered
permits final prospectuses to become
be inconsistent with the offshore offering have private rights of action for
available after an investor becomes
transaction requirements of Regulation materially deficient disclosure in
registration statements under Section 11 committed to purchase a security.392
S.383 This availability, therefore, does not
We do not believe that the publication and in prospectuses and oral
communications under Section 12(a)(2). necessarily address the receipt by an
of research in reliance on Rules 138 and investor of information at the time of its
139 will jeopardize the interests of Section 11 liability exists for untrue
statements of material facts or omissions contractual commitment.
investors in transactions relying on Rule
144A or Regulation S. On the other of material facts required to be included We provided an interpretation of
hand, limiting the ability to rely on in a registration statement or necessary Section 12(a)(2) and Section 17(a)(2) in
these exemptions when research on the to make the statements in the our Proposing Release and we are
issuers may otherwise be available registration statement not misleading at reaffirming that interpretation.
could, we believe, negatively impact the time the registration statement Securities Act Section 12(a)(2) and
information available to investors. became effective. Under Section Section 17(a)(2) do not require that oral
Commenters supported the proposals to 12(a)(2), sellers have liability to statements or the prospectus or other
exempt research reports meeting the purchasers for offers or sales by means communications contain all information
conditions of the safe harbor from the of a prospectus or oral communication called for under our line-item disclosure
restrictions in Regulation S and Rule that includes an untrue statement of rules or otherwise contain all material
144A.384 material fact or omits to state a material information.393 Rather, under these
fact that makes the statements made, provisions, the determination of liability
vii. Research and Proxy Solicitations based on the circumstances under is based on whether the communication
We are adopting with one which they were made, not includes a material misstatement or fails
modification from the proposal a misleading.389 Securities Act Section to include material information that is
codification of a Commission staff 17(a) is a general anti-fraud provision
necessary to make the communication,
position 385 that the publication or which provides, among other things,
under the circumstances in which it is
distribution of research under the that it shall be unlawful for any person
made, not misleading. Under our
conditions set forth in Rules 138 and in the offer and sale of a security to
obtain money or property by means of interpretation, the time at which an
139 is permitted in connection with a investor has taken the action the
transaction that is subject to the proxy any untrue statement of a material fact
or any omission to state a material fact investor must take to become committed
rules under the Exchange Act.386 The to purchase the securities, and has
new Rule provides that distribution of necessary in order to make the
statements made, in light of the therefore entered into a contract of sale,
research in accordance with Rule 138 or
Rule 139 is a solicitation to which Rules circumstances under which they were
made, not misleading.390 confirmation is sent or received or payment is
14a–3 through 14a–15 (other than Rule made. See, e.g., Radiation Dynamics, Inc. v.
14a–9) of the proxy rules 387 does not The term ‘‘sale’’ under the Securities
Goldmuntz, 464 F.2d 876, 891 (2d Cir. 1972)
apply. Commenters supported the Act includes any contract of sale.391 As (holding that a purchase occurs at ‘‘the time when
the parties to the transaction are committed to one
proposal to codify the staff position and 389 Whether any particular statement or omission another’’); In re Alliance Pharmaceutical Corp.
one requested that the exemption not be is material will depend on the particular facts and Secs. Lit., 279 F. Supp. 2d 171, 186–187 (S.D.N.Y.
restricted to use only in connection with circumstances. Information is material if ‘‘there is 2003) (following the holding in Radiation Dynamics
transactions registered under the a substantial likelihood that a reasonable with respect to the timing of a contract of sale);
shareholder would consider it important’’ in Pahmer v. Greenberg, 926 F. Supp. 287, (citing
Securities Act.388 We are adopting Rule making an investment decision. TSC Industries, Inc. Finkel v. Stratton Corp., 962 F.2d 169, 173 (2d Cir.
14a–2(b)(5) without the requirement v. Northway, Inc., 426 U.S. 438, 449 (1976); see also 1992) (‘‘[A] sale occurs for Section 12[(a)](2)
that the exemption be limited to Basic v. Levinson, 485 U.S. 224, 231 (1988). To purposes when the parties obligate themselves to
fulfill the materiality requirement, there must be a perform what they have agreed to perform even if
381 In the 1998 proposals, we expressed the substantial likelihood that a fact ‘‘would have been the formal performance of their agreement is to be
interpretive view that brokers and dealers may viewed by the reasonable investor as having after a lapse of time’’)); Adams v. Cavanaugh
significantly altered the ‘total mix’ of information Communities Corp., 847 F. Supp. 1390, 1402 (N.D.
publish and distribute research reports as described
made available.’’ Id. Ill. 1994) (noting that the Seventh Circuit has
in current Rule 138 and 139 without such reports
being deemed to constitute ‘‘directed selling Courts have analyzed materiality under Exchange followed the Radiation Dynamics decision). Also,
efforts.’’ The amendments we are adopting today Act Section 10(b) and Exchange Act Rule 10b–5, as indicated in note , below, the Uniform
codify that interpretation. and Securities Act Sections 11 and 12(a)(2) in a Commercial Code no longer requires that a
382 See amendments to Rule 138 and Rule 139. similar fashion. See, e.g., In re Donald J. Trump securities contract be in writing.
383 See amendments to Regulation S.
Casino Sec. Litig., 7 F.3d 357, 368 n.10 (3d Cir. 392 For example, in a shelf offering our rules
1993) (noting that while there are substantial permit an issuer to file a final prospectus
384 See, e.g., letters from ABA and Merrill Lynch.
differences in the elements that a plaintiff must supplement not later than the second business day
385 See Division of Corporation Finance no-action
establish under these provisions, they all have a after a takedown from the shelf registration
letter to Merrill, Lynch, Pierce, Fenner & Smith, Inc. materiality requirement and this element is statement.
(Oct. 24, 1997). analyzed the same under all of the provisions). 393 Registration statements or final prospectuses
386 See Exchange Act Rule 14a–2(b)(5) [17 CFR 390 See Securities Act Section 17(a)(2).
or prospectus supplements would, as today, require
240.14a–2(b)(5)]. 391 See Securities Act Section 2(a)(3). Courts have inclusion of information necessary to satisfy our
387 17 CFR 240.14a–3 through 240.14a–15.
held consistently that the date of a sale is the date line-item requirements and other applicable
388 See, e.g., letters from ABA and Merrill Lynch. of contractual commitment, not the date that a requirements.
is one appropriate time 394 to apply the in the issuer’s registration statement and • For purposes of Section 12(a)(2) and
liability standards of Section 12(a)(2) prospectuses for the offering in Section 17(a)(2) only, and without
and Section 17(a)(2).395 question, the issuer’s Exchange Act affecting any other rights under those
We interpret Section 12(a)(2) and reports incorporated by reference sections, for purposes of determining at
Section 17(a)(2) as meaning that, for therein or information otherwise the time of sale (including the time of
purposes of assessing whether at the disseminated by means reasonably the contract of sale), whether a
time of sale (including a contract of sale) designed to convey such information to prospectus, oral statement, or a
a prospectus or oral communication or investors. Such information also could statement,399 includes an untrue
statement includes or represents a include information directly statement of material fact or omits to
material misstatement or omits to state communicated to investors (including, state a material fact necessary in order
a material fact necessary in order to under the rules we are adopting today, to make the statements, in light of the
make the prospectus, oral through the use of free writing circumstances under which they were
communication, or statement, in light of prospectuses).397 made, not misleading,400 any
the circumstances under which it was As noted above, liability under information conveyed to the purchaser
made, not misleading, information Section 12(a)(2) attaches to an oral only after that time of sale will not be
conveyed to the investor only after the communication or prospectus by means taken into account; and
time of sale (including a contract of sale) of which an offer or sale is made that • For purposes of Section 12(a)(2)
should not be taken into account.396 For contains a material misstatement or only, a purchaser’s ‘‘knowing of such
purposes of Section 12(a)(2) and Section omits to state a material fact necessary untruth or omission’’ in respect of a sale
17(a)(2), whether or not information has to make the statements, in light of the (including a contract of sale) means
been conveyed to an investor at or prior circumstances in which they were knowing at the time of such sale.
to the time of the contract of sale made, not misleading. Liability under We find that our interpretation and
currently is a facts and circumstances Section 17(a)(2) attaches to an untrue interpretive rule are in furtherance of
determination, and our actions today do statement of a material fact or an the objectives of Section 12(a)(2) and
not affect that determination. Such omission to state a material fact Section 17(a) and are necessary for the
information could include information necessary to make the statements made, protection of the rights of investors
in light of the circumstances in which intended to be provided by those
394 Under our interpretation, the time of contract
they were made, not misleading, by sections.
of sale can be the time the purchaser either enters
means of which money or property is We do not believe that our
into the contract (including by virtue of acceptance interpretation or interpretive rule
by the seller of an offer to purchase) or completes obtained.
the sale. The time of the contract of sale under our Under our interpretation, the liability should result in ‘‘speed bumps’’ or
interpretation follows the statutory definition of determination under Section 12(a)(2) or otherwise slow down the offering
sale in Securities Act Section 2(a)(3). Under Section
Section 17(a)(2) as to an oral process. Particularly in light of the new
2(a)(3), sale includes ‘‘every contract of sale.’’ rules we are adopting today regarding
Our interpretation is not intended to affect any communication, prospectus, or
rights currently existing at any other time. Section statement, as the case may be, does not communications, issuers and
12(a)(2) applies to oral communications and take into account information conveyed underwriters should have sufficient
prospectuses (including final prospectuses) at other to a purchaser only after the time of sale flexibility to convey information in a
times. Section 17(a)(2) similarly applies to
(including the contract of sale), manner that does not slow the offering
statements at other times. In addition, both process. At the same time, in our view,
Securities Act Section 12(a)(2) and Section 17(a) including information contained in any
assess liability for ‘‘offers’’ as well as for sales. final prospectus, prospectus the interpretation that liability under
The 1954 amendments to the Securities Act supplement, or Exchange Act filing that Section 12(a)(2) and Section 17(a)(2)
permitting the use of a preliminary prospectus
is filed or delivered subsequent to the should be determined based on
recognized that the final prospectus would not information conveyed at the time of sale
always be available to investors at the time they time of sale (including the contract of
made their investment decisions. See 1954 sale) where the information is not (including a contract of sale) is
Amendments to the Securities Act of 1933, Pub. L. otherwise conveyed at or prior to that unassailable.
No. 83–577 68 Stat. 683 (1954). Following the 1954
amendments, the Commission adopted a number of
time.398 2. Comments and Guidance Regarding
rules that would ensure that preliminary In furtherance of our interpretation Our Interpretation and Rule 159
prospectuses were sent to investors in initial public discussed above, we also are adopting as With regard to our interpretation of
offerings at least 48 hours before the confirmation proposed an interpretive rule, Rule 159,
of the sale of the securities could be sent. Our Securities Act Section 12(a)(2) and
interpretation and rule do not affect this
under Section 12(a)(2) and Section Securities Act Section 17(a)(2) and
requirement. See Securities Act Rule 460 [17 CFR 17(a)(2). We intend that the effect of our proposed Rule 159, commenters raised
230.460], and Exchange Act Rule 15c2–8 [17 CFR interpretive rule will be the same as our concerns in the following areas:
240.15c2–8]. interpretation. Our new Rule provides
395 Article 8 of the Uniform Commercial Code was
• The Section 12(a)(2) and Section
the following: 17(a)(2) analysis of the information
amended in 1994 to eliminate the requirement that
a contract for the purchase of a security be reflected conveyed; 401
in a writing. See UCC, 1994 official text with 397 Direct communications can take various
• The manner in which the time of
comments, Article 8–113 (West 1994). The official forms, including orally or through the use of ‘‘sale’’ is determined; 402 and
comment to the rule states that the requirement that electronic or other free writing prospectuses, under
a contract be in writing is unsuited to the realities the new communications regime. See also Starr v.
399 These include a prospectus or oral statement
of the securities business. Thus, under state law Georgeson Shareholder, Inc., 2005 U.S. App. LEXIS
oral contracts for sales of securities are permitted. 11250 (2d Cir. 2005). in the case of Section 12(a)(2), or a statement to
396 As we discuss above, the basis for liability 398 As we elaborate on later, this interpretation which Section 17(a)(2) is applicable.
400 Or, in the case of Section 17(a)(2), any
under Section 12(a)(2) for statements in a would not, of course, affect the ability of the seller
prospectus (including a free writing prospectus) or and the purchaser to consider subsequently omission to state a material fact necessary in order
oral communication, and the basis for liability provided facts or disclosure and, among other to make the statements made, in light of the
under Section 17(a)(2) for the statements to which actions, by agreement terminate their sale contract circumstances under which they were made, not
the section applies, are that the statements cannot and by agreement enter into a new contract of sale misleading.
401 See, e.g., letters from ABA–ABS; BMA–ABS;
contain any misstatement of a material fact or omit with respect to the offered securities. In such case,
to state a material fact necessary to make the for purposes of our interpretation and rule, the time Cleary; and CSFB.
statements made, in light of the circumstances of the contract of sale to that purchaser will be the 402 See, e.g., letters from ABA; ABA–ABS; Alston;
under which they were made, not misleading. time of the new contract of sale. ASF; BMA–ABS; Citigroup; Cleary; CMSA; CSFB;
• The manner in which a purchaser characteristics of asset pools within seller’s obligations remain conditional
and seller may terminate an old contract given ranges or market standards. Where under state law.408 If such conflicts
and enter into a new contract of sale the characteristics enumerated in the were to arise in the future, we would
based on new information.403 portfolio profiles do not exclude have to consider at that time the
material elements of the pool’s appropriate actions to take, if any, to
a. The Section 12(a)(2) and Section
characteristics the omission of which preserve the important federal interests
17(a)(2) Analysis of the Information
would make the profiles misleading and in the determination of the time of a
Conveyed
where the final pools fall within the contract of sale. Importantly, beyond the
Securities Act Section 12(a)(2) and ranges or market standards disclosed in elements of formation of a contract,
Section 17(a)(2) do not require that oral the portfolio profiles, this kind of federal law governs any waiver of a right
statements or the prospectus or other disclosure prior to the time of a contract or claim arising under the federal
communication contain all information of sale can, depending on the facts and securities laws.409 Thus, contracts for
called for under our line-item disclosure circumstances and even if all disclosure sales of securities may not contain
rules or otherwise contain all material required in a statutory prospectus by provisions that operate to waive a
information. Rather, under these our line-item requirements is not purchaser’s substantive rights under the
provisions, the determination of liability included, meet the standards of Section federal securities laws. For example,
is based on whether the communication 12(a)(2) and Section 17(a)(2). conditional contracts that bind the
includes a material misstatement or fails purchaser at an earlier date but provide
to include material information that is b. Determination of Time of Sale that no contract of sale occurs until the
necessary to make the communication Some commenters argued that the final prospectus is provided would not
not misleading in light of the parties to the transaction should be able be consistent with the definition of sale
circumstances in which the to determine by contract, by reference to under the Securities Act nor the anti-
communication is made. In that regard, state law, when the contract of sale is waiver provisions of Securities Act
where in our discussion of our entered into, without regard to any Section 14.410
interpretation in the Proposing Release provision of the federal securities
we referred to ‘‘materially accurate and c. Termination of an Old Contract and
laws,405 including the anti-waiver Creation or Reformation of a New
complete information,’’ we were provisions of Securities Act Section
referring to the standards contained in Contract
14.406 Other commenters argued that the
Securities Act Section 12(a)(2) and iterative nature of their particular type We recognize that there may be
Section 17(a)(2)—a communication that of offerings meant that the parties could circumstances where a seller wishes to
contains no material misstatements, and not identify the precise point when the convey information to a purchaser after
no material omissions that would cause purchaser became bound to acquire the the time of a contract of sale that had
the communication to be misleading in securities.407 not been conveyed before that time. In
light of the circumstances in which it is As we discuss above, we believe that the Proposing Release, we made clear
made. Accordingly, liability for one appropriate time to assess whether our view that sellers could convey
omissions under Section 12(a)(2) and a purchaser has a claim under Section additional or changed information after
Section 17(a)(2) is not based on the mere 12(a)(2), or whether there has been a the time of the contract of sale,
omission of required prospectus violation of Section 17(a)(2), is the time terminate the old contract by agreement
information or other material of the contract of sale of the securities. with the purchaser, and enter into a new
information, but on the omission of contract of sale based on the new
State law contract principles are
material information as a result of information. Any rights to damages with
significant with regard to contract
which the information conveyed is respect to material defects in
formation, and we are not aware of any
misleading, under the circumstances in information in respect of the original
current significant conflicts between
which the communication in question is contract of sale would cease to exist as
state contract law and federal law
made. As a result, for example, a a result of the termination and
regarding the elements of formation of a
statement prior to the time of a contract formation of a new contract.
contract. Of course, a contract of sale
of sale that a transaction is ‘‘the same as Commenters expressed uncertainty
under the federal securities laws can
the XYZ transaction’’ or ‘‘just like the regarding how this renegotiation and
occur before there is an unconditional
XYZ transaction’’ with specified new contract would be effected.411
modifications can, if there are no bilateral contract under state law, for In light of commenters’ concerns, we
material omissions that would make example when a purchaser has taken all are providing guidance on the
that statement misleading under the actions necessary to be bound but a circumstances under which purchasers
circumstances in which it is made, meet 405 See, e.g., letters from Cleary; CSFB; Fried
and sellers can reassess their purchase
the standards of Section 12(a)(2) and Frank; Morgan Stanley; and SIA.
commitment based on new or changed
Section 17(a)(2). As another example, in 406 17 U.S.C. 77n. information and enter into a new
an area cited by a number of 407 See, e.g., letters from ABA–ABS; ASF; BMA–
commenters,404 in the asset-backed ABS; and CMSA. These comments were most 408 See notes 391 and 394 above.
securities market there are a number of prevalent in the asset-backed securities area. In this 409 AES Corp. v. Dow Chemical Co., 325 F.3d 174,
regard, the commenters stated that asset-backed 179 (3d Cir. 2003) cert. denied, 540 U.S. 1068
forward-sale transactions where securities offerings involved conditional contracts (2003); Petro-Ventures, Inc. v. Vrable, 967 F.2d 1337
contracts of sale are entered into based where investors agreed to purchase securities before (9th Cir. 1992).
on ‘‘portfolio profiles’’ or similar they had all the prospectus information. These 410 Any such contractual provision or any other
communications specifying important commenters stated that purchasers were given the contractual provision that operates as a waiver of
opportunity to reassess their purchase decisions if substantive rights under the federal securities laws
new or changed information was provided. would be void, even if such provision was
Deloitte; Fried Frank; Merrill Lynch; Morgan Investors who commented, on the other hand, did enforceable as a matter of state contract law.
Stanley; NYSBA; and SIA. not believe that material changes or additional 411 While commenters also requested elaboration
403 See, e.g., letters from ABA; ABA–ABS; CSFB;
material disclosures made after their binding on when and how information would be considered
Morgan Stanley; and NYSBA. purchase decisions were adequately communicated conveyed, as we made clear in the Proposing
404 See, e.g., letters from ABA–ABS; ASF; BMA– to them, if at all, and they believed it was clear Release, we believe this remains a facts and
ABS; CMSA; the Mortgage Bankers Association of when they had entered into a contract of sale. See, circumstances determination. See, e.g., letters from
America (‘‘MBA’’). e.g., letters from FMR and SSGA. ABA; Alston; Citigroup; Cleary; and S&C.
contract of sale, consistent with the information following a contract of sale, 3. Rule 412 and Rule 430B
purchaser’s rights, including under factors to consider in determining Under Securities Act Rule 412,
Section 12(a)(2), under the original whether the new information has been information contained in a prospectus
contract and the anti-waiver provisions conveyed could include whether it is supplement or Exchange Act filing
of the federal securities laws. identified as new or changed or is incorporated by reference into a
Commenters expressed uncertainty otherwise sufficiently prominent. registration statement may modify or
regarding the termination of a contract • The method by which the purchaser supersede other previously disclosed
of sale and the creation of a new is required to make or communicate its information that was contained in a
contract and the ability, consistent with decisions. For the contractual provision document incorporated or deemed to be
the federal securities laws, including the to be consistent with the anti-waiver incorporated by reference in that
anti-waiver provisions, to agree provisions of the federal securities laws, registration statement. We are revising
contractually on a procedure to the purchaser must knowingly terminate Rule 412 essentially as proposed to
terminate and reform a contract of sale the prior contract if it chooses to do so. make it consistent with the other rules
and thus provide a new time of sale at Similarly, the investor must knowingly we are adopting today. The revisions
the time of the reformation of the enter into the new contract if it chooses provide that information contained in a
contract.412 In our view, any such document that is deemed part of and
to do so. While we are not saying that
procedure must be the substantive included in or incorporated by reference
the method chosen necessarily requires
equivalent of the termination by mutual into a registration statement or
an affirmative communication rather
agreement of the prior contract of sale prospectus that is contained in the
than acquiescence by silence after the
and the entering into a new contract of registration statement would modify or
lapse of a specified period of time, the
sale. Any such procedure would, as supersede the information contained in
concept of reaffirmation is one that
pointed out above, result in a right to the registration statement or prospectus
earlier Commissions and Congress have
damages under the old contract ceasing that is part of or contained in the
struggled with since the 1940s.413 The
to exist. It follows from this position registration statement itself.416 Thus, the
method chosen should give the
that any such procedure would conflict provisions of Rule 412 regarding
purchaser a meaningful ability to make
with federal law unless: modified or superseded information
• The investor is provided adequate its contractual decisions in light of the
will operate regardless of whether the
disclosure of the contractual new or changed material information.
new information is contained in an
arrangement; In addition to our general Exchange Act report, prospectus
• The investor is provided with observations, we note the following: supplement, or prospectus that is part of
adequate disclosure of its rights under • Any contractual provision to the or included in a registration statement.
the existing contract at the time effect that the seller is deemed to have Under Rule 430B, which we are
termination is sought; communicated information to the adopting today (and in the
• The investor is provided with purchaser would be a violation of the corresponding undertakings of issuers),
adequate disclosure of the new anti-waiver provisions of the federal we have provided that subsequently
information that the seller seeks to securities laws.414 provided information deemed part of
convey; and and included in or incorporated by
• The investor is provided with a • A non-conditional contract that reference into a registration statement or
meaningful ability to elect to terminate moves the time of sale forward to a prospectus that is part of the registration
or not terminate the prior contract and different time would effectively act as a statement would not modify or
to elect to enter into or not enter into the waiver of substantive rights under the supersede any information conveyed to
new contract. federal securities laws and is a violation an investor at an earlier time of sale
Whether the investor is given such of the anti-waiver provisions of the (including the time of the contract of
adequate disclosure and meaningful federal securities laws.415 sale) for purposes of determining the
ability will depend on the particular information conveyed to an investor at
facts and circumstances. An evaluation 413 See, e.g., Nathan D. Lobell, Revision of the
or prior to that time.417
of the facts and circumstances would Securities Act, 48 Colum. L.Rev. 313, 332 (1948);
include but not be limited to the Clark Byse and Raymond J. Bradley, Proposals to 4. Relationship of Section 12(a)(2) and
Amend the Registration and Prospectus Section 17(a)(2) Interpretation and Rule
following: Requirements of the Securities Act of 1933, 96 U.Pa.
• The manner and prominence of the L.Rev. 609, 635–36 (1947–1948). 159 to Section 11 Liability
disclosure of the contractual 414 Moreover, a contractual provision that
Information contained in a prospectus
arrangements and the investor’s rights provides that a purchaser is deemed to have read or prospectus supplement that is part of
or have constructive or actual knowledge of
under the old contract. Insufficient information or documents, generally, would act as a registration statement that is filed after
disclosure as to the provisions would a waiver of substantive rights under the federal the time of the contract of sale will be
not necessarily put the purchaser on securities laws and thus would be inconsistent with part of and included in a registration
notice of the arrangement and of its the anti-waiver provisions of the federal securities statement for purposes of liability under
laws. For example, a contractual provision stating
rights, and thus may be viewed as an that a purchaser who has access to information is
Section 11 at the time of effectiveness,
unacceptable anticipatory waiver of the charged with knowledge of that information for which may be at or before the time of
purchaser’s substantive rights. purposes of Section 12(a)(2) would be
• The process by which the new or impermissible. These are merely examples of 416 See discussion in Section V.B.1 below under
language that would be inconsistent with the anti- ‘‘Date of Inclusion of Prospectus Supplements in
changed material information will be waiver provisions of the federal securities laws and Registration Statements and New Effective Dates of
conveyed to the purchaser. As noted are not all-inclusive. Registration Statements.’’
above, whether information is conveyed 415 Thus, a waiver might also be deemed to occur 417 We originally proposed to include this
is a facts and circumstances where an underwriter e-mails the purchaser saying provision in Rule 412 but have determined, in
determination. However, in our view, in that the issuer filed a prospectus supplement and response to comments, to include it instead in Rule
provides a specified period of time in which the 430B. See, e.g., letter from William J. Williams, Jr.
the context of providing new purchaser may contact the underwriter, after which It also is included in undertakings of issuers
the purchaser will be deemed to have purchased the provided in accordance with Item 512 of Regulation
412 See, e.g., letters from CSFB and Morgan securities as of the end of the period, which would S–K and Regulation S–B [17 CFR 229.512 and 17
Stanley. be a new date of sale. CFR 228.512].
the contract of sale. The date and time possibility that issuers may not be held • Any other communication that is an
that the information is part of the liable under Section 12(a)(2) to offer in the offering made by the issuer
registration statement and the time of purchasers in the initial distribution of to such purchaser.423
effectiveness relate to an investor’s the securities for information contained This definition of the issuer as a seller
rights under Section 11, but do not in the issuer’s prospectus included in its is not intended to affect whether any
affect any rights assessed at the time of registration statement. This also could other person offers or sells a security by
sale that the investor may have under be the case for other communications means of the same prospectus or oral
Section 12(a)(2) or that we might that are offers by or on behalf of an communication for purposes of Section
enforce under Section 17(a). Thus, issuer, including issuer free writing 12(a)(2). A communication by an
information that is deemed to be part of prospectuses. When an issuer registers underwriter or dealer participating in an
the registration statement as of the time securities to be sold in a primary offering would also not be on behalf of
of the contract of sale for shelf offering, the registration covers the offer the issuer solely by virtue of that
takedowns or as of effectiveness under and sale of its securities to the public. participation. As today, there are
Securities Act Rule 430A, will not, circumstances where the involvement of
The issuer is selling its securities to the
under our interpretation or Rule 159, be an issuer could be sufficiently extensive
public, although the form of
taken into account under Section (for example under adoption and
underwriting of such offering, such as a
12(a)(2) or Section 17(a)(2), unless the entanglement theories) that a
firm commitment underwriting, may
information is conveyed to an investor communication of another person,
at or prior to the time of sale (including involve the sale first by the issuer to the including an offering participant, could
the contract of sale). Similarly, an underwriter and then the sale by the be by an issuer.
investor’s rights under Section 11 will underwriter to the public.421 We believe A number of commenters were
not be affected by information conveyed that an issuer offering or selling its concerned that as proposed the rule was
to an investor at or prior to the time of securities in a registered offering unnecessarily broad and would
the contract of sale that is not included pursuant to a registration statement encompass purchasers of the issuer’s
in or incorporated by reference into the containing a prospectus that it has securities in the aftermarket, after the
registration statement at the time of the prepared and filed, or by means of other initial distribution of securities in the
effectiveness of the registration communications that are offers made by offering was completed.424 These
statement for the securities sold to the or on behalf of or used or referred to by commenters were also concerned that
investor.418 The class of investors that the issuer can be viewed as soliciting the proposed rule would encompass
may have a claim under Section 11 and purchases of the issuer’s registered oral communications made by
Section 12(a)(2) may thus be different. securities.422 Therefore, we are adopting underwriters.425 As with certain of our
A free writing prospectus that is not a rule providing that under Section other proposals, some commenters
part of a registration statement will not 12(a)(2) an issuer in a primary offering wanted to limit liability only to those
be subject to Section 11 liability, of securities, regardless of the form of situations in which the communication
although it will be subject to Section the underwriting arrangement, will be a was made by designated persons.426
12(a)(2) and Section 17(a)(2) liability.419 seller and will be considered to offer or While we have adopted the issuer as
Information contained in a free writing sell the securities to a purchaser in the seller provisions substantially as
prospectus not otherwise included in or initial distribution of the securities as to proposed, we have included language
incorporated by reference into the any of the following communications: that clarifies that it is aimed only at
registration statement will not be part of liability to purchasers in the initial
• Any preliminary prospectus or
the registration statement for purposes distribution of the securities who were
prospectus of the issuer relating to the
of Section 11. offered or sold the securities by means
offering required to be filed pursuant to
of the particular communication.427
B. Issuer as Seller Securities Act Rule 424 or Rule 497; Thus, the Rule, as adopted, would not
We believe there currently is • Any free writing prospectus relating cover purchasers of the issuer’s
unwarranted uncertainty as to issuer to the offering prepared by or on behalf securities in the aftermarket. We have
liability under Section 12(a)(2) for issuer of or used or referred to by the issuer also provided, as noted above, that an
information in registered offerings using and, in the case of an issuer that is an underwriter or dealer participating in an
certain types of underwriting open-end management investment offering is not acting on behalf of the
arrangements.420 As a result, there is a company, any profile relating to the issuer solely by virtue of that
offering provided pursuant to Securities participation.
418 See discussion regarding Rule 430B in Section
Act Rule 498; C. Due Diligence Interpretation
V.B.1 below under ‘‘Rule 430B.’’ See also Rule 158.
419 A free writing prospectus, while considered to • The portion of any other free
We requested comment in the
relate to a registered securities offering, is not writing prospectus (or, in the case of an Proposing Release as to whether we
included in and does not become part of the issuer that is a registered investment
registration statement unless the issuer files it as should re-evaluate the factors discussed
part of the registration statement or includes it in
company or business development in Securities Act Rule 176 428 regarding
a filing that is incorporated by reference into the company, any advertisement pursuant
registration statement. Thus, the responsibility and to Securities Act Rule 482) relating to 423 We are not addressing the status of the issuer
liability of offering participants for a particular free the offering containing material as a seller in a registered offering of transactions by
writing prospectus that is not incorporated or
included in the registration statement can arise only information about the issuer or its selling security holders only.
424 See, e.g., letters from ABA; Alston; CMSA;
under Section 12(a)(2) and Section 17(a)(2) and the securities provided by or on behalf of
other anti-fraud provisions. This is true regardless Davis Polk; and NYSBA.
the issuer; and 425 See, e.g., letters from ABA and CMSA.
of whether the free writing prospectus contains
426 See, e.g., letters from Alston and CMSA.
information from the registration statement
(including information that has been included with Rosenzweig v. Azurix Corp., 332 F.3d 854 (5th Cir. 427 We also have revised the final provision to
the consent of an expert). 2003). provide that it covers communications by the

420 See, e.g., Capri v. Murphy, 856 F.2d 473, 478 421 The two transactions are parts of the same issuer, not communications by or on behalf of the
(2d Cir. 1988); Lone Star Ladies Investment Club v. distribution of the securities to the public. issuer.
Schlotzsky’s, Inc, 238 F.3d 363, 370 (5th Cir. 2001); 422 See Pinter v. Dahl, 486 U.S. 622 (1988). 428 17 CFR 230.176.
what constitutes a reasonable requirements for reporting under the Securities Act registration process.433 A
investigation and reasonable grounds Exchange Act for public issuers have number of commenters on these
under Securities Act Section 11(c), and been intended to improve the quality proposed changes, while supporting the
requested an explanation of the changes and currency of disclosure under the automatic shelf registration proposals
that should be made and how each of Exchange Act. Together with for well-known seasoned issuers,
those changes would work in the technological advances, these believed that all seasoned issuers
context of each type of registered developments provide the basis for the should be able to use certain of the
securities offering. In response, rules we are adopting today to elements of automatic shelf registration
commenters urged us to reintroduce the modernize many procedural aspects of such as identification of selling security
1998 proposal to amend Rule 176 so securities offerings registered under the holders in prospectus supplements,
that it also applies to the reasonable care Securities Act. omission of most information from base
standard under Section 12(a)(2).429 Our new rules cover the registration prospectuses, and addition of new
Additionally, commenters asked us to procedures for seasoned and securities and new registrants by
reaffirm the statement from the 1998 unseasoned issuers, and seek to automatically effective post-effective
proposals that ‘‘Section 11 requires a streamline the registration process for amendments.434 As discussed in greater
more diligent investigation than Section most types of reporting issuers. These detail below, we are adopting the
12(a)(2),’’ so as to avoid any implication rules include: procedural changes with some
that our view of the matter has • A more flexible automatic modifications.
changed.430 We have determined not to registration process for well-known
seasoned issuers; b. Information in a Prospectus
propose modifications to Rule 176 at
this time. We believe, however, as we • Modifications that clarify and i. Mechanics
have stated previously, that the standard expand how and when information can
(A) Rule 430B
of care under Section 12(a)(2) is less be included in registration statements;
demanding than that prescribed by • A clarification of the Securities Act Rule 415 provides for continuous or
Section 11 or, put another way, that liability treatment of information delayed offerings and is, therefore, the
Section 11 requires a more diligent provided in a prospectus supplement foundation for shelf registration.
investigation than Section 12(a)(2).431 and Exchange Act reports incorporated Primary offerings on a delayed basis
Moreover, we believe that any practices by reference; may be registered by certain seasoned
or factors that would be considered • Modification of the timing of issuers only. A number of other delayed
favorably under Section 11, including effectiveness of shelf registration or continuous offerings may be
pursuant to Rule 176, also would be statements applicable to issuers in undertaken or registered by any issuer,
considered as favorably under the certain cases; and including offerings on a continuous
reasonable care standard of Section • Rules relating to non-shelf offerings basis of securities issued on exercise of
12(a)(2).432 of securities. outstanding options or warrants or
conversion of other securities, offerings
V. Securities Act Registration Rules and B. Procedural Rules
on a continuous basis under dividend
Amendments 1. Procedural Changes Regarding Shelf reinvestment plans, offerings on a
A. Overview Offerings continuous basis under employee
a. Overview benefit plans, and offerings solely on
As discussed above and in the behalf of selling security holders. Rule
Proposing Release, enhanced We are adopting changes to the 415 also permits registration by any
operation of the shelf registration issuer of a continuous offering that will
429 See, e.g., letters from Morgan Stanley; SIA; system under the Securities Act. These commence promptly and may continue
and TBMA. new provisions involve: for more than 30 days from the date of
430 See, e.g., letters from ABA; SIA; and S&C.
• Clarifying and codifying the initial effectiveness.435
431 See the 1998 proposals, note , at Section IX.D.
information to be included in and Many of the types of offerings
In a brief filed in Sanders v. John Nuveen & Co.,
619 F.2d 1222 (7th Cir. 1980), the Commission omitted from base prospectuses in shelf contemplated by Rule 415 can be
stated that the standard of care under Section registration statements; accomplished using a prospectus that is
12(a)(2) (formerly Section 12(2)) is less demanding • Codifying the manner of inclusion complete at the time of effectiveness of
than that prescribed by Section 11: of information in the final prospectus; the related registration statement and
[I]t would be inconsistent with the statutory • Providing for the treatment of
scheme to apply precisely the same standards to the therefore may not require a supplement
scope of an underwriter’s duty under Section prospectus supplements; and
• Liberalizing certain of the because there may be no additional
12[(a)](2) as the case law appropriately has applied
to underwriters under Section 11. Because of the requirements under Securities Act Rule information to include in the
vital role played by an underwriter in the 415, including: prospectus.436 There are a number of
distribution of securities, and because the • Eliminating the two-year limitation
registration process is integral and important to the 433 See, e.g., letters from ABA; Alston; Citigroup;
statutory scheme, we are of the view that a higher for registered securities for a delayed Cleary; Davis Polk; Fried Frank; IBA; NYCBA;
standard of care should be imposed on those actors offering; NYSBA; S&C; SIA; and TBMA.
who are critical to its proper operations. Since Æ Eliminating the ‘‘at-the-market’’ 434 See, e.g., letters from ABA; Alston; Citigroup;
Congress has determined that registration is not offering restrictions for issuers Cleary; Davis Polk; NYCBA; NYSBA; S&C; SIA; and
necessary in certain defined situations, we believe TBMA.
that it would undermine the Congressional intent—
registering primary equity offerings on
435 See Securities Act Rule 415(a)(1)(ix) [17 CFR
that issuers and other persons should be relieved Form S–3 or Form F–3;
230.415(a)(1)(ix)].
of registration—if the same degree of investigation Æ Eliminating the prohibition against 436 The terms of the securities being offered and
were to be required to avoid potential liability immediate takedowns off delayed shelf the plan of distribution are often complete at the
whether or not a registration statement is required.
registration statements; and time of effectiveness and not subject to change.
Brief for SEC in Nos. 74–2047 and 75–1260
(CA7), Sanders v. John Nuveen & Co., 554 F.2d 790
Æ Making conforming changes to Rule Where the offering is not registered on Form S–3
424 regarding the filing of prospectus or Form F–3, updating information in the
(7th Cir., 1977), p. 69, as quoted by Powell, J., registration statement regarding the issuer cannot be
dissenting to the denial of certiorari in John Nuveen supplements. included in future periodic reports filed under the
& Co. v. Sanders, 450 U.S. 1005 (U.S., 1981). Commenters strongly supported the Exchange Act and incorporated by reference, and
432 See the 1998 proposals, note 30, at Section IX. proposed procedural changes to the therefore must be included in the prospectus
offerings contemplated by Rule 415, primary shelf eligible issuers pursuant statement is filed, offering participants
however, such as a delayed offering, in to Rule 415(a)(1)(x), including asset- can use a base prospectus that omits
which the prospectus included in the backed issuers eligible to register their information in accordance with the
related registration statement at the time offerings on Form S–3; Rule. In addition, issuers can
of effectiveness, usually referred to as a • Secondary offerings by certain communicate using Rule 134 notices,
‘‘base prospectus,’’ must be primary shelf eligible issuers, including and issuers and other offering
supplemented to reflect the final terms for the purpose of adding information participants can use free writing
of the security and offering for each regarding the identities of and amounts prospectuses under Rules 164 and 433.
particular offering of securities. In of securities to be sold by selling Commenters supported proposed Rule
addition, in continuous or delayed security holders; and 430B because of the level of certainty it
offerings employing shelf registration • Offerings of mortgage-backed would provide for delayed offerings off
under Rule 415, there may be securities permitted by Rule of shelf registration statements.444
circumstances where a prospectus will 415(a)(1)(vii) that generally are
registered on Form S–11.439 (B) Means for Providing Information
be supplemented other than at the time
of a takedown. Rule 430C covers all registered A base prospectus that omits
Rule 424 provides the framework for offerings that are not covered by Rule statutorily required information is not a
the filing of each type of prospectus and 430B and prospectuses that are not Securities Act Section 10(a) final
prospectus supplement. There currently covered by Rule 430A.440 prospectus, and today’s rules do not
is no rule, however, that specifies the Rule 430B generally is consistent with change that fact. To satisfy the
relationship between the base current requirements and practice for requirements of Securities Act Section
prospectus and prospectus supplements shelf registration statements for delayed 10(a), as is the case with shelf
and the information that may be omitted offerings on Forms S–3 and F–3.441 registration statements today, an issuer
from or included in one or the other. We Under Rule 430B, a base prospectus in must include the information omitted
are adopting with some clarifications a shelf registration statement must from the base prospectus in:
from the proposals a new rule, Rule comply with the applicable form • A prospectus supplement;
430B, which we intend to achieve that requirements but can, as has been the • A post-effective amendment; or
purpose by codifying existing practice case before today’s new rules, continue • Where permitted as described
in most respects and liberalizing the to omit information that is unknown or below, through its Exchange Act filings
framework for the registration process in not reasonably available to the registrant that are incorporated by reference into
certain areas.437 We also are adopting pursuant to Rule 409.442 the registration statement and
Rule 430C which addresses the Rule 430B provides that a base prospectus that is part of the registration
treatment of prospectuses and prospectus that omits information as statement and identified in a prospectus
prospectus supplements for all provided in the Rule will be a permitted supplement.
registered offerings not covered by Rule prospectus.443 Thus, after a registration Information included in a base
430B and for prospectuses not covered prospectus or in an Exchange Act
by Rule 430A.
439 17 CFR 239.18. periodic report incorporated into a
Rule 430B is a shelf offering corollary
440 As we discuss below, Rule 430C provides that prospectus is included in the
all prospectuses and prospectus supplements filed
to existing Rule 430A, in that it pursuant to Rule 424 and Rule 497(b), (c), (d), and
registration statement. Rule 430B makes
describes the type of information that (e) (other than for offerings relying on Rule 430B or clear that prospectus supplements and
primary shelf eligible and automatic prospectuses covered by Rule 430A) are deemed information in them also will be
part of and included in the related registration deemed to be part of and included in
shelf issuers may omit from a base statement as of the date of first use. Rule 430C
prospectus in a Rule 415 offering and applies to prospectuses filed in offerings made in the registration statement.445
include instead in a prospectus reliance on Rule 430A to the extent the prospectus The rules we are adopting today
supplement, Exchange Act report or prospectus supplement is not covered by Rule provide primary shelf eligible issuers
430A. and well-known seasoned issuers with
incorporated by reference, or a post- 441 Rule 430B liberalizes current requirements in
effective amendment.438 certain respects, and significantly liberalizes
automatic shelf registration statements
Rule 430B covers the following types requirements for automatic shelf registration the ability to add to a prospectus, by
of offerings: statements, as discussed in Section V.B.2 below means other than a post-effective
under ‘‘Automatic Shelf Registration for Well-
• Offerings by well-known seasoned Known Seasoned Issuers.’’
amendment to the registration
issuers registered on automatic shelf 442 See Rule 430B and Rule 409 [17 CFR 230.409].
statement, more additional or omitted
registration statements; The base prospectus still must include, for other information than is currently the
• Immediate, delayed, and than automatic shelf registration statements, general case.446 We are adopting amendments to
continuous primary offerings by descriptions of the types of securities and possible Forms S–3 and F–3 to permit all
plans of distribution.
443 The Rule codifies that such a prospectus will
information required in the prospectus
contained in the registration statement by a post- satisfy the requirements of Securities Act Section 10 about the issuer and its securities to be
effective amendment. In that case, the new form of for purposes of Securities Act Section 5(b)(1). incorporated by reference from
prospectus included in the amended registration
statement is then complete at the new effective date
For asset-backed securities offerings made in Exchange Act reports.447 Such
reliance on General Instruction I.B.5 of Form S–3,
and therefore also does not require a supplement. because those issuers do not have to satisfy a
437 We also are making conforming changes to 444 See, e.g., letters from Alston; NYCBA; and
reporting history requirement, asset-backed
Rule 424. NYSBA.
securities offerings often must present most of their 445 In the 1998 proposals, we expressed our belief
438 Issuers cannot rely on Rule 430B for offerings
disclosure in the base prospectus and prospectus
made in reliance on other provisions of Rule 415(a). supplements rather than incorporate such that prospectus supplements and the information
For example, issuers that are not primary shelf information by reference into the registration contained in them are subject to liability under
eligible, but that are eligible to register securities for statement. Thus, for purposes of Section 10, a Section 11. The rules we adopt today codify that
resale on behalf of selling security holders in prospectus for an asset-backed securities offering position. See 1998 proposals, note 30, at Section
reliance on General Instruction I.B.3 of Form S–3 must include the format of deal-specific V.C.1.
446 Issuers still have the flexibility to file post-
or register the issuance of securities on exercise or information in the base prospectus or the base
conversion of outstanding securities pursuant to prospectus and a prospectus supplement. See effective amendments to include the information.
General Instruction I.B.4 of Form S–3, would not be Asset-Backed Securities Adopting Release, note , at 447 The amendments to Forms S–3 and F–3
eligible to rely on this Rule, but would instead be Section III.A.3.b. and General Instruction V. to explicitly permit information otherwise required in
subject to Rule 430C. Form S–3. Continued
information also can be contained in the Instruction I.B.1 to those Forms 451 to are issued and outstanding prior to
prospectus or a prospectus identify selling security holders and the initial filing of the resale registration
supplement.448 For example, material amounts of securities to be registered on statement.
changes in the plan of distribution, behalf of each of them after An issuer registering the resale of
which currently are required to be effectiveness. securities sold in a private offering may
included in post-effective amendments, Rule 430B and amendments to Form not rely on this provision to identify
can be amended under our new rules by S–3 and Form F–3, as adopted, permit after effectiveness selling security
incorporated Exchange Act reports or eligible seasoned issuers to add the holders who will acquire the securities
prospectus supplements.449 Rule 430B identities of the selling security holders directly from the issuer if the securities
also requires that a prospectus and all information about them, as are not yet issued in the private offering,
supplement be prepared and filed required by Item 507 of Regulation S– even where the investors are
pursuant to Rule 424 if omitted K,452 to the registration statement contractually bound to acquire the
information about an offering, such as covering the resale of their securities securities.456 The issuer can still register
the terms of the offering, the securities, after effectiveness by: the resale of the not-yet-issued
the plan of distribution, or the selling • An amendment to that registration securities, but it must identify the
security holders, is included in an statement; selling security holders in the
Exchange Act report incorporated by • A prospectus supplement; or registration statement at the time of
reference. The prospectus supplement filing and prior to effectiveness because
• An Exchange Act report
filed pursuant to Rule 424 must disclose the issuer will know the identities of the
incorporated by reference into the
the Exchange Act report or reports selling security holders who will
registration statement (subject to filing a
containing such information. This acquire the securities from it.
prospectus supplement identifying such We believe that it is important for
disclosure will assist investors and the report).453
markets in locating this offering-related issuers to be able to satisfy their
We have revised this provision from contractual registration obligations to
information and will also be consistent the proposal to clarify that this ability
with the treatment of other prospectus selling security holders in registering
to identify selling security holders after their resales, while also assuring that
supplements filed for these purposes. effectiveness will be available only if: offerings are properly registered and the
(C) Identification of Selling Security • The registration statement is an selling security holders and the
Holders Following Effectiveness automatic shelf registration securities to be sold by them are
statement; 454 or identified in the registration statement.
(1) Scope of Provision • All of the following are satisfied: The purpose of this provision of Rule
As we discussed in the Proposing Æ The resale registration statement 430B is to provide a more convenient
Release, transfers of restricted securities identifies the initial offering transaction method to identify selling security
can occur after a private placement is or transactions pursuant to which the holders in registration statements, and
completed so that the identities of the securities, or securities convertible into not to change the existing
holders of those restricted securities at such securities, were sold; 455 responsibilities and liabilities of issuers
the time of filing the resale registration Æ The initial offering of the securities, and these selling security holders under
statement may not be known to the or the securities convertible into such the federal securities laws.
issuer.450 Filing post-effective securities, is completed; and
amendments to add new or previously Æ The securities, or the securities (2) Comments on Identification of
unidentified security holders can convertible into such securities, that are Selling Security Holders
impose delays. To alleviate the timing the subject of the registration statement Commenters expressed support for
concern arising from an issuer’s the proposals to allow seasoned issuers
451 General Instruction I.B.1 to Form S–3 and
inability to identify selling security the ability to identify selling
Form F–3 permits reporting issuers that are current
holders prior to effectiveness, we are and timely in their periodic and current reporting shareholders after effectiveness.457 As
including provisions to allow issuers obligations under the Exchange Act and that have with many of the other proposals, some
eligible to use Form S–3 or Form F–3 for $75 million in non-affiliate voting and non-voting believed that this flexibility also should
common equity market capitalization to register be extended to unseasoned issuers.458 In
primary offerings in reliance on General securities offerings for cash on Form S–3 and Form
F–3 for the benefit of the issuer or selling security
addition, one commenter suggested that
the prospectus directly pursuant to Item 3 through holders. Blank check companies, shell companies, we eliminate the proposed requirement
Item 11 of Form S–3 and Item 3 through Item 5 of and penny stock issuers are not eligible to rely on that the issuer identify any known
Form F–3 to be included in this manner. this provision. selling security holders prior to
448 The changes to Form S–3 and Form F–3 are 452 17 CFR 229.507.
effectiveness, because some selling
intended to allow the disclosure requirements to be 453 As we are amending Rule 424 today,
satisfied through incorporation by reference, or prospectus supplements may be filed in connection

security holders known to the issuer
through a filed prospectus or prospectus with selling security holders offerings, to add may not have consented to the inclusion
supplement, not to change the timing of when the selling security holders omitted pursuant to Rule of their names in the prospectus.459
information must be included. 430B and to provide supplemental or additional In response to commenters’
449 As noted above, under today’s rules, information. The filing of a prospectus supplement
to include the identity of omitted selling security
suggestions, we have clarified that the
prospectus supplements and the information
contained in them are deemed to be part of and holders pursuant to Rule 424(b)(7) will be deemed initial transaction that the issuer must
included in the registration statement. to be a new effective date of the registration disclose in the resale registration
450 Currently, the staff in the Division of statement for Section 11 liability purposes of the statement must be the initial offering
Corporation Finance requires all issuers registering issuer and underwriter. Under the Securities Act,
selling security holders may be underwriters in
transaction in which the securities were
securities for the benefit of selling security holders
to include the names of selling security holders in connection with the distribution of the securities
456 These types of offerings include PIPE
the registration statement either prior to being registered for resale on their behalf.
effectiveness or through a post-effective amendment 454 See Section V.B.2 below under ‘‘Automatic transactions discussed in note 182 above.
457 See, e.g., letters from Alston; ABA; and Davis
to the registration statement, with limited Shelf Registration for Well-Known Seasoned
exceptions for the identities of security holders Issuers.’’ Polk.
458 See, e.g., letters from ABA; NYCBA; NYSBA;
owning a de minimis amount of the issuers 455 The Rule requires disclosure of the initial
securities (less than 1%) or receiving the securities offering transaction pursuant to which the sales and TBMA.
as a result of a donative transfer. were made, not any subsequent resale transactions. 459 See letter from Fried Frank.
initially sold, not a resale transaction in and included in the registration (B) New Effective Date for Section 11
which any particular selling security statement as follows: Purposes
holder may have acquired the securities. • For a prospectus supplement Rule 430B also establishes a new
The goal of the disclosure is to clearly required to be filed other than in effective date for a shelf registration
link the securities being registered for connection with a takedown of statement for Section 11 liability
resale to a completed initial offering. securities, all information contained in purposes only for the issuer and for a
Moreover, we have revised the that prospectus supplement will be person that is at the time an
instructions to Form S–3 and Form F– deemed part of and included in the underwriter.465 That new effective date
3 to eliminate any requirement to name registration statement as of the date the will be the date a prospectus
any selling security holders prior to prospectus supplement is first used; 462 supplement filed in connection with the
effectiveness if the conditions of Rule and takedown or takedowns is deemed part
430B are satisfied. of the relevant registration statement.466
Commenters also suggested that we • Under Rule 430B only, for a
prospectus supplement required to be For purposes of liability under Section
should allow all issuers to be able to 11 of the issuer and any underwriter at
identify selling security holders after filed in connection with a takedown of
securities pursuant to Rule 424(b)(2), the time only, the new effective date
effectiveness.460 We have determined will be as to the part of the registration
not to extend this flexibility to all (b)(5), or (b)(7), all information in that
prospectus supplement will be deemed statement relating to the securities to
issuers. We believe that issuers that are which such prospectus relates. The part
not eligible to file a primary offering on part of and included in the registration
statement as of the earlier of the date it of the registration statement will consist
Form S–3 or Form F–3 are more prone, of all information included in the
in general, to engage in transactions is first used or the date and time of the
first contract of sale of securities in the registration statement and any
some of which have raised disclosure prospectus relating to the offering of the
and registration issues.461 As a result, offering to which the prospectus
supplement relates.463 securities as of the new effective date
we believe it is important to have and all information included in reports
complete selling security holder We have chosen the triggering dates and materials incorporated by reference
information and be able to review that for prospectus supplements to be into the registration statement and
information in registration statements to deemed part of and included in prospectus as of such date relating to
assure compliance with Section 5 and registration statements for a number of the offering, and in each case, not
our disclosure rules in connection with reasons. First, under Rule 430B and modified or superseded pursuant to
these offerings. Rule 430C, for a prospectus supplement Rule 412. The part of the registration
ii. Information Deemed Part of filed other than in connection with a statement will include information
Registration Statement takedown, we have chosen the date of relating to the offering in a prospectus
first use as the appropriate date for it to already included in the registration
We are adopting provisions in Rule be deemed part of and included in the statement. This includes, for example, a
430B that will make clear that registration statement because that is the form of prospectus containing
information contained in a prospectus date on which the prospectus information relating to the offering and
supplement required to be filed under supplement updates the information in previously filed pursuant to Rule
Rule 424, whether in connection with a the registration statement.464 Second, 424(b)(3) other than in connection with
takedown or otherwise, will be deemed under Rule 430B, a prospectus the takedown in question, where the
part of and included in the registration supplement filed in connection with a information has not been modified or
statement containing the base takedown pursuant to Rule 424 will be superseded. These provisions also will
prospectus to which the prospectus deemed part of and included in the reconcile the effective date for shelf
supplement relates. We also are registration statement as of the earlier of offerings for issuers and underwriters
adopting new Rule 430C that has similar when it is first used or the date and time with a comparable date for non-shelf
provisions regarding the treatment of of the first contract of sale of the offerings. We believe the Rule also will
prospectus supplements, which applies securities to which the prospectus eliminate the unwarranted, disparate
to offerings not covered by Rule 430B supplement relates. This timing, treatment of underwriters and issuers
and prospectuses not covered by Rule combined with the new effective date under Section 11.467
430A. As a result of Rule 430B and Rule provisions discussed below, provides
430C, prospectus supplements required the appropriate timing for assessing 465 We also are amending Rule 158 to include
to be filed under Rule 424 or Rule liability under Section 11 for issuers conforming changes to the effective date for
497(b), (c), (d), or (e) will, in all cases, and underwriters. purposes of the last paragraph of Securities Act
be deemed to be part of and included in Section 11(a).
Under Rule 430C, the filing of prospectus
registration statements for purposes of 462 We already have made clear that the date of supplements will not trigger new effective dates of
Securities Act Section 11. first use for purposes of Securities Act Rule 424 is the registration statement.
not the date that the prospectus supplement is 466 The new effective date will not, however, be
iii. Date of Inclusion of Prospectus given to a purchaser in connection with a sale. considered the filing of a new registration statement
Supplements in Registration Statements Rather, it refers to the date that the prospectus is for purposes of Form eligibility. See Securities Act
and New Effective Dates of Registration available to the managing underwriter, syndicate Rule 401.
Statements member, or any prospective purchaser. See 467 Currently, there can be a mismatch between
Elimination of Certain Pricing Amendments and issuers and underwriters in the time that liability
(A) Scope of Provisions Revision of Prospectus Filing Procedures, Release is assessed. For example, in an offering off a shelf
No. 33–6714 (May 27, 1987) [52 FR 21252]. registration statement, an issuer could have its
Rule 430B and Rule 430C, as adopted, 463 These new provisions determine when a
liability assessed as of the date of the registration
deem information contained in prospectus supplement is deemed part of the statement’s initial effectiveness (or post-effective
prospectus supplements to be part of registration statement for Securities Act Section 11 amendment) or the most recent updating required
purposes. They do not affect the determination of under Securities Act Section 10(a)(3), while the
when information is conveyed to a purchaser for liability of an underwriter would be assessed at the
460 See, e.g., letters from ABA; NYCBA; NYSBA; Section 12(a)(2) liability purposes. later time when it became an underwriter. In such
and TBMA. 464 See amendments to Securities Act Rule 412(a) a case, underwriters in takedowns occurring after
461 See note 182 above. [17 CFR 230.412(a)]. Continued
At the same time, we believe that for financial statements or previous reports information included in the registration
other persons, including directors, on management’s assessment of internal statement at the time of the prospectus
signing officers, and experts, the filing control over financial reporting, unless supplement filing.
of a form of prospectus should not result a prospectus supplement (and any
(C) Comments on Prospectus
in a later Section 11 liability date than Exchange Act report incorporated by
Supplements and New Effective Dates
that which applied prior to our new reference into the prospectus and
rules.468 Therefore, under Rule 430B, registration statement) or post-effective A number of commenters addressed
except for an effective date resulting amendment contains new audited the provisions providing for new
from the filing of a form of prospectus financial statements or other effective dates of registration statements
for purposes of updating the registration information as to which the auditor is at the time of filing of prospectus
statement pursuant to Section 10(a)(3) an expert and for which a new consent supplements for takedowns off shelf
or reflecting fundamental changes in the is required.470 As to any other expert, registration statements.471 Commenters
information in the registration statement the filing of the prospectus supplement supporting these proposals agreed that,
pursuant to the issuer’s undertakings, also will not trigger a new effective date, as to shelf registration statement
the prospectus filing will not create a and thus will not require the filing of a takedowns, the liability of issuers under
new effective date for directors or consent, unless the prospectus Section 11 should be brought into line
signing officers of the issuer. Any supplement (including incorporated with the liability of underwriters.472 A
person signing any report or document Exchange Act reports) includes a new number of commenters were concerned
incorporated by reference in the report or opinion of an expert whose with the liability of auditors, other
prospectus that is part of the registration consent is required pursuant to Section experts, and outside directors that
statement or the registration statement, 7 and who will have liability pursuant would arise under Section 11 as of the
other than a document filed for the to Section 11. For example, a prospectus new effective date of the registration
purposes of updating the prospectus supplement filed in connection with statement.473 While some commenters
pursuant to Section 10(a)(3) or reflecting one or more takedowns of securities that believed that the Rule should provide
a fundamental change, is deemed not to did not include other disclosure that a new auditor’s consent is not
be a person who signed the registration (including through incorporated required in connection with the
statement as a result. The new effective Exchange Act reports) for which the takedown and new effective dates,
date also does not apply to a person that consent of an expert is required others believed that unless the Rule was
becomes an underwriter after that pursuant to Securities Act Section 7 and clear that the takedown would not be a
effective date; in that case Securities Act Securities Act Rule 436 will not require new effective date for auditors and other
Section 11(d) provides that the date the consents to be filed. experts, we should require that consents
person became an underwriter is its Including information contained in of these experts be provided at the new
effective date.469 prospectus supplements in registration effective date.474
We also are not changing the effective statements and triggering new effective We have revised Rule 430B in
date for auditors who provided consent dates for the issuer and underwriter will response to commenters’ concerns about
in an existing registration statement for provide and preserve important investor new effective dates as we discuss above.
their report on previously issued protections under the Securities Act. We We believe that these changes should
believe that these modifications are provide clarity for auditors, among
the date of initial effectiveness (or post-effective appropriate to ensure issuer liability for others, that a new effective date for
amendment) or the Section 10(a)(3) update would
be subject to liability under Section 11 for an 470 New audited financial statements or other
them is not created and that new
issuer’s Exchange Act reports incorporated by
information as to which the accountant is an expert
consents and corresponding procedures
reference into the prospectus included in the are not required as a result of Rule 430B.
and for which a new consent is required under
registration statement after that date while issuers
Securities Act Section 7 [15 U.S.C. 77g] or
would not. Rule 430B results in most cases in the iv. Amendments to Rule 415
Securities Act Rule 436 [17 CFR 230.436] includes
date of effectiveness of a registration statement for any financial statements filed pursuant to Article 3
an issuer and underwriter in a particular offering of Regulation S–X [17 CFR 210.3–01 et seq.] after
(A) Elimination of Limitation on
being close in time. the date of the last consent by the accountant, Amount of Securities Registered
468 Prior to today’s amendments, Rule 158(c)
including those that are restated. Examples of such
provided that, for purposes of the last paragraph of audited financial statements and financial
(1) Revised Provisions
Section 11(a), a new effective date is deemed to be information are (1) a restatement of the issuer’s or
the latest to occur of (1) the effective date of the Prior to today’s amendments, Rule
a guarantor’s financial statements, (2) financial
registration statement, (2) any post-effective statements required under Rule 3–05 of Regulation 415(a)(2) limited the amount of
amendment next preceding a particular sale of S–X [17 CFR 210.3–05], and (3) financial statements securities that could be registered where
registered securities by the issuer filed to update the that are required under Rule 3–14 of Regulation S– the registration statement pertained to
registration statement pursuant to Section 10(a)(3) X [17 CFR 210.3–14]. In addition, a new consent is
or to reflect in the prospectus fundamental changes offerings pursuant to Rule
required when the accountant’s report on
in the information in the registration statement or management’s assessment of the registrant’s 415(a)(1)(viii), (ix), and (x). Rule
add any material information about or reflect any internal control over financial reporting is changed. 415(a)(2) limited the amount of
material changes in the plan of distribution; or (3) In the event a new consent is required, that securities that could be registered in
the date of filing of the last report of the issuer consent may be filed by a post-effective amendment
incorporated by reference into the prospectus and to the registration statement or by filing an 471 See, e.g., letters from ABA; AICPA; Alston,
relied on in lieu of filing a post-effective Exchange Act report, such as an annual report on
amendment to effect a Section 10(a)(3) update to the BDO Seidman; Deloitte; E & Y; KPMG; PwC; and
Form 10–K or a report on Form 8–K or Form 6–K,
registration statement or to reflect a fundamental SIA.
which is incorporated by reference into the 472 See, e.g., letters from ABA and SIA.
change in the information in the registration registration statement. Under Rule 430B, a report
statement, next preceding a particular sale by the pursuant to Rule 10–01(d) of Regulation S–X [17
473 See, e.g., letters from ABA; AICPA; Alston,
issuer of registered securities. CFR 210.10–01] on unaudited interim financial BDO Seidman; Deloitte; E & Y; KPMG; and PwC.
469 Securities Act Section 11(d) provides in part, 474 One commenter expressed concern that
information by an accountant which has conducted
‘‘If any person becomes an underwriter with respect a review of such interim financial information requiring an auditor to give a consent before a shelf
to the security after the part of the registration would not require the consent of such accountant takedown would impose undue delays on the
statement with respect to which his liability is under Rule 436. Such a report is not considered offering process. See letter from ABA. The
asserted has become effective, then * * * such part part of a registration statement prepared or certified commenter noted that, although auditor ‘‘bring-
of the registration statement shall be considered as by an accountant or a report prepared or certified down’’ procedures are customary in connection
having become effective with respect to such person by an accountant within the meaning of Securities with a comfort letter, these procedures currently do
as of the time when he became an underwriter.’’ Act Sections 7 and 11. not delay pricing.
these offerings to an amount which, at effective.479 Prior to effectiveness of the statement, during which issuers could
the time the registration statement new registration statement (including at not continue to sell securities off their
became effective, was reasonably the time of filing for an automatic shelf old registration statements.482 As noted
expected to be offered and sold within registration statement), the issuer can above, we are maintaining the three-year
two years from the initial effective date amend the later registration statement to requirement, but we are allowing the
of a registration statement. include any securities (and fees issuer to continue to offer and sell
For offerings under Rule 415(a)(1)(x) attributable to such securities) securities off its old registration
and continuous offerings under Rule remaining unsold on the older statement until the earlier of the
415(a)(1)(ix) in each case that are registration statement. We believe that effectiveness of the new registration
registered on Form S–3 or Form F–3, we allowing issuers to continue to offer and statement or six months after the timely
are eliminating the provision in sell securities off the old registration filing of the new registration statement.
Securities Act Rule 415(a)(2) that limits statement for an additional six months We believe that this provision will
the amount of securities registered. The after filing the new registration eliminate any inappropriate blackout
two-year limitation was designed to statement pending effectiveness of the periods.
ensure that the issuer had a bona fide new registration statement, and then
including any securities remaining (B) Immediate Takedowns From a Shelf
intention to offer and sell securities in Registration Statement Filed Under Rule
the proximate future.475 We are unsold on the new registration
statement, will preserve the ability of 415(a)(1)(x)
eliminating this requirement for these
offerings because we do not believe that these issuers to continue to use their We are amending Securities Act Rule
it provides any significant investor shelf registration statements to access 415(a)(1)(x), as proposed, to allow
protection.476 the capital markets. The additional six- primary offerings on Form S–3 or Form
month time period will not impact F–3 to occur immediately after
However, under the amendments to
adversely our decision to have new effectiveness of a shelf registration
Rule 415 we are adopting today, that
shelf registration statements filed every statement.483 With respect to immediate
shelf registration statement can only be three years. In addition, continuous
used for three years (subject to a limited offerings from an effective registration
offerings begun prior to the end of the statement, our current rules permit
extension) after the initial effective date three years can continue on the old
of the registration statement.477 Under omission of information from the
registration statement until the effective prospectus at the time of effectiveness
the revised rule, new shelf registration date of the new registration statement if
statements must be filed every three only in reliance on Securities Act Rule
they are permitted to be made under the 430A.484 The changes we are adopting
years, with unsold securities and fees new registration statement.
paid thereon allowed to be included on today affecting the treatment of
We believe that, especially with our prospectus supplements provides
the new registration statement, where liberalization of procedures for shelf
the shelf registration statement relates sufficient protection to investors to
registration, particularly automatic shelf allow, in an immediate offering,
to: registration as described below, the omission of information under Rule 415
• Offerings registered on an automatic precise contents of shelf registration and Rule 430B.485 Commenters on this
shelf registration statement; or statements may become difficult to provision expressed support for
• Offerings of securities described in identify over time, and that markets will allowing immediate takedowns off of
Rule 415(a)(vii), (ix), or (x).478 benefit from a periodic updating and shelf registration statements in reliance
Automatic shelf registration consolidation requirement.480 The new on Rule 415.486
statements are immediately effective, as registration statement will include the
discussed below. In other cases, as long disclosures then required under the (C) Eliminating ‘‘At-the-Market’’
as the new shelf registration statement applicable form and our rules. Offering Restrictions for Seasoned
is filed within three years of the original Issuers
(2) Comments on Elimination of
effective date of the old registration Limitation on Amount of Securities The restrictions on primary ‘‘at-the-
statement the issuer may continue to Registered market’’ offerings of equity securities
offer and sell securities from the old currently set forth in Rule 415(a)(4)
Commenters supported most of the
registration statement for up to six were adopted initially to address
proposed changes to Rule 415.481 Some
months thereafter until the new concerns about the integrity of trading
commenters were concerned that the
registration statement is declared markets.487 As discussed in the
requirement to file a new shelf
registration statement every three years 482 See, e.g., letters from ABA; Alston; BRT;
475 See Securities Act Section 6(a) [15 U.S.C.
could result in a blackout period NYCBA; S&C; and SIA. One commenter suggested
77f(a)] and Proposed Revision of Regulation S–K
and Guides for the Preparation and Filing of between the end of the three years and a five-year, rather than a three-year, time period to
Registration Statements and Reports, Release No. effectiveness of the new registration file a new automatic registration statement. See
33–6276 at Part III.E (Dec. 23, 1980) [46 FR 78]. letter from NYCBA.
476 We are retaining the limitation for business 483 See amendments to Securities Act Rule
479 The six-month extension does not apply to
combination transactions registered under Rule automatic shelf registration statements, since they 415(a)(1)(x).
484 See Prospectus Delivery; Securities
415(a)(viii) and continuous offerings under Rule will go effective immediately upon filing. See
415(a)(ix) that are not registered on Form S–3 or discussion in Section V.B.2 below under Transactions Settlement, Release No. 33–7168 (May
Form F–3. ‘‘Automatic Shelf Registration for Well-Known 11, 1995) [60 FR 26604] at Section II.A.5.
477 The rules adopted today do not limit the 485 Rule 430A continues to be available for
Seasoned Issuers.’’
amount that can be registered and provide for 480 See, for example, our revisions to Securities immediate takedowns where the information
unused amounts to be carried forward. Act Rule 412 to permit information in registration omitted from a form of prospectus contained in the
478 In the Proposing Release we sought comment statements and prospectuses to be modified or registration statement at the time of effectiveness
on whether Rule 415(a)(1)(vii), which permits shelf superseded by subsequently filed Exchange Act omits only Rule 430A information. We are
offerings of mortgage related securities, should be reports and prospectus supplements and our amending Rule 430A to enable the rule to be relied
eliminated. We have decided to retain Rule amendments to Forms S–3 and F–3 to permit most on by issuers using automatic shelf registration
415(a)(1)(vii), but have also determined that the information to be included in the prospectus statements that go effective immediately.
through incorporation by reference. 486 See, e.g., letters from NYCBA and NYSBA.
requirement of a new shelf registration statement
every three years should apply to offerings of these 481 See, e.g., letters from Brinson Patrick; NYCBA; 487 17 CFR 230.415(a)(4). See Integrated
securities. and NYSBA. Disclosure Release, note 23, at Section IV.B.2.d.
Proposing Release, we are eliminating used.493 We are adopting the changes to material change in such information in
these restrictions for primary shelf Rule 424 essentially as proposed.494 the registration statement.498
eligible issuers because they are not Currently, shelf issuers can satisfy the
vi. Elimination of Rule 434
necessary to provide protection to first two of these obligations by filing
markets or investors. The market today In the Proposing Release, we Exchange Act periodic reports that are
has greater information about seasoned requested comment as to whether we incorporated by reference into the
issuers than it did at the adoption of the should eliminate Rule 434 in its registration statement. We are amending
‘‘at-the-market’’ limitations, due to entirety.495 The commenters who the Item 512(a) undertaking as proposed
enhanced Exchange Act reporting. responded to this request believed that to clarify that, in shelf registration
Further, trading markets for these the Rule is superfluous and should be statements filed on Forms S–3 and F–3,
issuers’ securities have grown eliminated.496 Because we believe that all the disclosures required by this
significantly since that time. Requiring Rule 434 has been used only very rarely, undertaking also may be contained in
the involvement of underwriters and and because our new rules regarding any filed prospectus supplement
limiting the amount of securities that free writing prospectuses permit the use deemed part of and included in a
can be sold imposes artificial limitations of written descriptions of the terms of registration statement or any Exchange
on this avenue for these issuers to the issuer’s securities or of the offering, Act report, instead of only in periodic
access capital. Under our revised Rule, such as term sheets, under more flexible reports, that an issuer files that is
an issuer that is registering a primary circumstances, we are eliminating Rule incorporated by reference into the
equity shelf offering pursuant to Rule 434.497 registration statement.499 As discussed
415(a)(1)(x) can register an ‘‘at-the- vii. Issuer Undertakings below, we also are adopting as proposed
market’’ offering of equity securities the undertaking to allow automatic shelf
without identifying an underwriter in We are adopting conforming revisions issuers to include in this manner all
its registration statement 488 and without to the issuer undertakings that are other information that has been omitted
a limitation on the amount of the required in connection with a shelf from the base prospectus, subject in the
offering. Issuers who are not eligible to registration statement. These revisions case of a takedown of securities to the
register primary equity offerings using reflect the issuer’s agreement regarding filing of a prospectus supplement. In the
Rule 415(a)(1)(x) will still not be eligible the inclusion of information contained event that satisfaction of any element of
to register ‘‘at-the-market’’ equity in prospectus supplements in the undertaking requires the filing by
securities offerings. Commenters registration statements and new any of the permitted methods of a
generally supported the removal of the effective dates of the registration consent of an expert, that consent may
restrictions on ‘‘at-the-market’’ statement on filing of a prospectus be filed by post-effective amendment to
offerings.489 supplement. Part II of the registration statement or by
(A) Treatment of Information in filing of an Exchange Act report, such as
v. Rule 424 Amendments
Prospectus Supplements an annual report on Form 10–K or a
In conjunction with our other report on Form 8–K or Form 6–K, that
procedural rules, we are adopting Item 512(a) of Regulation S–K is incorporated by reference into the
certain companion modifications to currently requires an issuer that has registration statement.500
Securities Act Rule 424. We are adding registered securities pursuant to Rule
415 to undertake to file a post-effective (B) Prospectus Supplements Deemed
a separate new paragraph (b)(8) to Rule Part of a Registration Statement and
424 for forms of final prospectuses not amendment to the registration statement
to: New Effective Dates
filed within the required timeframe
under Rule 424. As we discuss below, • Include in the registration statement To reflect the issuer’s understanding
this provision of Rule 424 will allow us any prospectus required by Securities of and agreement to the changes
to identify more readily final Act Section 10(a)(3); described above regarding inclusion of
prospectuses not filed timely.490 As • Reflect in a prospectus included in prospectus supplements in registration
noted above, we also are adding a the registration statement any facts or statements and new effective dates, we
separate new paragraph (b)(7) under events arising after the effective date of are including a new undertaking in
Rule 424 for filing of prospectuses the registration statement (or the most which the issuer will agree that,
identifying selling security holders. recent post-effective amendment consistent with Rules 430B and 430C,
thereto) which, individually or in the information in prospectus supplements
Commenters supported the aggregate, represent a fundamental
amendments to Rule 424.491 Some is deemed part of and included in
change in the information set forth in registration statements and that,
commenters suggested additional the registration statement; and
revisions to Rule 424, including deleting consistent with Rule 430B, new
• Include in a prospectus included in effective dates as to the issuer and
references to paper copies 492 and the registration statement any material
defining the phrase ‘‘date it is first underwriter will occur in respect of
information with respect to the plan of
distribution not previously disclosed in 498 In addition, Item 512(a)(4) contains a
488 Underwriters may, as in the case of other the registration statement or any provision under which foreign private issuers are
information, be included in the relevant prospectus required include an undertaking regarding the
supplement. updating of the financial and other information in
489 See, e.g., letters from Brinson Patrick; NYCBA; 493 See, e.g., letter from NYSBA. a shelf prospectus in accordance with the age of
and NYSBA. 494 We have included in Rule 430B a provision financial statements provisions under Item 8.A of
490 A prospectus filed under new paragraph (b)(8) regarding identification in prospectuses or Form 20–F. We are not modifying this requirement.
will still be characterized as ‘‘required to be filed’’ prospectus supplements of Exchange Act reports Foreign private issuers will continue to be subject
under the paragraph originally applicable to it. For filed to include certain omitted information in to this updating requirement, by a post-effective
example, a form of prospectus required to be filed prospectuses and registration statements. amendment or by incorporation by reference, as
under paragraph (b)(2) but filed under paragraph 495 Rule 434 has permitted the use of term sheets currently provided for under Item 512(a)(4).
(b)(8) will still trigger a new effective date as in connection with certain offerings. 499 This amendment will permit an issuer to use
provided in Rule 430B. 496 See letters from Cleary and Davis Polk. an incorporated Form 8–K (or incorporated Form 6–
491 See, e.g., letters from Alston and NYSBA. 497 We have made conforming changes to the K) to satisfy this undertaking.
492 See, e.g., letters from Cleary and Davis Polk. rules that reference Rule 434. 500 See Securities Act Rule 436.
prospectuses related to certain shelf as today, on whether the subsidiary Under our automatic shelf registration
takedowns.501 The new undertaking meets the conditions of Rule 3–10 of process, eligible well-known seasoned
will assure that the issuer agrees that it Regulation S–X and Exchange Act Rule issuers may register unspecified
has liability for information that is 12h–5. amounts of different specified types of
included in or deemed part of the securities on immediately effective
2. Automatic Shelf Registration for
registration statement, that the liability Form S–3 or Form F–3 registration
Well-Known Seasoned Issuers
of the issuer will be assessed as of the statements. Unlike other issuers
date such a prospectus supplement is a. Overview registering primary offerings on Form S–
deemed part of and included in the i. Rule Changes 3 or Form F–3, the automatic shelf
registration statement.502 registration process allows eligible
Because closed-end management In addition to the updating of the
issuers to add additional classes of
investment companies use Securities shelf registration process described
securities and to add eligible majority-
Act Rule 415 to make shelf offerings above, we are adopting rules to establish
owned subsidiaries as additional
under certain circumstances and a significantly more flexible version of
registrants after an automatic shelf
provide an undertaking similar to that shelf registration for offerings by well-
registration statement is effective. They
required by Item 512(a) of Regulation S– known seasoned issuers. This version of
also can freely accommodate both
K in their registration statements on shelf registration, which we refer to as
primary and secondary offerings using
Form N–2, we are including a new ‘‘automatic shelf registration,’’ involves
filings on Form S–3 or Form F–3. The automatic shelf registration. Thus, these
undertaking in Form N–2 similar to that issuers have significant latitude in
which we are including in Item 512(a) automatic shelf registration rules are in
addition to the communications determining the types and amounts of
of Regulation S–K.503 We also are their securities or those of their eligible
amending Rule 415 to clarify that exemptions we are adopting today and
will allow eligible well-known seasoned subsidiaries that can be offered without
investment companies filing on Form any potential time delay or other
issuers substantially greater latitude in
N–2 that use the Rule must provide the obstacles imposed by the registration
registering and marketing securities.
undertaking required by Form N–2, process.
The automatic shelf registration process
rather than the undertaking required in Issuers using an automatic shelf
will continue to enable the issuer, as
Item 512(a) of Regulation S–K.504 registration statement will be permitted,
with other shelf registrants, to take
c. Changes to Form S–3 and Form F–3 down securities off a shelf registration but not required, to pay filing fees at any
statement from time to time.506 time in advance of a takedown or on a
In addition to adopting changes that
Automatic shelf registration is not ‘‘pay-as-you-go’’ basis at the time of
will allow additional Form S–3 or Form
mandatory; a well-known seasoned each takedown off the shelf registration
F–3 disclosures to be included through
issuer may continue to file any other statement in an amount calculated for
prospectus supplements and Exchange
registration statement it is eligible to use that takedown.
Act reports, we are amending Form S–
3 and Form F–3, as proposed, to expand or engage in any exempt offering or The rules as adopted also permit more
the categories of majority-owned offerings of exempt securities available information to be excluded from the
subsidiaries that will be eligible to to it.507 base prospectus in an automatic shelf
For well-known seasoned issuers, we registration statement than from a
register their non-convertible securities,
believe that the modifications we are regular shelf registration statement. The
other than common equity, or
adopting will facilitate immediate omitted information can then be
guarantees under General Instruction
market access and promote efficient included at or before the time of filing
I.C. of Form S–3 or General Instruction
capital formation, without at the same a prospectus supplement. The automatic
I.A.5 of Form F–3. The permitted
time diminishing investor protection. shelf registration process, together with
circumstances are the same as those
Most significantly, the new rules will the loosening of the restrictions on
provided for majority-owned
provide the flexibility to take advantage communications, permits well-known
subsidiaries to be well-known seasoned
of market windows, to structure seasoned issuers with maximum
issuers.505 We believe that this
securities on a real-time basis to flexibility to use free writing
expansion is appropriate in that it
accommodate issuer needs or investor prospectuses to structure transactions.
recognizes the various types of
demand, and to determine or change the
subsidiary guarantees that may be ii. Comments on Automatic Shelf
plan of distribution of securities as
employed in registered offerings of such Registration
issuers elect in response to changing
non-convertible securities, other than
market conditions. We hope that Commenters strongly supported the
common equity, of related entities.
providing these automatic shelf issuers concept of automatic shelf registration
Whether information regarding the
more flexibility for their registered
subsidiary will have to be included in
offerings, coupled with the liberalized
the registration statement will depend, that issuers currently may elect to conduct on an
communications rules we are adopting, unregistered basis. For example, this process will
501 See
will encourage these issuers to raise facilitate the registration under the Securities Act of
Rules 430B and 430C.
502 With regard to the liability of directors,
their necessary capital through the rights offerings conducted by eligible foreign
registration process.508 private issuers. At present, foreign private issuers
persons signing registration statements, and experts, frequently do not extend rights offerings to their
see the discussion in Section V.B.1. above under U.S. security holders because the current
‘‘Date of Inclusion of Prospectus Supplements in 506 As with other delayed shelf registration
registration process under the Securities Act does
Registration Statements and New Effective Dates of statements, the issuer will be considered to be in not accommodate the timing mechanics of rights
Registration Statements.’’ registration or offering its securities only when it offerings, which are typically announced and
503 Item 34.4.d and e of Form N–2. Form N–2 is offers securities in a takedown off its registration launched in a very short period of time. The ability
the registration form used by closed-end statement. See, e.g., the 2000 Electronics Release, of eligible foreign private issuers to use the
management investment companies to register note , at note 10. automatic shelf registration process and to have a
under the Investment Company Act of 1940 and to 507 Those other registration statements will not go
Securities Act registration statement become
offer their securities under the Securities Act. effective immediately. automatically effective so that sales in a rights
504 See Rule 415(a)(3). 508 The flexibility permitted under the automatic offering can take place immediately after filing
505 See discussion in Section II.A. above under shelf registration process will benefit issuers and should encourage eligible foreign private issuers to
‘‘Well-Known Seasoned Issuers.’’ investors by facilitating different types of offerings extend rights offerings to U.S. security holders.
for well-known seasoned issuers.509 or otherwise desire to delay the effective ii. Information in a Registration
Commenters also believed that date of their registration statements. Statement
automatic shelf registration should be (A) Information That May Be Omitted
optional and, in addition, should allow b. Automatic Shelf Registration
Mechanics From the Base Prospectus
issuers to control the timing of
effectiveness of their registration i. Eligibility Our rules as adopted will allow well-
statements, if they did not want known seasoned issuers using automatic
immediate effectiveness.510 A number of The automatic shelf registration shelf registration statements to omit
commenters on the procedural changes, procedure can be used in connection more information from the base
while supporting the automatic shelf with registration statements on Form S– prospectus in an automatic shelf
registration proposals for well-known 3 or Form F–3 for all primary and registration statement than is the case
seasoned issuers, believed that all secondary offerings of securities of well- currently or than is the case in a regular
seasoned issuers should be able to use known seasoned issuers.514 In general, shelf offering registration statement
certain of the elements of automatic securities of majority-owned under new Rule 430B. A base
shelf registration such as identification subsidiaries of a well-known seasoned prospectus included in an automatic
of selling security holders in prospectus issuer parent can be included on the shelf registration statement can, as
supplements, omission of most automatic shelf registration statement of today, omit information pursuant to
information from base prospectuses, and Securities Act Rule 409 that is unknown
the parent if the subsidiary satisfies the
addition of new securities and new and not reasonably available and, as
conditions for being considered a well-
registrants by automatically effective adopted, can omit the following
known seasoned issuer described
post-effective amendments.511 additional information:
above.515 Under automatic shelf • Whether the offering is a primary or
The rules we are adopting today registration, as adopted, a registration
continue to provide the greatest secondary offering;
statement can be amended by post- • The description of the securities to
flexibility to well-known seasoned
effective amendment to add an eligible be offered other than an identification of
issuers. We have not expanded the
subsidiary as an issuer.516 the name or class of the securities;
automatic shelf provisions to other
issuers.512 As we discussed in the Under the rules we are adopting • The names of any selling security
Proposing Release, we believe that today, an issuer can file an automatic holders; and
limiting the benefits of automatic shelf shelf registration statement if it meets • The disclosure regarding any plan
registration to well-known seasoned the eligibility criteria for well-known of distribution.
issuers is appropriate, at this point, as seasoned issuer on the initial filing date. Omitting this additional information
these issuers have an established Thereafter, the issuer also must from the base prospectus will not affect
Exchange Act record and a significant determine its eligibility at the time of the information that an investor will be
following in the market. As we discuss each amendment to its shelf registration provided in connection with a
above, we are directing the staff of the statement for purposes of providing its particular sale.517
Division of Corporation Finance and update under Securities Act Section (B) Mechanics for Including Information
OEA to undertake a study in three years 10(a)(3) (or on the due date thereof). If
after the full implementation of the We believe that our new rules to
an issuer is no longer eligible to use an broaden the means by which issuers
rules as to the operation of the automatic shelf registration statement at
definition of well-known seasoned may include information in an
the time of its determination of automatic shelf registration statement
issuers.513 eligibility, it will have to either post-
We are not mandating that automatic will benefit both issuers and investors.
effectively amend its registration These new rules provide issuers with
shelf registration be used by any issuer
statement onto the form it is then automatic shelf registration statements
meeting the conditions for being a well-
eligible to use or file a new registration the ability to add omitted information to
known seasoned issuer and we are not
modifying the immediate effectiveness statement on such a form. For example, a prospectus by means of:
provisions to permit a well-known a well-known seasoned issuer that is • A post-effective amendment to the
seasoned issuer to defer effectiveness. initially eligible for automatic shelf registration statement;
Rather, well-known seasoned issuers registration, that is not eligible at the • Incorporation by reference from
may continue to file a registration time of its annual report filing, but that Exchange Act reports; or
statement on any form for which it is retains its eligibility to file a shelf • A prospectus or a prospectus
eligible if they either do not wish to file registration statement under Rule 415 supplement that would be deemed to be
an automatic shelf registration statement on Form S–3, can file a post-effective
amendment or a new registration 517 In shelf registration statements currently, base
prospectuses generally do not contain certain

509 See, e.g., letters from ABA; Alston; BMA; statement on Form S–3 that designates information about particular securities offering
Citigroup; Cleary; Davis Polk; Fried Frank; NYCBA; an amount of securities to be registered takedowns. That information is communicated
NYSBA; S&C; and SIA.
510 See, e.g., letters from ABA and Cleary.
and otherwise complies with orally or through a preliminary prospectus and then
requirements for seasoned issuers that reflected in a final prospectus filed pursuant to Rule
424. Under our new rules, it also will be permitted
NYSBA; SIA; S&C; and TBMA. are not well-known seasoned issuers. to communicate such information in free writing
512 As a result of the amendments to Rule 415 and
prospectuses. The automatic shelf expands the
the provisions of Rule 430B, seasoned issuers will categories of information that may be omitted from
have more flexibility in a number of respects, the base prospectus. The right to omit information
including in providing information in registration 514 As today, business combination transactions, from a base prospectus does not affect the fact that
statements, including selling security holder including exchange offers cannot be registered on under our interpretation and Rule 159 regarding
information, conducting ‘‘at-the-market’’ offerings, Securities Act Sections 12(a)(2) and 17(a)(2),
Form S–3 or Form F–3. Automatic shelf registration
and conducting immediate takedowns off of shelf whether there are material misstatements or
registration statements. is not available for Form S–4 or Form F–4.
material omissions that make a communication
515 See discussion in Section II.A above under
513 See Section II.A.4 above under ‘‘Comments misleading, in the circumstances in which it is
Regarding the Definition of Well-Known Seasoned ‘‘Well-Known Seasoned Issuers.’’ made, is assessed on the basis of information
Issuer.’’ 516 See discussion below at note 520. conveyed at the time of sale, as discussed above.
part of and included in the registration issuers based only on their registered conducting registered securities
statement.518 non-convertible security issuances can offerings.
Examples of the types of information register on automatic shelf registration We are adopting revisions to remove
that can be added in this manner for statements only non-convertible the current restriction that would
automatic shelf registration statements securities, other than common equity, prevent well-known seasoned issuers
include: unless they also are primarily eligible to from adding classes of securities to an
• The public offering price; use Form S–3 or Form F–3 for a primary automatic shelf registration statement
• Any updating information regarding offering because they have a public float after effectiveness.526 Under the
the issuer (whether or not a of $75 million or more.522 The amended rules, a well-known seasoned
fundamental change); calculation of registration fee table in issuer can add new classes of securities
• Detailed description of securities or securities of an eligible subsidiary to
the initial registration statement will not
including information not contained or an automatic shelf registration statement
need to include a dollar amount or a
incorporated by reference in the base at any time before the sale of those
prospectus; specific number of securities, unless a
fee based on an amount of securities is securities. In order to add new classes
• The identity of underwriters and of securities, an issuer must file a post-
selling security holders; and paid at the time of filing, but that table
effective amendment, which will be
• The plan of distribution of the must at least list each class of security
immediately effective, to register an
securities. registered and indicate if the filing fee
will be paid on a pay-as-you-go basis. unspecified amount of securities of the
The principal exceptions to this
new class of security.527 This
complete flexibility will be that an The issuer can specify the number or
issuer adding new types of securities 519 requirement will cause the registration
dollar amount of securities in a
or new eligible issuers, including statement to include each new class of
prospectus supplement at the time it
guarantors, and the securities they may securities to be offered. An issuer can
pays a fee in advance of or for each provide the disclosure about the new
issue to a registration statement must do offering.523
so by post-effective amendment, which class of securities of the issuer in:
will be effective immediately upon
The base prospectus in the initial • A post-effective amendment to the
filing.520 New issuers and requisite registration statement must identify in registration statement;
officers and directors are required to be general terms the names or classes of • A prospectus supplement deemed
signatories to the post-effective securities registered.524 In addition, we part of and included in the registration
amendment.521 are expanding the unallocated shelf statement; or
procedure to allow automatic shelf
(C) Registration of Securities To Be issuers to register classes of securities 526 See amendments to Securities Act Rule 413
Offered without allocating the mix of securities [17 CFR 230.413].
527 If an issuer using automatic shelf registration
An eligible well-known seasoned registered between the issuer, its eligible
determines after effectiveness to add a class of debt
issuer may register on an automatic subsidiaries, or selling security securities or guarantees of securities to its
shelf registration statement an holders.525 Allowing registration registration statement, in addition to filing a post-
unspecified amount of securities to be without separately allocating the effective amendment to the registration statement to
offered, without indicating whether the registered classes of securities will register the class of debt securities or guarantees, it
also needs to qualify all appropriate indentures
securities are being sold in primary provide, we believe, greater flexibility to under the Trust Indenture Act of 1939. The Division
offerings or secondary offerings on well-known seasoned issuers in of Corporation Finance has long taken the position
behalf of selling security holders. that the indenture covering the securities to be sold
Issuers that are well-known seasoned 522 See the discussion in Section II.A.3 above
pursuant to a registration statement must be
qualified when that registration statement becomes
under ‘‘Well-Known Seasoned Issuers Securities effective and not at the time of any post-effective
518 The amendments permit any information Offerings.’’ amendment to that registration statement. See
required in the prospectus pursuant to Item 3 523 See amendments to Securities Act Rules 413,
Division of Corporation Finance letter to Donald P.
through Item 11 of Form S–3 and Item 3 through 456(b), and 457(r) [17 CFR 230.413; 230.456(b), and Spencer (available September 24, 1982). This
Item 5 of Form F–3 to be included in this manner 230.457(r)]. See also, Form S–3—General position is consistent with the existing registration
by any one of these methods or a combination Instruction II.E and Instructions to the Calculation process and Securities Act Rule 413, which
thereof. Rule 430B requires that the issuer file a of Registration Fee Table. provides that an issuer must register an offering of
prospectus supplement if the Exchange Act reports 524 One commenter suggested that the rule should
additional securities through the use of a separate
include the offering-related information. not require issuers using automatic shelf registration statement. In the automatic shelf
519 See discussion in Section V.B.2 below under
registration statements to include a description of registration process we are adopting today,
‘‘Registration of Securities to be Offered.’’ securities in the base prospectus. See letter from however, an issuer is permitted to add securities to
520 Adding the issuer by post-effective NYCBA. The proposal did not contemplate a a shelf registration statement by means of a post-
amendment, including necessary signatures and detailed description and we are clarifying that only effective amendment. As such, unlike in the current
information and filings necessary for qualification the identification of the names or classes of registration statement process, under our new rules
under the Trust Indenture Act of 1939 [15 U.S.C. securities such as ‘‘debt,’’ ‘‘common the effectiveness of an automatic shelf registration
77aaa-bbbb] where applicable, ensures that the stock,’’preferred stock,’’ etc., is required. post-effective amendment that adds securities to a
entity will be considered an issuer for purposes of 525 See General Instruction II.E. of Form S–3 and shelf registration statement will be the time ‘‘when
Securities Act Section 11 for the securities covered General Instruction II.F. of Form F–3. Currently, an registration becomes effective as to such
by the registration statement. Information about the issuer offering securities on Form S–3 or Form F– securit(ies),’’ as that term is used in Trust Indenture
newly added subsidiary is required in the amended 3 is not required to specify the amount of each class Act Section 309(a)(1). Accordingly, under the
registration statement, either in a prospectus that is of securities that it will offer, but it is required to automatic shelf procedure, the Trust Indenture Act
part of the registration statement or through separately register and designate the amount and qualification requirement will be satisfied in the
incorporation by reference, unless the subsidiary is classes of securities that may be offered and sold following manner: (1) for debt securities or
exempt from reporting pursuant to Exchange Act by eligible subsidiaries and selling security holders. guarantees included in the registration statement at
Rule 12h-5. The post-effective amendment also Under our current rules, offerings for selling original effectiveness, the trust indenture will be
must include necessary opinions and consents. All security holders are not considered delayed required to be included in the registration statement
disclosure items with regard to that new issuer can offerings under Rule 415(a)(1)(x) and thus must be at the time that registration statement becomes
be incorporated by reference from the new issuer’s separately registered or designated prior to effective; and (2) for debt securities or guarantees
Exchange Act filings, or be included in a prospectus effectiveness of the registration statement. Except added to the registration statement through a post-
supplement or a post-effective amendment. under our new rules for well-known seasoned effective amendment, the trust indenture will be
521 See Securities Act Section 6 [15 U.S.C. 77f], issuers, issuers cannot offer and sell securities of required to be included in the registration statement
and the discussion in Section V.B.2 below under selling security holders using an unallocated shelf at the time that post-effective amendment becomes
‘‘Registration of Securities to be Offered.’’ registration statement. effective.
• An Exchange Act report that is (2) Comments on Pay-as-You-Go Fees is available. Securities Act Section 6
incorporated by reference into the Commenters supported a pay-as-you- governs how securities may be
registration statement.528 go filing fee approach.531 Some registered, including the filing of
commenters were concerned about the registration statements and the payment
(D) Pay-as-You-Go Registration Fees of filing fees. Any securities offered and
effect of an inadvertent failure to pay
(1) Pay-as-You-Go Fee Rules the filing fee in a timely manner.532 sold off an effective automatic shelf
Commenters also believed that issuers registration statement will satisfy the
We are adopting rules to permit, but should continue to be able to pay filing requirements of Securities Act Section
not require, issuers using automatic fees in advance of an offering.533 Some 5(c) if the registration statement, as
shelf registration statements to pay commenters requested guidance on the amended if applicable, includes that
filing fees at the time of a securities time at which automatic shelf issuers class of securities and is filed prior to
offering—commonly known as ‘‘pay-as- using the pay-as-you-go system should sale and will satisfy the requirements of
you-go’’—or prior to that time. Under calculate the amount of the filing fee.534 Securities Act Section 5(a) if such
the new rules, for issuers electing to use We have adopted the pay-as-you-go registration statement, as amended if
the pay-as-you-go arrangement, the filing fee provisions substantially as applicable, includes that class of
issuer will not have to pay any filing fee proposed, but with certain securities and is effective prior to sale.
at the time of filing the initial modifications to address commenters’ The securities sold in the takedown will
registration statement.529 We have concerns. In response to commenters’ be registered for purposes of Securities
eliminated the requirement in the concerns, we have provided a cure Act Section 6 if:
proposal to pay a nominal ($100) initial provision that will allow an issuer to • The class of securities is included
filing fee. The triggering event for a pay a filing fee after its original payment in the registration statement, which is
required fee payment is a takedown off due date if it made a good faith effort signed as required; and
to pay timely and then paid the fee • The appropriate fee is paid as
a shelf registration statement. For each
within four business days of the original provided in our rules.
takedown, the issuer can file a
prospectus supplement for the fee due date. We also have clarified that (F) Immediate Effectiveness
takedown that includes a calculation of automatic shelf issuers may use any of Under the automatic shelf registration
registration fee table or can file a post- the methods available to pay their filing statement rules we are adopting today,
effective amendment including the same fees, including paying the filing fees in all automatic shelf registration
information. The rules provide that the advance, or paying the filing fees on a statements and post-effective
issuer must pay the appropriate fee pay-as-you-go basis. We have eliminated amendments thereto will become
calculated in accordance with Securities the initial fee requirement. As a result effective immediately upon filing.536 In
Act Rule 457 within the time required of this clarification and the cure addition, we are adopting the proposed
to file the prospectus supplement provisions, we believe that we have amendments to Securities Act Rule
pursuant to Rule 424, but provide an addressed commenters’ concerns in this 401(g) to provide that an automatic shelf
ability to cure a failure to pay the fee. area. With regard to the time when the registration statement will be deemed to
The cure is available if the issuer made amount of the filing fee is calculated, as be filed on the proper form unless we
today, the amount of the filing fee is notify the issuer after filing of our
a good faith effort to pay the fee timely
calculated based on the fee schedule in objection to the use of such form.537
and then pays the fee within four
effect at the time of payment (upon Therefore, until an issuer is notified by
business days of the original fee due
filing in advance, or at the time of a us, it can conduct offerings with
date. The rules we are adopting today
takedown) in accordance with the certainty that it has registered the
also require that the issuer file the
provisions of Rule 457. Thus, the fee securities on the proper form. After we
prospectus supplement, including the amount may be different depending on
fee table reflecting payment of the fee on notify an issuer of our objection, the
the time of payment.535 issuer cannot proceed with subsequent
the cover page, pursuant to Rule 424. In
addition, at any time before one or more (E) Registration under Securities Act offerings (those offerings not in
takedowns in the future (for example, in Sections 5 and 6 progress), unless it amends the
the case of a medium-term note As we discussed in the Proposing registration statement to the proper
program), the issuer can pay a filing fee Release, under our new rules for form, or otherwise resolves the issue
in advance and file such a prospectus automatic shelf registration, compliance with us. If we notify an issuer that it is
supplement with a fee table reflecting with Securities Act Sections 5 and 6 is ineligible to use an automatic shelf
payment of the fee on the cover.530 tied to the timing of the necessary registration statement, securities sold
filings and the content of the automatic prior to our notification will not have
528 This disclosure becomes part of the
shelf registration statement (including, been sold in violation of Section 5. For
registration statement regardless of the method as we have described, amendments, ongoing offerings, the issuer, once
chosen to provide it.
incorporated documents, and notified by us, will promptly have to file
529 Because an issuer can pay any filing fee, in
prospectus supplements). Securities Act a post-effective amendment or a new
whole or in part, in advance of a takedown, the
rules as adopted provide flexibility in the timing of Section 5 requires registration of each registration statement to reflect that it is
the fee payment. Issuers using pay-as-you-go can securities offering unless an exemption 536 See Rule 462(e) and (f).
still deposit monies in an account for payment of
filing fees when due. As today, the fee rules 531 See,
537 We are delegating our authority to object and
applicable to the use of such account will apply. e.g., letters from ABA; Cleary; S&C; and to notify the issuer to the Division of Corporation
We are referring to this account as the ‘‘lockbox TBMA. Finance.
532 See, e.g., letters from Cleary and TBMA.
account.’’ The amount of the fee will be calculated One commenter supported the change to Rule 401
533 See, e.g., letters from NYSBA; S&C; and SIA.
based on the fee schedule in effect when the money that provides that automatic shelf registration
is withdrawn from the lockbox account. We are 534 See, e.g., letters from Cleary and TBMA.
statements will be deemed to be filed on the proper
providing this flexibility for issuers, such as those 535 Fees paid through the use of the lockbox form unless we notify the issuer of our objection.
with medium term note programs, to determine the account will be calculated at the time the money See letter from Alston. Of course this provision
fee payment approach most appropriate for them. is withdrawn from the lockbox account to make the does not affect the issuer’s responsibility to assess
530 As we note above, issuers can use the lockbox payment, not at the time the money is deposited its eligibility as a well-known seasoned issuer on
account for the monies to be used to pay the fees. into the lockbox account. the relevant determination date.
not an automatic shelf registration prohibited from issuing securities off an change from the proposals, only the
statement. Pending effectiveness of the automatic shelf registration statement following issuers will not be able to
post-effective amendment or a new that is more than three years old. Our incorporate by reference into a Form S–
registration statement, the ongoing rules provide, however, that, so long as 1 or Form F–1:
offering could continue if such offering eligibility for automatic shelf • Reporting issuers who are not
is permitted by the post-effective registration is maintained, the new current in their Exchange Act
amendment or new registration registration statement will be effective reports; 544
statement. immediately and will carry forward to • Issuers who are, or were or any of
Immediate effectiveness of automatic the new registration statement, at the whose predecessors were during the
shelf registration statements will not issuer’s election, either any unused fees past three years:
raise, we believe, significant investor paid or unsold securities registered and Æ Blank check issuers;
protection concerns. As with shelf fees paid attributable to such registered Æ Shell companies (other than
registration statements today, most, if securities under the old registration business combination related shell
not all, information about the issuer is statement. As a result, an issuer’s companies); or
included in shelf registration statements securities offerings under the • Issuers for offerings of penny stock.
through incorporation by reference of registration statement can be In addition, as proposed, to enhance
Exchange Act reports. Such shelf uninterrupted.540 the availability to investors of
registration statements permit issuers to incorporated information, the ability to
3. Unseasoned Issuers and Non-
sell securities off the shelf registration incorporate by reference is conditioned
Reporting Issuers
statement without previous staff review on the issuer making its incorporated
of each offering.538 We expect issuers to a. Overview Exchange Act reports and other
evaluate disclosure or accounting issues We are adopting as proposed materials readily accessible on a web
in Exchange Act filings before filing procedural changes that will affect site maintained by or for the issuer. By
registration statements, including reporting issuers that are not seasoned conditioning the ability to incorporate
automatic shelf registration statements, issuers. These include: by reference on the ready accessibility
and at the time of filing incorporated • Expanding the circumstances under of an issuer’s incorporated Exchange
Exchange Act reports. Because we which issuers may incorporate Act reports and other materials on its
believe it is important that issuers information from their Exchange Act web site, we are providing investors the
address unresolved staff comments as reports into their Securities Act ability to obtain the information from
part of its evaluation of these issues, we registration statements; 541 and those reports and materials at the same
are adopting, as we discuss below, • Eliminating Form S–2 and Form F– time that they would have been able to
substantially as proposed the 2. obtain the information if it was set forth
requirement for accelerated filers and The provisions of Rule 430C also directly in the registration statement.
well-known seasoned issuers to disclose apply to prospectuses and prospectus Issuers may satisfy this condition by
written staff comments received 180 supplements used in offerings by non- including hyperlinks directly to the
days before an issuer’s fiscal year end reporting issuers and unseasoned reports or other materials filed on
that the issuer believes are material and reporting issuers.542 EDGAR or on another third-party web
that have remained unresolved at the b. Amendments to Form S–1 and Form site where the reports or other materials
time of filing of the Form 10–K or Form F–1—Expanded Use of Incorporation by are made available in the appropriate
20–F.539 Reference time frame and access to the reports or
other materials is free of charge to the
(G) Duration i. Eligibility user.545
An automatic shelf registration As we stated in the Proposing Release,
ii. Procedural Requirements
statement will become effective as part of our initiatives to integrate
immediately and will cover an further the Exchange Act and the Under the amendments we are
unspecified amount of securities. The Securities Act, we are adopting as adopting today, the prospectus in the
open-ended nature of such registration proposed amendments to Form S–1 and registration statement at effectiveness
statements could result in a large Form F–1 to permit a reporting issuer must identify all previously filed
number of post-effective amendments. that has filed at least one annual report Exchange Act reports and materials,
We are, therefore, adopting as proposed and that is current in its reporting such as proxy and information
a requirement for issuers to file new obligation under the Exchange Act to statements, that are incorporated by
automatic shelf registration statements incorporate by reference into its Form reference. There will be no permitted
every three years that will, in effect, S–1 or Form F–1 information from its
restate their then-current registration previously filed Exchange Act reports to be primarily for the purpose of changing the state
and documents. Successor registrants or jurisdiction of incorporation of the issuer or
statement and amend it, as they deem because all of the predecessor issuers were eligible
appropriate. As adopted, issuers will be can incorporate by reference if their at the time of the succession and the issuer
predecessors were eligible.543 In a continues to be eligible.
538 The staff of the Division of Corporation 544 To be current in its reporting obligations
Finance will continue to review, upon request, 540 We are adopting a similar requirement for under the Exchange Act, at the time of filing the
prospectus supplements involving novel and non-automatic shelf issuers but are providing an registration statement, the issuer must have filed all
unique securities offerings that are submitted to additional six-month timeframe for such issuers to materials required to be filed pursuant to Exchange
them prior to the offering. have their non-automatic shelf registration Act Sections 13, 14, or 15(d) during the preceding
539 See amendments to Form 10–K and Form 20– statements declared effective. See discussion in 12 calendar months (or for such shorter period that
F. We recently began publicly releasing, not less Section V.B.1. above under ‘‘Elimination of the issuer was required to file such materials).
than 45 days after the staff has completed a filing Limitation on Amount of Securities Registered.’’ 545 This manner of access is similar to that
541 See amendments to Form S–1 and Form F–1.
review, staff comment letters and response letters provided for disclosure of web site access to an
relating to disclosure filings made after August 1, 542 See discussion in Section V.B.1 above under accelerated filer’s Exchange Act reports. See
2004 that are selected for review. See SEC Press ‘‘Information Deemed Part of Registration Acceleration of Periodic Report Filing Dates and
Release 2005–72 (May 9, 2005). See discussion in Statement.’’ Disclosure Concerning Web site Access to Reports,
Section VII.B below under ‘‘Disclosure of 543 This is the same as has been the case for Form Release No. 33–8128 (Sept. 5, 2002) [67 FR 58480]
Unresolved Staff Comments.’’ S–2 and Form F–2. The succession will either have at part II.D.3.
incorporation by reference of Exchange ‘‘forward incorporation by reference’’ of Securities Act Section 10(a).553 A
Act reports and materials filed after the Exchange Act reports that are filed in written confirmation is not designed to
registration statement is effective— the future. As adopted, we also are meet these requirements. Therefore, a
known as ‘‘forward incorporation by retaining the condition that the reports final prospectus must accompany or
reference.’’ Under the amended Forms, and other materials that are precede a written confirmation. In
an issuer eligible to incorporate by incorporated by reference must be addition, Securities Act Section 5(b)(2)
reference its Exchange Act reports and readily available and accessible on a makes it unlawful to deliver a security
other materials into its Securities Act web site maintained by or for the issuer ‘‘unless accompanied or preceded’’ by a
registration statement must include the and containing issuer information. final prospectus.
following in the prospectus that is part Under these requirements, in the
c. Elimination of Form S–2 and Form
of the registration statement: current system, if no preliminary
F–2
• A list of the incorporated reports prospectus or written selling materials
and materials; As we discussed in the Proposing are distributed, the final prospectus is
• A statement that it will provide Release, the purposes underlying the the only prospectus received by
copies of any incorporated reports or disclosure and delivery requirements of investors. However, an investor’s
materials on request; Form S–2 and Form F–2 are to minimize purchase commitment and the resulting
• An indication that the reports and duplicative reporting, while still contract of sale of securities to the
materials are available from us through requiring that the incorporated investor in the offering generally occur
our EDGAR system or our public information be delivered with the before the final prospectus is required to
reference room; prospectus. It appears that the premises be delivered under the Securities Act.
• Identification of the issuer’s web underlying Form S–2 and Form F–2 Moreover, for sales occurring in the
site address where such incorporated have become outdated in view of the aftermarket, as a result of our rules,
reports and other materials can be introduction of EDGAR, other investors in securities of reporting
accessed; and technological developments, and the issuers generally are not delivered a
• Required disclosures regarding rapid dissemination of information in final prospectus.554 Accordingly, the
material changes in or updates to the the market. Also, these forms have not greatest utility of a final prospectus may
information that is incorporated by been widely used, particularly for the be as a document that informs and
reference from an Exchange Act report purposes they were intended.549 memorializes the information for the
or other material required to be filed. Expanding the types of issuers that may aftermarket. Actual delivery to
incorporate by reference through our purchasers is not necessary to satisfy
iii. Comments on Form S–1 and Form amendments to Form S–1 and Form F– this purpose.555
F–1 Amendments 1, without requiring delivery of the We have previously adopted a
Commenters on this aspect of the incorporated documents (except on number of other rules to address
proposals strongly supported the request), makes Form S–2 and Form F– prospectus delivery in primary offerings
changes to allow issuers to incorporate 2 superfluous. Several commenters and secondary market transactions.
by reference historical filings into Forms supported the elimination of Form S–2 Securities Act Rule 153 addresses
S–1 and F–1.546 Some commenters and Form F–2.550 We are, therefore, delivery of final prospectuses in
suggested that Form S–1 and Form F– rescinding Form S–2 and Form F–2.551 transactions between brokers taking
1 should allow forward incorporation by
VI. Prospectus Delivery Reforms
reference as well for filings made after 553 The term ‘‘prospectus,’’ as defined in
effectiveness of a registration A. Current Prospectus Delivery Securities Act Section 2(a)(10), includes any written
communication that ‘‘offers a security for sale or
statement.547 Some commenters did not Requirements confirms the sale of any security; except that * * *
believe that issuers should, as a The Securities Act requires delivery a communication provided after the effective date
condition to incorporating by reference of a prospectus meeting the of the registration statement * * * shall not be
into their Forms S–1 or F–1, be required deemed a prospectus if it is proved that prior to or
requirements of Securities Act Section at the same time with such communication a
to make their Exchange Act reports and 10(a), known as a ‘‘final prospectus,’’ to written prospectus meeting the requirements of
other materials readily accessible on each investor in a registered offering.552 subsection (a) of section 10’’ is sent or given.
their web sites.548 After the effective date of a registration
554 For non-reporting issuers who are listed, as of
As we discuss above, we have statement, a written communication that

the offering date, on a national securities exchange
adopted the proposals substantially as or automated quotation system, we require that
offers a security for sale or confirms the prospectuses be delivered for 25 days after the
proposed. We have narrowed the sale of a security may be provided if a offering date. See Securities Act Rule 174(d) [17
categories of ineligible issuers that can final prospectus is sent or given CFR 230.174(d)].
use incorporation by reference because previously or at the same time.
555 Professor Louis Loss has noted that ‘‘[a]
the amended provisions still permit prospectus that comes with the security does not
Otherwise, such a communication is a tell the investor whether or not he or she should
only incorporation of previously filed prospectus and may not be provided buy; it tells the investor whether he has acquired
reports. Because the purpose of the unless it meets the requirements of a security or a lawsuit.’’ L. Loss & J. Seligman,
proposal was not to extend short-form Securities Regulation, § 2–b–3 (3d ed. 2001). See
registration to all reporting issuers, but also Cohen, Truth in Securities Revisited, 79 Harv.
549 According to data obtained from our internal
L. Rev.1340, note 20, at 1386 (criticizing the
to further integrate disclosures under Filing Activity Tracking System, from 2001 to 2004, requirement that a final prospectus be delivered
the Securities Act and Exchange Act a total of 10 Forms F–2 were filed by 9 different after an investment decision is made and noting
without impacting investor protection, issuers and a total of 253 Forms S–2 were filed by that information essential to a transaction should,
153 different issuers. to the extent practicable, be required to be provided
we have not adopted the suggestion that 550 See, e.g., letters from ABA; Alston; BDO
in time for use in an investment decision). The final
Form S–1 and Form F–1 permit Seidman; E & Y; NYCBA; and NYSBA. prospectus also can be a basis for liability claims
551 We also are amending Forms S–4 and F–4 to under Securities Act Section 12(a)(2).
546 See, e.g., letters from Alston; BDO Seidman;
delete the references to Forms S–2 and F–2. Our interpretation set forth above and in the
Cleary; Davis Polk; and E & Y. 552 Congress intended that the prospectus provide Proposing Release and Rule 159 as adopted also
547 See, e.g., letters from ABA; Alston; Cleary;
investors with ‘‘the means of understanding the provide that liability under Section 12(a)(2) is
Davis Polk, and NYCBA. intricacies of the transaction * * *.’’ H.R. Rep. No. assessed based on the information conveyed at the
548 See, e.g., letters from ABA; E & Y; and NYSBA. 85, 73rd Cong., 1st Sess. 8 (1933). time of the contract of sale.
place over a national securities Many commenters and market 1. Access Equals Delivery
exchange. Securities Act Rule 434 was participants have encouraged us to a. Rule 172
intended to ease the burden of adopt an ‘‘access equals delivery’’
prospectus delivery within the T+3 model for final prospectus delivery.558 (i) Scope of Rule
settlement cycle by permitting delivery Under such an ‘‘access equals delivery’’ We are adopting new Rule 172 with
of a final prospectus to be made in model, investors are presumed to have some refinements from the proposals to
multiple documents at different access to the Internet, and issuers and implement our access equals delivery
intervals in the offering process.556 intermediaries can satisfy their delivery model.560 Under Rule 172(b), as
Many of our recent rulemakings to requirements if the filings or documents adopted, a final prospectus will be
improve the content and timing of a are posted on a web site. The access deemed to precede or accompany a
reporting issuer’s Exchange Act filings, concept is premised on the information security for sale for purposes of
together with the communications and or filings being readily available. Securities Act Section 5(b)(2) as long as
procedural changes we are adopting At this time, we believe that Internet the final prospectus meeting the
today, are aimed at providing more usage has increased sufficiently to allow requirements of Securities Act Section
information to investors at the time they us to adopt a final prospectus delivery 10(a) is filed or the issuer will make a
commit to purchase a security. As we model for issuers and their good faith and reasonable effort to file
discussed in the Proposing Release, the intermediaries that relies on timely it with us as part of the registration
increase in the flow of current access to filed information and statement within the required Rule 424
information about a reporting issuer and documents.559 Issuers, brokers, and prospectus filing timeframe.561
the ability of offering participants to use dealers can satisfy their final prospectus Our ‘‘access equals delivery’’ model
free writing prospectuses in connection delivery obligations if a final prospectus will continue to satisfy the principal
with offerings will give offering is or will be on file with us within the statutory purposes of final prospectus
participants a greater ability to provide time required by the new rules, delivery while recognizing the need to
information to investors about the including the cure period. modernize the obligations in view of
securities at that time. Further, rapid technological and market structure
technological advances in the area of As adopted, the new and amended
rules will: developments.562
information delivery have resulted in
greater access to information. For • Eliminate the existing link between (ii) Comments on Rule 172
example, prospectuses and other filings delivery of the final prospectus and the
delivery of a written confirmation of Most commenters supported the
now are available through EDGAR and proposals that would deem the final
other electronic sources, including the sale;
prospectus delivery requirements
Internet, immediately upon filing.557 • Provide that the obligation to have satisfied through the filing of the final
a final prospectus precede or prospectus with the Commission.563
B. Prospectus Delivery Revisions accompany a security for sale can be Some commenters believed that the
We are adopting revisions to the satisfied by filing the final prospectus ‘‘access equals delivery’’ concept should
prospectus delivery requirements. Our with us within the relevant timeframe extend to delivery obligations for
new and amended rules are intended to provided by Rule 424(b); preliminary prospectuses in initial
facilitate effective access to information, • Permit written notices of public offerings as well as those
while taking into account advancements allocations; and applicable to proxy statements and
in technology and the practicalities of • Permit the prospectus delivery other documents.564 One commenter
the offering process. These changes are obligations in dealer transactions during
intended to alleviate timing difficulties was concerned that an access equals
any prospectus delivery period and in delivery method for providing
that may arise under the current broker or dealer transactions on
securities clearance and settlement information would not provide older
exchanges, facilities of exchanges, and persons with the information they
system, and also to facilitate the alternative trading systems to be
successful delivery of, and payment for, needed for their investment
satisfied if the final prospectus has been decisions.565
securities in a registered offering. or will be filed with us.
As we discussed in the Proposing A number of commenters were
Release, given that the final prospectus concerned about the condition to the
delivery obligations generally affect
558 Commenters on prospectus delivery aspects of
proposed rule that the final prospectus
the 2000 Electronics Release indicated support for
investors only after they have made some sort of ‘‘access equals delivery’’ model. See 560 This prospectus delivery model is in addition
their purchase commitments and that comment letters in File No. S7–11–00 from ACCA;
to Rules 153 and 174, as we are amending those
investors and the market have access to NYCBA; SIA; and TBMA.
559 Internet usage in the United States has grown
rules. See discussion in Section VI.B.3 below under
the final prospectus upon its filing, we considerably since 2000 when we published our
‘‘Transactions Taking Place on an Exchange or
believe that delivery obligation should Through a Registered Trading Facility—Rule 153’’
most recent interpretive guidance on the use of and in Section VI.B.4 below under ‘‘Aftermarket
be able to be satisfied through a means electronic media in securities offerings, including Prospectus Delivery—Rule 174.’’
other than physical delivery. Because with regard to prospectus delivery by electronic 561 A final prospectus only filed as provided in
means. For example, recent data indicates that 75%
the contract of sale has already of Americans have access to the Internet in their
Rule 172 will not be considered to be sent or given
occurred, we also believe that delivery prior to or with a written offer within the meaning
homes, and that those numbers are increasing
of clause (a) of Securities Act Section 2(a)(10).
of a written confirmation and the steadily among all age groups. See, Three out of 562 We are not amending Exchange Act Rule
delivery of the final prospectus need not Four Americans Have Access to the Internet,
Nielsen//NetRatings, March 18, 2004; Robyn 15c2–8(d), which requires broker-dealers to take
be linked. Greenspan, Senior Surfing Surges, ClickZNetwork, reasonable steps to comply promptly with written
Nov. 20, 2003 (citing statistics from Neilsen/ requests for copies of the final prospectus.
556 As part of our actions today, we are 563 See, e.g., letters from ABA; Alston; ASF; BRT;
NetRatings and Jupiter Research). In addition, there
eliminating Rule 434 because it has been used is evidence suggesting that the ‘‘digital divide’’ is Cleary; Davis Polk; Fried Frank; Goldman Sachs;
extremely infrequently and we believe that with the diminishing. See, for example, Kristen Fountain, ICI; Intel; Lindsay Kassof; Merrill Lynch; NYCBA;
new rules it is no longer necessary. Antennas Sprout, and a Bronx Neighborhood Goes NYSBA; PEG; S&C; SCSGP; SIA; and TBMA.
557 Paper copies also remain available through our 564 See, e.g., letters from BRT and Cleary.
Online, The N.Y. Times, June 10, 2004 at G8; and
Public Reference Room, 100 F Street, N.E., Steve Lohr, Libraries Wired, and Reborn, The N.Y. 565 See letter from the American Association of
Washington, DC 20549. Times, Apr. 22, 2004 at G1. Retired Persons (‘‘AARP’’).
would have to be on file with the because either they do not raise the Rule 173 provides that, in these
Commission within the time frame same issues as in corporate capital transactions, each underwriter or dealer
required under Securities Act Rule formation transactions or they are participating in a registered offering (or,
424.566 The commenters were already subject to rules unique to their if the sale was effected by the issuer and
concerned about retroactive violations offerings. For example, in offerings not by or through an underwriter or
of Section 5 if underwriters or dealers made pursuant to Form S–8, the final dealer, then the issuer) must provide to
sent written confirmations and then the prospectus is never filed with us and each purchaser from it, not later than
issuer failed to file the final prospectus thus, these offerings do not raise the two business days after the completion
within the required time frame. These same types of issues as other capital of the sale, a copy of the final
commenters recommended including a formation transactions. Business prospectus or, in lieu of the final
cure provision in the Rule. Other combination transactions and exchange prospectus, a notice providing that the
commenters recommended eliminating offers also differ from other types of sale was made pursuant to a registration
this condition entirely and instead offerings registered under the Securities statement or in a transactions in which
relying on Commission enforcement Act because the proxy rules and tender a final prospectus would have been
actions as the penalty for issuers failing offer rules in conjunction with state law required to have been delivered in the
to timely file final prospectuses.567 impose informational and delivery absence of Rule 172.
As we note above, we have adopted requirements in those transactions. The The Rule also provides that an
Rule 172 to continue to cover only information contained in the final investor can request a final prospectus.
delivery of final prospectuses. We do prospectus, therefore, will be delivered Under the Rule, a requested final
not currently believe that extension of regardless of the Securities Act’s prospectus does not have to be provided
access equals delivery is appropriate for requirements. Moreover, it is important before settlement.571
preliminary prospectus delivery to retain consistency among the various Rule 173, as adopted, provides that
obligations in initial offerings because rules and regulations applicable to these compliance with Rule 173 is not a
we believe that it is important for business combination transactions and condition to reliance on Rule 172 to
potential investors to be sent the exchange offers.569 satisfy final prospectus delivery.
preliminary prospectus. Finally, registered investment Accordingly non-compliance with Rule
We have, however, revised the Rule in 173 will not result in a violation of
companies and business development
response to commenters’ concerns about Securities Act Section 5. Rule 173 is,
companies will not be able to rely on
the filing condition. As adopted, we however, an important component of
the Rule. These entities are subject to a
have provided that the filing condition the prospectus delivery modifications
separate framework governing
is satisfied if the issuer makes a good we are adopting today.
communications with investors, and we
faith and reasonable effort to file the As adopted, the same offerings
believe that it would be more
prospectus within the timeframe excluded pursuant to Rule 172, as
appropriate to consider any changes to
required by Rule 424. We have included discussed above, also are excluded from
a cure provision that allows the issuer our prospectus delivery requirements as
they apply to registered investment this notification provision.572 We also
an ability to cure an unintentional have revised Rule 173 to exclude
failure to file if it has made such a good companies and business development
companies in the context of a broader transactions solely between brokers or
faith and reasonable effort to comply dealers in reliance on Rule 153.
with the filing condition and files the reconsideration of this framework.570
prospectus as soon as practicable after c. Notification (ii) Comments on Rule 173
discovery of the failure to file. We Commenters suggested certain
(i) Rule 173
believe that these revisions to the Rule clarifications to proposed Rule 173
will address commenters’ concerns In addition to providing access to including providing a cure provision for
regarding retroactive violations of information, prospectus delivery can failure to provide the required
Section 5 due to an issuer’s failure to serve the function of informing notification,573 eliminating required
timely file the final prospectus.568 We investors that they purchased securities compliance with Rule 173 for
also have provided new paragraph (b)(8) in a registered transaction. This aftermarket sales covered by Rule
of Rule 424 under which the issuer will notification will provide investors the 174,574 and providing that compliance
file a form of prospectus that is not ability to trace their purchases for with Rule 153 would be deemed
timely filed. We also have provided that purposes of asserting their rights under compliance with Rule 173.575 One
the filing condition does not apply to the liability provisions of the federal commenter also requested that we
transactions by dealers requiring securities laws. To preserve this confirm that the Rule 173 notification
delivery of a final prospectus pursuant investor protection function, we are may be included in Rule 10b–10
to Securities Act Section 4(3). adopting Rule 173 substantially as confirmations.576
proposed. Rule 173 addresses each
b. Exceptions to the Rule
transaction involving: 571 The final prospectus also can be comprised of
We have excluded certain types of • A sale by an issuer or an a set of documents which, taken together, satisfy the
offerings from the Rule as adopted underwriter to a purchaser; and information requirements of Securities Act Section
10(a). See discussion in Section V.B.1 above under
566 See, e.g., letters from Citigroup; Cleary; CSFB;
• A sale in which the final prospectus ‘‘Information Deemed Part of Registration
Fried Frank; Goldman Sachs; Merrill Lynch;
delivery requirements apply. Statement.’’
572 In addition, as a result of the operation of Rule
Morgan Stanley; NYSBA; and PEG.
567 See, e.g., letters from ABA and SIA. Some 569 Securities Act Rule 162 provides, however, a 172 and Rule 173, if a current final prospectus is
commenters requested that we provide an final prospectus delivery exemption in certain filed with us, final prospectuses will no longer be
interpretation of the applicability of the Electronic registered exchange offers subject to Exchange Act required to be delivered in connection with market-
Signature in Global and National Commerce Act Rules 13e–4(e) [17 CFR 240.13e–4(e)] or 14d–4(b) making transactions by dealers affiliated with
(‘‘E-Sign’’) to the Securities Act prospectus delivery [17 CFR 240.14d–4(b)]. issuers.
573 See, e.g., letter from TBMA.
requirements. See, e.g., letters from ABA and S&C. 570 Although some commenters wanted us to
568 We believe that the filing condition remains a 574 See, e.g., letter from Goldman Sachs.
expand the categories of issuers to whom Rule 172
575 See, e.g., letter from Brinson Patrick.
central component of the access equals delivery would apply, we are not doing so at this time. See,
construct. e.g., letters from ABA; Allied; and Cleary. 576 17 CFR 240.10b–10. See, e.g, letter from CSFB.
We have adopted Rule 173 One commenter suggested that the paper-based system upon which Rule
substantially as proposed. We have notice of allocation be permitted to 153 is premised is outmoded and
made clear that Rule 173 does not apply included CUSIP numbers and also unnecessary due to electronic filings of
to transactions between dealers or suggested that, especially for asset- final prospectuses on EDGAR and the
brokers in reliance on Rule 153, but it backed securities, the notice of technological resources of market
continues to apply to the transaction allocation should be expanded to permit members. There currently is no
between the broker or dealer and the communication of demand for securities significance to the paper copies of
underlying purchaser on whose behalf and ‘‘price talk’’ or a communication of prospectuses delivered to national
or for whose account the transaction is information regarding expected or securities exchanges.
effected. We believe that it is important actual allocation of classes of securities As we stated in the Proposing Release,
that purchasers in registered offerings in order to facilitate an investment we believe it is important, therefore, to
are notified that they have acquired decision.579 We have included specific amend Rule 153. Under the
their securities in the registered reference permitting inclusion of a amendments we are adopting today,
transaction and so we also have not CUSIP number. However, we believe brokers or dealers effecting transactions
taken commenters’ suggestions to that the other information identified in on a registered exchange, through a
eliminate compliance with the Rule for this comment, if communicated in trading facility of a registered national
aftermarket sales. The Rule 173 writing, should be the subject of a free securities association, or through a
notification can be sent separately or writing prospectus. It is not an registered alternative trading system
can be included in a Rule 10b–10 appropriate subject for a notice of will be deemed to satisfy their
confirmation. allocation. The notice of allocation is prospectus delivery obligations under
intended to be a notice of actual Securities Act Section 5(b)(2) with
2. Written Confirmations and Notices of allocation of securities to the investor or
Allocations regard to transactions in securities if:
participating dealer to which the notice
is provided. • The issuer has filed or will file the
We are adopting Rule 172(a),
final prospectus with us;
substantially as proposed, to provide an 3. Transactions Taking Place on an
exemption from Securities Act Section • Securities of the same class as the
Exchange or Through a Registered securities that are the subject of the
5(b)(1) that allows written confirmations Trading Facility—Rule 153
and notices of allocation to be sent after transaction are trading on that exchange
effectiveness of a registration statement Securities Act Rule 153 addresses or through that trading facility or
without being accompanied or preceded delivery of final prospectuses in alternative trading system;
by a final prospectus.577 The exemption transactions taking place between • The registration statement relating
is conditioned on the registration brokers over a national securities to the offering is effective and not the
statement being effective and the final exchange; it does not currently apply to subject of a stop order issued under
prospectus meeting the requirements of transactions on an automated quotation Securities Act Section 8; and
system, such as the Nasdaq Stock
Securities Act Section 10(a) being filed • Neither the issuer nor any
with us.578 The exemption permits: Market. Rule 153 provides that where
underwriter or participating dealer is
• Written confirmations containing members of the exchange are on both
the subject of a pending proceeding
information limited to that called for in sides of the transaction and the
under Securities Act Section 8A in
Exchange Act Rule 10b–10 and other transaction is effected on that exchange,
the Section 5 obligation to deliver a connection with the offering.
information customarily included in These changes will eliminate the
confirmations, including any notice final prospectus before or with a
security between the brokers will be difficulties for prospectus delivery
provided pursuant to Rule 173; and among brokers and dealers in registered
• Written communications from an satisfied if the issuer or underwriter
delivers copies of the final prospectus to resales and other sales into existing
offering participant to a customer or trading markets where securities of the
from an underwriter to dealers in the the exchange.580 Rule 153 has limited
utility today because it may be relied on same class already are trading. We are
selling group notifying them of the not requiring as part of the Rule that
transaction and their allocations of only for transactions between brokers on
an exchange. The difficulty in physical copies of the prospectus be
securities in a registered offering. sent to the exchange or a market maker.
Under the exemption, for example, prospectus delivery that Rule 153 was
designed to address—the difficulty or Further, the exchange and the market
broker-dealers could send e-mail notices maker no longer will need to keep track
after effectiveness to inform investors in inability to identify the ultimate buyer—
has expanded since 1936 with the rise of any prospectuses.582 As with the
a public offering of their allocations.
in transactions effected on markets other existing rule, the amended Rule does
Under the Rule as adopted, the notices
than national securities exchanges, such not affect delivery obligations to
of allocations may include the name of
the securities, the CUSIP number, the as the Nasdaq Stock Market and
amount allocated to the customer, the alternative trading systems, the growth Statement and Possible Expansion of Definitional
of the book-entry system, and street Rule, Release No. 33–5768 (Nov. 22, 1976) [41 FR
price of the securities, and the date or 52701]. Two years later, these plans were deferred
expected date of settlement and name holdings.581 In addition, the for further consideration due to lack of public
incidental information. Similar interest and input at the time. See Effective Date of
579 See
letter from BMA–ABS. Amendments to Registration Statement and
information is permitted in notices to 580 SecuritiesAct Rule 153 defines the phrase Expansion of Definition Rule, Release No. 33–5978
participating dealers. The exemption is ‘‘preceded by a prospectus’’ as used in Securities (Sep. 18, 1978) [43 FR 43725]. Many trading
not available for the same offerings Act Section 5(b)(2). markets allow market participants to preserve their
excluded from the prospectus delivery 581 In connection with a proposed rulemaking in anonymity, thus making it difficult or impossible to
1976, we solicited comment on extending the identify the ultimate buyer. The growth in the book-
provision of the Rule discussed above. procedures available under Securities Act Rule 153 entry system and the fact that most securities are
to transactions effected on the automated quotation held in street name exacerbates the problem.
577 See Rule 172. system of a national securities association registered 582 Because we are adopting the proposed changes
578 The exemption is in Rule 172 and is subject under Exchange Act Section 15A [15 U.S.C. 78oA], to Rule 153, on the effective date of the amendment
to the same prospectus filing and cure condition, at least initially for Form S–8 transactions. See our interpretation in Question 11 in the 1995
as we have modified it, as described above. Effective Date of Amendments to Registration Electronics Release will no longer be effective.
purchasers other than brokers or aftermarket delivery obligations (other factor disclosure in Securities Act
dealers. than for blank check companies). registration statements to Exchange Act
We have revised our proposed Some commenters recommended that registration statements and annual
amendments to Rule 153 in one respect. we eliminate the conditions to ‘‘access reports.590 As such, risk factor
For purposes of Rule 153 as amended, equals delivery’’ contained in Rule 172 disclosure under the Exchange Act will
the filing of the final prospectus, for brokers or dealers involved in only be the same type of disclosure as
regardless of whether it occurs before or aftermarket distributions.585 required in a Securities Act registration
after reliance on the Rule, will satisfy Commenters also recommended statement by Item 503, other than
the conditions of the Rule.583 elimination of all aftermarket information about a particular securities
prospectus delivery requirements for all offering.591 We are not requiring asset-
4. Aftermarket Prospectus Delivery— transactions, with some suggesting that backed issuers to include risk factor
Rule 174 the obligation should be eliminated disclosure in their annual reports on
Unless our rules provide otherwise, where the securities are listed on an Form 10–K. We agree with commenters
all dealers are required to deliver a final exchange or quoted on the Nasdaq Stock who noted that disclosure requirements
prospectus for a specified period after a Market.586 While we are not eliminating in a Form 10–K for asset-backed issuers
registration statement becomes effective the prospectus delivery obligations that varies considerably under Regulation
to persons who buy the securities in the currently arise under Securities Act AB from corporate issuers.592 These
aftermarket.584 Securities Act Rule 174 Section 4(3) and Rule 174, we are requirements, along with the
exempts from this aftermarket dealer providing for reliance on Rule 172 to fundamental structure of most asset-
prospectus delivery obligation any satisfy those delivery obligations (other backed securities offerings involving
transaction relating to securities of a than for blank check companies).587 stand-alone trusts, make this
reporting issuer. These exemptions in Rule 173 applies in part where requirement inappropriate for asset-
Rule 174 do not apply to underwriters Securities Act Section 4(3) requires backed issuers.
or dealers with regard to any unsold prospectus delivery and where there is We also are adopting as proposed the
allotment. Otherwise, if the transaction no exemption from delivery under Rule requirement that the risk factor
relates to securities of a non-reporting 174. disclosure in Forms 10 and 10–K be
issuer that will be listed on a national written in accordance with the same
VII. Additional Exchange Act
securities exchange or quoted on an ‘‘plain English’’ standards as apply to
Disclosure Provisions
electronic inter-dealer quotation system, risk factor disclosure in Securities Act
current Rule 174 sets an aftermarket A. Risk Factor Disclosure registration statements.593 The
delivery period of 25 days after amendments as adopted also provide for
1. Scope of Requirement
effectiveness. For offerings of securities quarterly updates to reflect material
As we stated in the Proposing Release, changes from risk factors as previously
of non-reporting issuers that will not be
many Securities Act registration disclosed in Exchange Act reports. The
so listed or quoted and offerings by
statements require disclosure of the amendments do not otherwise require,
blank check companies, Rule 174 sets
risks associated with an investment in and we discourage, unnecessary
an aftermarket prospectus delivery
an issuer’s securities. Items 503(c) of restatement or repetition of risk factors
period of 90 days after effectiveness or
Regulation S–K and Regulation S–B 588 in quarterly reports.
after the funds are released from the
describe that required disclosure as a As we stated in the Proposing Release,
escrow or trust account, as the case may
‘‘discussion of the most significant the requirement to include risk factor
be. Where a registration statement
factors that make the offering disclosure in Forms 10 and 10–K will,
relates to offerings to be made from time speculative or risky.’’ The risk factor
to time, Rule 174 provides that there is we believe, further enhance the contents
section is intended to provide investors of Exchange Act reports and their value
no aftermarket delivery requirement with a clear and concise summary of the in informing investors and the
once the initial period expires. The material risks to an investment in the markets.594 Further, requiring risk factor
underlying purpose of aftermarket issuer’s securities.
prospectus delivery is to assure wide We are adopting substantially as 590 See Item 503(c) of Regulation S–K. We
dissemination of information about the proposed a new item requiring risk recognize that a risk factor discussion in a Form 10–
issuer in the market. For reporting factor disclosure in annual reports on K may not be necessary or appropriate in all cases,
issuers, the Rule assumes that the depending on the issuer.
Forms 10–K and Exchange Act 591 We have revised the item from the proposal
information is already disseminated and registration statements on Form 10.589 to eliminate the added language which caused
eliminates the prospectus delivery We are not extending this requirement concern that a different standard for risk disclosure
requirement for these issuers. to Forms 10–KSB or Form 10–SB. The would apply to annual reports on Form 10–K and
We believe that, where information new item applies the standard for risk registration statements on Form 10 from that
regarding all issuers is largely required for Securities Act registration statements.
We believe that the added language was redundant
disseminated other than through 585 See, e.g., letters from ABA; Cleary; and Davis of the existing language of Item 503 and, therefore,
physical delivery, including through Polk. unnecessary.
EDGAR, physical delivery of a final 586 See, e.g., letters from ABA; Goldman Sachs; 592 See, e.g., letters from ABA–ABS; ASF; BMA–
prospectus in the aftermarket is of Morgan Stanley; and SIA. ABS; and CMSA.
587 We also have eliminated the filing condition 593 Securities Act Rule 421 [17 CFR 230.421]
limited utility and necessity. We are, as a condition to satisfaction of that delivery requires issuers to write and design their risk factor
therefore, amending Rule 174 as requirement. disclosure in registration statements using plain
proposed to provide that during the 588 17 CFR 229.503(c) and 17 CFR 228.503(c). English principles. See also Updated Staff Legal
aftermarket period, dealers can rely on 589 See amendments to Form 10–K and Form 10. Bulletin No. 7 (June 7, 1999), question no. 3. The
Form 20–F (the form used for annual reports and plain English rules applicable to Securities Act
proposed Rule 172 to satisfy any registration statements already apply to risk factor
Exchange Act registrations for foreign private
issuers) already requires risk factor disclosure. See disclosure in Exchange Act reports incorporated by
583 We have revised the amendments to Rule 153 reference into Securities Act registration statements.
Item 3.D. of Form 20–F. The 1998 proposals also
to address the suggestions of some commenters in proposed risk factor disclosure in annual reports. 594 We note that many issuers have included risk
this regard. See, e.g., letters from Cleary and Fried The Advisory Committee Report contained similar factor disclosure in their Exchange Act reports for
Frank. recommendations. See the Advisory Committee a number of years. See comment letter in File No.
584 See Securities Act Section 4(3). Report, note 25, at Section II.B.4. S7–30–98 from BRT. Issuers may already include
disclosure in Exchange Act registration disclosures in various sections of their think it is appropriate for accelerated
statements and annual reports will annual reports.599 Commenters also filers and well-known seasoned issuers
enhance the ability of reporting issuers noted that the proposed language was to disclose outstanding staff comments
to incorporate risk factor disclosure more extensive than Item 503(c).600 A that remain unresolved for a substantial
from these Exchange Act reports into number of commenters thought we period of time.
Securities Act registration statements to should extend the requirement for risk
satisfy the risk factor disclosure factor disclosure to small business 1. Disclosure Requirement
requirements.595 Because one of our issuers.601 Further, at least one We are adopting substantially as
goals is to further integrate disclosures commenter was concerned about the proposed the requirement that all
under the Securities Act and the proposal to require updated risk factor entities defined as accelerated filers and
Exchange Act, we believe it is important disclosures in quarterly reports.602 well-known seasoned issuers disclose,
to establish consistent disclosure We have made modifications to the in their annual reports on Form 10–K or
standards for risk factor disclosure. language in the proposals as we Form 20–F, written comments our staff
We are adopting the proposed considered appropriate. While we are made in connection with a review of
requirements for updated risk factor providing risk factor disclosure to be Exchange Act reports that:
disclosure in quarterly reports because included ‘‘where appropriate,’’ and have
• The issuer believes are material;
we believe that issuers who are required eliminated duplicative language, we
to file quarterly reports already need to continue to believe that a risk factor • Were issued more than 180 days
undertake a review of changes in their section in Exchange Act annual reports before the end of the fiscal year covered
operations, financial results, financial and registration statements will, where by the annual report; 604 and
condition, and other circumstances in appropriate, be beneficial to investors. • Remain unresolved as of the date of
order to prepare the other portions of the filing of the Form 10–K or Form 20–
B. Disclosure of Unresolved Staff
the quarterly report, including the F.605
Comments
financial statements and MD&A.596 The disclosure must be sufficient to
Therefore, we believe that issuers As we stated in the Proposing Release, disclose the substance of the comments.
should be able, on a quarterly basis, to because enhanced Exchange Act Staff comments that have been resolved,
update risk factors to reflect material reporting provides a principal element including those that the staff and issuer
changes from previously disclosed risk of support for, and is at the core of, the have agreed will be addressed in future
factors. rules we are adopting today, it is Exchange Act reports, do not need to be
important that issuers timely resolve disclosed. Issuers can provide other
2. Comments on Risk Factor Disclosure any staff comments on their Exchange
Requirement information, including their position
Act reports. It is possible, however, that regarding any such unresolved
While some commenters supported the procedural changes we are adopting
comments.
the proposal generally, others suggested today may eliminate some of the
modifications to the risk factor incentives issuers have to respond to 2. Comments on Disclosure of
requirement.597 For example, several and resolve comments on their Outstanding Comments
commenters suggested we should Exchange Act reports in a timely
require risk factors only ‘‘where manner. In particular, with immediate Many commenters did not support the
appropriate.’’ 598 Other commenters did effectiveness, well-known seasoned proposed disclosure of outstanding
not believe a separate risk factor section issuers will not be subject to the comments.606 These commenters
was necessary because reporting possibility that effectiveness of a believed that issuers already have
companies already included risk Securities Act registration statement sufficient incentives to comply with
could be delayed while comments are staff comments and that the disclosure
risk factor disclosure in their Exchange Act reports being resolved. In addition, all shelf may not provide meaningful
for varying reasons, including to take advantage of eligible issuers will have to file new information to investors.607 Some
the safe harbor for forward-looking statements in
registration statements only every three commenters suggested that well-known
Securities Act Section 27A and the ‘‘bespeaks seasoned issuers should be able to
caution’’ defense developed through case law. See, years. Staff in the Division of
e.g., In re Donald Trump Sec. Litig., 7 F.3d at 371 Corporation Finance has begun to choose to either comply with the
(3d Cir. 1993); P. Stolz Family P’ship L.P. v. Daum, review more Exchange Act reports and disclosure requirement or abstain from
355 F.3d 92, 97 (2d Cir., 2004); and In re Sprint conducting an offering until the
Corp. Sec. Litig., 232 F. Supp. 2d 1193 (D. Kan. will continue to do so in keeping with
Sept. 30, 2002). the requirements of the Sarbanes-Oxley
604 The 180-day time period begins from the date
595 We note that incorporation by reference of risk Act 603 as well as our view of the
factors in Exchange Act reports may not fully satisfy importance of an issuer’s Exchange Act of the first comment letter that specifically raises
the Securities Act disclosure obligations. For the issue, which may be later than the date of the
example, additional offering-related risks may need
reports. Under these circumstances, and initial comment letter on the filing.
to be included in Securities Act registration with the greater flexibility given in the 605 The requirement to disclose outstanding
statements. rules we are adopting today to comments applies to both domestic and foreign
596 Moreover, issuers will already have in place
communications outside the statutory registrants. The term ‘‘accelerated filer,’’ which is
disclosure controls and procedures and internal defined in Exchange Act Rule 12b–2 [17 CFR
prospectus and offering procedures, we 240.12b–2], does not distinguish between domestic
controls over financial reporting that should alert
them to new or changing material risks affecting the and foreign issuers. Accelerated filers who file
599 See,e.g., letters from BRT; Intel; and SCSGP.
issuer. reports on Form 20–F are not subject to accelerated
597 See, e.g., letters from ABA; AICPA; Alston; 600 Asproposed, the risk factor disclosure would deadlines because that Form, unlike Form 10–K,
BDO Seidman; BRT; Deloitte; E & Y; KPMG; have required a discussion of the most significant does not include accelerated deadlines for filing.
NYCBA; and PwC. factors with respect to the registrant’s business, Nevertheless, any registrant that meets the
598 See, e.g., letters from ABA; Davis Polk; operations, industry, or financial position that may definition of accelerated filer is subject to the
NYSBA; and S&C. The proposed disclosure have a negative impact on the registrant’s future disclosure requirement for outstanding comments.
requirement omitted the qualifier that risk factors financial performance. See, e.g., letters from ABA; 606 See, e.g., letters from AICPA; Alston; BDO
should only be disclosed ‘‘where appropriate.’’ In Alston; and S&C. Seidman; BRT; Cleary; CSFB; Deloitte; E & Y;
601 See, e.g., letters from ABA; AICPA; Alston;
addition, commenters believed that risk factors are KPMG; Intel; Merrill Lynch; Morgan Stanley;
not appropriate for issuers of asset-backed BDO Seidman; KPMG; NYSBA; and PwC. SCSGP; and TBMA.
602 See letter from Fried Frank.
securities. See, e.g., letters from ASF; BMA–ABS; 607 See, e.g., letters from AICPA; BDO Seidman;
and CMSA. 603 See Section 408 of the Sarbanes-Oxley Act. and E & Y.
comments have been resolved.608 One treatment as reporting issuers should number of free writing prospectuses that
commenter was concerned about register a class of their securities under will be filed as a result of the changes
potential liability that might arise from the Exchange Act.611 Identification of to the treatment of electronic road
the disclosure of the unresolved voluntary filers will enable market shows, as discussed below.
comments.609 participants and us to identify voluntary The titles for all the collections of
For the reasons noted above, we filers. information affected by these rules
believe that disclosure of outstanding Commenters on voluntary filers are: 616
comments is an important component of generally thought that voluntary filers (1) ‘‘Form 10’’ (OMB Control No.
the rules that we are adopting today. should be treated as seasoned issuers 3235–0064);
Because the disclosure requirement because many of them have contractual (2) ‘‘Form 20–F’’ (OMB Control No.
applies only to comments issued more obligations to file reports.612 Some 3235–0288);
than 180 days before the issuer’s fiscal commenters were concerned that it (3) ‘‘Form 10–K’’ (OMB Control No.
year end that remain unresolved at the would be difficult for certain foreign 3235–0063);
filing date, we believe that, in most private issuers to assess their voluntary (4) ‘‘Form 10–Q’’ (OMB Control No.
circumstances, this will provide issuers filer status because of issues relating to 3235–0070);
with more than enough time to address calculating the number of U.S. holders (5) ‘‘Regulation S–K’’ (OMB Control
and resolve issues. Moreover, we are not of record.613 No. 3235–0071);
modifying the language from the We are adopting as proposed the (6) ‘‘Regulation S–B’’ (OMB Control
proposal to allow issuers the choice to requirement for voluntary filers to No. 3235–0417);
either disclose or refrain from offering disclose their status on the cover of (7) ‘‘Regulation C’’ (OMB Control No.
securities in registered offerings because Form 10–K, Form 10–KSB, and Form 3235–0074);
we believe the disclosures are important 20–F. To date, we have permitted (8) ‘‘Form S–1’’ (OMB Control No.
to the entire market. voluntary filers to submit their reports 3235–0065);
to us through EDGAR. We believe it is (9) ‘‘Form F–1’’ (OMB Control No.
C. Disclosure of Status as Voluntary important to be able to assess whether 3235–0258);
Filer Under the Exchange Act issuers are subject to our reporting and (10) ‘‘Form S–2’’ (OMB Control
As we noted in the Proposing Release, other requirements arising from their Number 3235–0072);
our filing system does not prohibit reporting status. We do not believe that (11) ‘‘Form F–2’’ (OMB Control
issuers that are not required to file calculation of the number of U.S. Number 3235–0257);
Exchange Act reports us from filing holders is a significant obstacle to (12) ‘‘Form S–3’’ (OMB Control
those reports voluntarily. In most cases, unregistered foreign private issuers’ Number 3235–0073);
voluntary filers are issuers who have, at determination of their voluntary filer (13) ‘‘Form F–3’’ (OMB Control
some point, completed a registered status. Number 3235–0256);
offering under the Securities Act and VIII. Paperwork Reduction Act (14) ‘‘Form S–4’’ (OMB Control
have continued to file Exchange Act Number 3235–0324);
reports even after their reporting A. Background (15) ‘‘Form F–4’’ (OMB Control
obligation under Exchange Act Section The rules contain ‘‘collection of Number 3235–0325);
15(d) has been suspended.610 information’’ requirements within the (16) ‘‘Form N–2’’ (OMB Control
We are adopting the proposal to meaning of the Paperwork Reduction Number 3235–0026);
include a box on the cover page of Act of 1995 (PRA).614 We published a (17) ‘‘Rule 173’’ (OMB Control
Forms 10–K, 10–KSB, and 20–F for an notice requesting comment on the Number 3235–0618);
issuer to check if it is filing reports collection of information requirements (18) ‘‘Rule 163’’ (OMB Control
voluntarily. However, the box is for in the Proposing Release, and we Number 3235–0619); and
disclosure purposes only and an issuer’s submitted these requirements to the (19) ‘‘Rule 433’’ (OMB Control
filing obligation will be unaffected by an Office of Management and Budget Number 3235–0617).
incorrectly checked box. (OMB) for review in accordance with We adopted all of the existing
We believe that it is important that the PRA.615 regulations and forms pursuant to the
investors and other market participants We did not receive any comments on Securities Act of 1933, the Securities
are aware that an issuer that is a the PRA analysis contained in the Exchange Act of 1934, and the
voluntary filer is not required to Proposing Release. As discussed above, Investment Company Act of 1940. They
continue to file Exchange Act reports we have made several changes to the set forth the disclosure requirements for
and may cease to file its Exchange Act proposed rules in response to comments annual and quarterly reports,
reports at any time and for any reason on the proposals. These changes are registration statements, and
without notice. In addition, our designed to avoid potential unintended prospectuses that are prepared by
communications and procedural rules consequences and reduce possible issuers to ensure that investors have the
we are adopting today do not treat additional costs or burdens pointed out information they need to make informed
voluntary filers as reporting issuers or by commenters. After evaluating the investment decisions in registered
seasoned issuers. As we indicated comments and our responsive revisions offerings and in secondary market
above, voluntary filers desiring to address them, we are not changing transactions. We also are adopting new
the initial PRA estimates described in Securities Act Rules 163, 173, and 433
608 See, e.g., letters from ABA; Alston; CSFB; and
the Proposing Release and submitted to
NYSBA. OMB, other than to reflect the decreased 616 The paperwork burden from Regulations S–K,
609 See letter from TBMA.
S–B, and C are imposed through the forms that are
610 Exchange Act Section 15(d) suspends subject to the requirements in those Regulations
611 See Exchange Act Section 12(g) [15 U.S.C.
automatically its application to any issuer that and reflected in the analysis of those forms. To
78l(g)].
would be subject to the filing requirements of that 612 See, e.g., letters from ABA and Alston.
avoid a Paperwork Reduction Act inventory
section where, if other conditions are met, on the reflecting duplicative burdens, for administrative
613 See, e.g., letters from ABA and Alston.
first day of the issuer’s fiscal year, it has fewer than convenience we estimate the burdens imposed by
614 44 U.S.C. 3501 et seq.
300 holders of record of the class of securities that Regulations S–K, S–B, and C to be a total of one
created the Section 15(d) obligation. 615 44 U.S.C. 3507(d) and 5 CFR 1320.11. hour.
and eliminating Securities Act Rule 434 • Risk factor disclosure; offerings of common equity or
and Forms S–2 and F–2. • Disclosure by accelerated filers and convertible equity securities by non-
The amendments to existing forms well-known seasoned issuers, in their reporting issuers broadly disseminated
and regulations and new rules will annual reports on Forms 10–K or 20–F, on an unrestricted basis.
modify and advance the Commission’s of any written staff comments regarding The rules will decrease existing
regulatory system for offerings under the their Exchange Act reports issued more disclosure requirements by:
Securities Act, enhance than 180 days before the end of the • Reducing the need to repeat
communications between public issuers fiscal year covered by the annual report previously disclosed information by
and investors, and promote investor that the issuer believes to be material permitting any reporting issuer that has
protection. The rules involve three main and that remain unresolved as of the filed at least one annual report and that
areas: date of the filing of the annual report; is current in its reporting obligation to
• Communications related to and incorporate information by reference
registered securities offerings; • ‘‘Check boxes’’ that will appear on into its registration statement on Forms
• Procedural restrictions in the the cover page of the report or S–1 or F–1; and
offering and capital formation processes; registration statement to indicate • Reducing the number of registration
and whether the registrant is filing Exchange
• Delivery of information to investors. statements filed because the automatic
Act reports on a voluntary basis and shelf registration rules likely will
The hours and costs associated with whether the registration is a well-known
preparing disclosure, filing forms, and eliminate the need to file multiple
seasoned issuer.617 registration statements.
retaining records constitute reporting The rules will impose the following
and cost burdens imposed by the new disclosure requirements and filing C. Summary of Comment Letters on the
collections of information. The or notification conditions in connection PRA Analysis
estimates of reporting and cost burdens with registered offerings under the
provided in this PRA analysis address We received no comments in response
Securities Act: to our request for comment on the PRA
the time, effort, and financial resources • A brief notice to purchasers in a
necessary to provide the collections of analysis in the Proposing Release. We
registered offering providing that the have made several changes and
information and are not intended to sale was made pursuant to a registration
represent the full economic cost of clarifications in response to comments
statement; 618 on the proposals that are designed to
complying with the rules. An agency • A brief legend in ‘‘free writing avoid or reduce possible additional
may not conduct or sponsor, and a prospectuses’’ 619 that refers investors to
person is not required to respond to, a costs or burdens pointed out by
the statutory prospectus; commenters. For example, we are not
collection of information unless it • ‘‘Check boxes’’ on registration
displays a currently valid control requiring that an electronic road show
statement cover pages indicating
number. be filed for most offerings, except if an
whether the registration statement is
The information collection electronic road show that is a written
being used for ‘‘automatic shelf
requirements related to registration communication is used in an initial
registration’’ or post-effective
statements and periodic reports will be public offering of common equity or
registration of additional securities or
mandatory. For registration statements convertible equity securities by a non-
classes of securities; 620
and periodic reports, there will be no • Additional disclosure in the reporting issuer. In that case, the
mandatory retention period for the undertakings required to be included in electronic road show does not have to
information disclosed, and the a registration statement for securities to be filed if a bona fide electronic road
information gathered will be made be offered pursuant to Rule 415; 621 show is made readily available
publicly available. The information • A filing condition in connection electronically on an unrestricted basis
collection requirements related to the with the use of certain free writing In addition, we have revised the
communications and prospectus prospectuses; 622 and definition of graphic communication so
delivery rules will apply only to issuers • Making a version of an electronic that live, in real-time presentations to a
and other offering participants choosing road show that is a written live audience will not be considered
to rely on them. There will be a communication used in initial public written communications and therefore
mandatory record retention period with not free writing prospectuses. As a
respect to the communications and 617 We believe that the burden associated with result of these modifications, we believe
prospectus delivery provisions. checking a box on the cover page of an Exchange that fewer free writing prospectuses,
Act report or registration statement is so minimal including those that are electronic road
Moreover, free writing prospectuses that that we are unable to quantify the burden.
are prepared by or on behalf of or used 618 Under Securities Act Rule 173, this
shows, will be filed or otherwise made
or referred to by an issuer, and free notification will be imposed, which may be available electronically on an
writing prospectuses that are broadly satisfied through inclusion of the notification on a unrestricted basis, and we have
disseminated by another offering confirmation of sale already required to be provided therefore revised the estimates for the
in sales involving broker dealers, while Securities total burden imposed by Rule 433.
participant, will have to be filed and Act Rule 172 will eliminate the more burdensome
will be publicly available on the EDGAR requirement of delivery of a final prospectus. D. Paperwork Reduction Act Burden
filing system, whereas other free writing 619 ‘‘Free writing prospectuses’’ are written
Estimates
prospectuses prepared by or on behalf of communications (other than statutory prospectuses)
or used or referred to by offering
that constitute offers to sell or solicitations of offers For purposes of the PRA, we
to buy securities. estimated the total annual incremental
participants, other than the issuer, will 620 In this regard, see note regarding the burden
not have to be filed. associated with checking a box on the cover page.
reduction in the paperwork burden for
621 We also are requiring similar undertaking registrants to comply with the collection
B. Summary of Information Collections language in Form N–2, the registration statement of information requirements to be
The rules will add the following form for closed-end management investment approximately 40,393 hours of in-house
companies. issuer personnel time and the reduction
disclosure requirements to Exchange 622 See the discussion in Section III above under
Act periodic reports and registration ‘‘Permissible Use of Free Writing Prospectuses’’
in cost to be approximately $70,797,000
statements: under ‘‘Filing Conditions.’’ for the services of outside
professionals.623 The changes in the paperwork burden for all issuers to services of outside professionals, as we
PRA burden estimates for Rule 433 prepare the disclosure required in explained more fully in the Proposing
(OMB Control No. 3235–0617) have the Exchange Act periodic reports and Release. That estimate reflected changes
effect of reducing the estimated registration statements under the rules to the number of filings that could result
paperwork burden for registrants by to be approximately 43,245 hours of from the rules as well as the decrease in
approximately 356 hours of in-house issuer personnel time and the cost to be disclosure preparation time resulting
personnel time, for a new estimate of approximately $4,477,000 for the from the expansion of incorporation by
approximately 40,749 hours, and a services of outside professionals, as we reference.
reduction in cost of approximately explained more fully in the Proposing
$320,800, for a new estimate of Release. Those estimates include the IX. Cost Benefit Analysis
approximately $71,117,800 for the time and the cost of preparing and A. Background
services of outside professionals. For reviewing the required new disclosure.
We are revising the registration,
broker-dealers, we estimated the annual The estimates reflect our belief that,
communications, and offering processes
incremental paperwork burden to because the current disclosure
under the Securities Act. The rules
comply with the collection of requirements for Exchange Act reports
involve three main areas:
information requirements to be (such as Management’s Discussion and
• Communications related to
approximately 3,874,133 hours of in- Analysis of Financial Condition and
registered securities offerings;
house issuer personnel time, and we are Results of Operations) 626 already
• Registration and other procedures
not changing this estimate.624 Those require issuers to obtain information
necessary to evaluate their material in the offering and capital formation
estimates include the time and the cost processes; and
of preparing and reviewing disclosure, risks, and because disclosure by
accelerated filers describing unresolved • Delivery of information to investors.
filing documents or otherwise The overall goal of the reforms is to
publicizing information, and retaining written staff comments on previous
filings that the issuer believes to be make the registration system more
records. workable for issuers and underwriters
As we noted in the Proposing Release, material will be simply a summary of
comments provided to the issuer by the and more effective for investors in
the estimates represent the average
staff of the Commission, the disclosure today’s capital markets. We believe that
burden for all issuers, both large and
that issuers would have to make in their the gun-jumping provisions of the
small. We expect that the burdens and
Exchange Act periodic reports and Securities Act impose substantial and
costs could be greater for larger issuers
registration statements should not increasingly unworkable restrictions on
and lower for smaller issuers. For
impose significant new burdens. useful communications that would be
Exchange Act periodic reports, we
beneficial to investors and markets and
estimated that 75% of the burden of 2. Communications and Prospectus consistent with investor protection.
preparation is carried by the issuer Delivery Today’s rules reflect our view that
internally and that 25% of the burden
For purposes of the PRA, we estimate revisions to the Securities Act
is carried by outside professionals
that the annual paperwork burden for registration and offering processes are
retained by the issuer at an average cost
issuers that choose to comply with the appropriate in light of significant
of $300 per hour.625 For Securities Act
communications rules will be developments in the offering and capital
registration statements, Exchange Act
approximately 1,176 hours of issuer formation processes and can provide
registration statements, all filings by
personnel time and a cost of enhanced protection of investors under
foreign private issuers, and the free
approximately $1,058,288 for the the statute. This view is based on our
writing prospectus rules, we estimated
services of outside professionals. These belief that today’s rules will:
that 25% of the burden of preparation
estimates reflect the burden hours and • Facilitate greater availability of
is carried by the issuer internally and
costs associated with the disclosure, information to investors and the market
that 75% of the burden is carried by
filing, and record retention conditions. with regard to all issuers;
outside professionals retained by the
As noted above, we are revising the • Eliminate barriers to open
issuer at an average cost of $300 per
annual burden for the information communications that have been made
hour. The portion of the burden carried
collection requirements of Rule 433 as increasingly outmoded by technological
by outside professionals is reflected as
a result of the changes to the treatment advances;
a cost, while the portion of the burden
of electronic road shows and we have • Reflect the increased importance of
carried by the issuer internally is
decreased the annual paperwork burden electronic dissemination of information,
reflected in hours.
accordingly. For the prospectus delivery including the use of the Internet;
1. Exchange Act Periodic Reports and rules, we estimated that the annual • Make the capital formation process
Registration Statements burden would be 3,874,133 hours total more efficient; and
For purposes of the PRA, we for all respondents to comply with Rule • Define more clearly both the
estimated the annual incremental 173. information and the timeliness of the
availability of information against
3. Securities Act Registration Statements which a seller’s statements are
623 For administrative convenience, the
presentation of the totals related to the paperwork For purposes of the PRA, we evaluated for liability purposes.
burden hours have been rounded to the nearest estimated that the rules affecting the
whole number and the cost totals have been B. Summary of Rules
collection of information requirements
rounded to the nearest thousand.
624 We assume that brokers and dealers will not
related to Securities Act registration The amount of flexibility granted to
use outside professionals to comply with the new statements would reduce incrementally issuers under the revisions to the
collection of information requirements. the annual paperwork burden by registration, communications, and
625 In connection with other recent rulemakings,
approximately 85,170 hours of issuer offering processes is contingent on the
we have had discussions with several private law personnel time and by a cost of characteristics of the issuer. We believe
firms to estimate an hourly rate of $300 as the
average cost of outside professionals that assist approximately $76,653,000 for the that the most far-reaching revisions of
issuers in preparing disclosures and conducting the communications rules and
registered offerings. 626 Item 303 of Regulation S–K [17 CFR 229.303]. registration processes should be
considered for issuers that have a been filed by its due date, such due • There will be two separate
reporting history under the Exchange date). In addition, we will require exclusions from the gun-jumping
Act and are presumptively the most issuers to check a box on the cover of provisions for communications not
widely followed in the marketplace. We their Form 10–K or Form 20–F if they encompassed in the rules above that
believe that these issuers have an are a well-known seasoned issuer so occur prior to the filing of a registration
Exchange Act record, a broad following that market participants may reasonably statement:
of their Exchange Act filings, and the rely on the issuer’s determination. For Æ An exclusion from the definition of
contemplated attention directed to their issuers with publicly traded equity, we offer for purposes of Securities Act
Exchange Act reports by analysts and believe that market capitalization Section 5(c) for all issuers for all
institutional investors, and the staff of provides a sufficient proxy for communications made by or on behalf
the Division of Corporation Finance that determining whether or not an issuer is of issuers 30 days prior to filing a
will produce the greatest likelihood of well followed. For issuers of fixed registration statement; and
Exchange Act reports that not only are income securities, we believe that the Æ An exemption from the prohibition
reliable but also are broadly scrutinized amount of fixed income securities sold on offers for purposes of Securities Act
by investors and the markets. in registered offerings for cash in the Section 5(c) before the filing of a
For purposes of the rules we are past three years provides a sufficient registration statement for offers made by
adopting today, we categorize issuers proxy.628 or on behalf of eligible well-known
into tiers, consisting of non-reporting Under the rules, a well-known seasoned issuers.
issuers, unseasoned issuers, seasoned seasoned issuer will have the greatest • Certain written offering related
issuers, and well-known seasoned flexibility. The largest issuers are communications, such as
issuers. The first three tiers of issuers followed by sophisticated institutional communications about the schedule for
are identified by pre-existing criteria and retail investors, members of the an offering or communications about
under the existing federal securities financial press, and numerous sell-side account-opening procedures, will be
laws. A non-reporting issuer is an issuer and buy-side analysts that actively seek permitted in connection with an
that is not required to file reports new information on a continual basis. offering and will be excluded from the
pursuant to Sections 13 or 15(d) of the Unlike smaller or less mature issuers, definition of ‘‘prospectus.’’
Exchange Act.627 An unseasoned issuer large, seasoned public issuers tend to • Issuers and other offering
is an issuer that is required to file have a more regular dialogue with participants will be permitted to use
reports pursuant to Sections 13 or 15(d) investors and market participants free writing prospectuses after the filing
of the Exchange Act, but does not satisfy through the press and other media. The of the registration statement, subject to
the requirements of Form S–3 or Form communications of these well-known enumerated conditions (including, in
F–3 for a primary offering of its specified cases, filing with the
seasoned issuers are subject to scrutiny
securities. A seasoned issuer is an issuer Commission).
by investors, the financial press,
that uses Form S–3 or Form F–3 to
analysts, and others who evaluate • The safe harbors for research
register primary offerings of securities. reports will be expanded.
disclosure when it is made.
Our longstanding experience with these
categories of issuers provides us with a 1. Communications 2. Securities Act Registration Rules
basis for determining the amount of As part of the rules to modernize the
We are adopting communications
flexibility provided by the rules we are regulatory regime for registered
rules that recognize the value of ongoing
adopting today. securities offerings, we are streamlining
The characteristics of the last tier of communications as well as the
the registration process for most types of
issuer, called well-known seasoned importance of avoiding unnecessary
reporting issuers. The rules recognize
issuers in the rules, will be easily restrictions on offers during a registered
the role that technology and improved
measurable and readily available so that offering. The rules are designed to
Exchange Act reporting procedures have
issuers and market participants can improve investors’ access to
in informing the marketplace. The rules
determine eligibility easily. In response information, to promote
address the registration procedures for
to comments, we are modifying the communications between offering
seasoned and unseasoned issuers. These
definition of well-known seasoned participants and investors, and to
rules include:
issuer to provide that the eligibility maintain adequate investor protection. • Modifications that clarify and
determination will be made as of the The rules will operate in the following expand how and when information can
later of the time of filing of the issuer’s manner: be included in registration statements;
most recent registration statement on • There will be two separate safe • A clarification of the Securities Act
Form S–3 or Form F–3 for a primary harbors from the gun-jumping liability treatment of information
offering, the time of filing its most provisions for ongoing communications provided in a prospectus supplement
recent amendment for purposes of at any time: and Exchange Act reports incorporated
complying with Section 10(a)(3) of the Æ A safe harbor for a reporting by reference;
Securities Act, or an amendment to a issuer’s continued publication or • A more flexible automatic
shelf registration within 16 months. If dissemination at any time of regularly registration process for well-known
the well-known seasoned issuer has not released factual business and forward- seasoned issuers, including immediate
filed an automatic shelf registration looking information; and effectiveness and pay-as-you-go
statement, the eligibility is determined Æ A safe harbor for a non-reporting registration fee payment; and
at the time of filing the issuer’s most issuer’s continued publication or • Rules related to non-shelf offerings
recent annual report on Form 10–K or dissemination at any time of factual of securities.
Form 20–F (or if such report has not business information that is regularly
3. Prospectus Delivery
released to persons other than investors
627 Under the rules, an issuer that is filing or potential investors. We are adopting an ‘‘access equals
Exchange Act reports voluntarily, but is not delivery’’ prospectus delivery model,
required to do so, will be a non-reporting issuer for
purposes of the communications and procedural 628 For further discussion of the characteristics of where final prospectus delivery
rules. well-known seasoned issuers, see Section II above. obligations for purposes of Securities
Act Section 5(b)(2) will be satisfied if formation process and modernizing registered offering. While much of the
the issuer filed the final prospectus with offering communications, while Commission’s recent rulemaking is
the Commission within the required preserving investor protection and intended to encourage reporting issuers
time frame. The rules will: avoiding unnecessary impediments to to provide materially accurate and
• Eliminate the existing link between the capital formation process. We did complete information to the market on
delivery of the final prospectus and the not receive any comments on the cost- a more current basis, the Securities
delivery of a written confirmation of benefit analysis, other than asking Act’s constraints on communications
sale; generally about cost savings by during an offering cause issuers to be
• Provide that the obligation to have underwriters and broker-dealers. Some concerned about the treatment of their
a final prospectus precede or commenters noted potential costs that ongoing communications and whether
accompany a security can be satisfied by certain of the proposals might impose. their customary disclosures will be
filing a final prospectus with us within We considered these comments considered an impermissible offer of
the relevant timeframe provided by Rule carefully and believe that we have made securities. As a result of the multiplicity
424(b); responsive changes in order to minimize of means of communication, restricting
• Permit written notices of these potential costs. written offers to a statutory prospectus
allocations; and For example, a number of commenters inhibits desirable methods of timely
• Permit the prospectus delivery were concerned about the final communication of information. The
obligations in dealer transactions during prospectus filing condition in Rule 172, rules regarding communications,
any prospectus delivery period and due to the potential liability if written registration, and liability will operate to
broker or dealer transactions in confirmations were sent and the issuer increase the amount of valuable
registered resales of securities that are failed to file the final prospectus within information that could be provided to
trading to be satisfied if the final the required time frame. We have investors before they make investment
prospectus has been or will be filed included a cure provision allowing an decisions. We believe that more
with us. issuer that has made a good faith and information will be provided on a more
reasonable effort to file within the timely basis because the rules will
4. Exchange Act Reports required time frame to file the final eliminate regulatory barriers to the
A public issuer’s Exchange Act record prospectus as soon as practicable after dissemination of that information, and
often provides the most detailed source discovery of the failure to file. the markets may provide incentives for
of information to the market and to Commenters also expressed concern issuers, underwriters, and broker
potential purchasers regarding the about the distinctions between oral and dealers to produce additional
issuer, its business, its financial written communications and the effects information.
condition, and its prospects. We are on offering participants to provide
Increased information flow will
adopting, substantially as proposed, information. We have revised the
promote efficient capital markets
several reforms to Exchange Act definition of graphic and written
because the market may be able to value
reporting requirements related to the communications to make clearer when a
securities more accurately. Under the
reforms to the Securities Act offering communication is written and when it
rules, underwriters can communicate
process. As a result of the rules, we will: is oral.
with potential investors during an
• Extend risk factor disclosure
D. Benefits offering to better gauge investor interest,
requirements to annual reports on
As discussed, the overall goal of the thus facilitating greater discourse among
Exchange Act Form 10–K and
reforms is to make the registration investors and underwriters.
registration statements on Exchange Act
Form 10; system more workable for issuers and Another benefit of increasing the
• Require updates for previously underwriters and more effective for information flow is that investors may
disclosed risk factors in quarterly investors in today’s capital markets. We become better informed in making
reports on Exchange Act Form 10–Q; believe that the reforms will achieve portfolio allocation decisions in
• Require accelerated filers and well- this goal and consequently result in accordance with their particular risk-
known seasoned issuers to disclose in significant benefits in a number of areas, return profiles. Moreover, the ability of
their annual reports on Exchange Act including by increasing the flow of offering participants to use free writing
Forms 10–K and 20–F any written staff information available to investors prospectuses in connection with
comments on Exchange Act reports during a registered offering while offerings will impart a greater ability to
issued more than 180 days before the maintaining investor protection against provide information to investors about
end of the fiscal year covered by the misleading or inaccurate disclosures. securities before they make investment
report that the issuer believes to be We also anticipate that the rules will decisions. For example, issuers and
material and that remain unresolved as improve access to the public capital underwriters will be able to provide
of the filing date of the report; markets and possibly lower the cost of proprietary analytical material that is
• Include a box on the cover page of capital by, among other things, specifically tailored to address the
the Exchange Act Forms 10–K and 20– modifying, and in some cases clarifying, particular asset allocation
F for an issuer to check if it is a well- the federal securities laws related to considerations of different investors.
known seasoned issuer; and communications, liability, shelf Today’s markets include a growing
• Include a box on the cover page of registration, and the use of electronic number of increasingly complex
Exchange Act Forms 10–K, 10–KSB, and media during a registered offering. securities where written
20–F for an issuer to check if it is filing Finally, we believe that the rules will communications, such as detailed term
reports voluntarily. provide cost-saving options to issuers sheets, will enhance significantly the
and underwriters. offering process for the benefit of
C. Comments on the Proposals investors. In addition, we are adopting
Commenters supported the proposals, 1. Increased Information Flow rules to permit research to be
with many commenters noting that the The primary benefit that the rules distributed about more issuers that are
proposals struck the appropriate balance seek to achieve is an increased flow of making registered offerings. Having
between improving the capital information to investors during a access to these reports may facilitate
additional security analysis among communication is made. We believe protection. We believe that the
investors. that the rules will provide issuers and disclosure by issuers meeting the
By reducing the restrictions on the underwriters with greater flexibility to definition of accelerated filers and well-
contents of written communications, we communicate information in a manner known seasoned issuers of unresolved
anticipate that investors will demand that does not slow the offering process written staff comments that the issuer
more information and issuers, unduly. At the same time, investors believes to be material will benefit
underwriters, and other offering should be in a better position to have investors because they will be able to
participants will be more willing to accurate information at the time of the ascertain the nature of the staff
provide it. Significant technological sale of the securities to them (including comments and take them into account
advances have increased both the the time of the contract of sale). These in their investment decisions. We
market’s demand for more timely measures should encourage the believe that the disclosure of risk factors
corporate disclosure and the ability of disclosure of accurate information about in plain English will help investors in
issuers to capture, process, and transactions.629 assessing the risks that an issuer
disseminate information. The rules will The free writing prospectus rules will currently faces or may face in the future.
enable issuers and market participants promote investor protection by Many issuers currently provide this risk
to take greater advantage of the Internet requiring issuers to file issuer prepared factor disclosure in their Exchange Act
and other electronic media to or used free writing prospectuses and reports voluntarily. However, for other
communicate and deliver information to issuer information in free writing issuers, investors have access to this
investors. As discussed in greater detail prospectuses. We believe that information only if the issuer has
below, reducing regulatory and liability conditioning the use of written issuer recently conducted a registered offering
uncertainty with respect to the provided or used information on filing under the Securities Act, in which case
treatment of written communications will improve investor protection. On the the issuer will be subject to risk factor
may make issuers more comfortable in one hand, the filing requirement is disclosure requirements in its Securities
supplying information without worrying designed to assure that written issuer Act registration statement. The rules
about violating the gun-jumping provided or used information is also require disclosure of voluntary filer
provisions. Accordingly, investor publicly available. On the other hand, status. We believe it is important that
demand for information can be satisfied requiring underwriters to file their the staff and the market understand
through relatively inexpensive mass proprietary analysis may cause them when issuers are filing Exchange Act
dissemination of the information competitive harm. Additionally, the free reports voluntarily, since such issuers
through electronic means. writing prospectus will be a Section may cease filing these reports at any
Finally, the rules we are adopting 10(b) prospectus under the Securities time.
today that provide that an electronic Act and, as such, will be subject to
road show presentation must either be 3. Facilitating Capital Formation
liability under Section 12(a)(2) as well
filed or a bona fide version must be as the anti-fraud provisions of the We anticipate that the rules will
made readily available to an federal securities laws. As a Section facilitate capital formation, and possibly
unrestricted audience for initial public 10(b) prospectus, there will be lower the cost of capital, by improving
offerings of a non-reporting issuer’s continuing Commission oversight and access to the public capital markets. The
common equity or convertible equity enforcement authority over the contents rules are designed to eliminate
securities provide for the availability of and use of the free writing prospectus, unnecessary regulatory impediments to
information in these offerings to all including the ability to halt the use of capital formation and provide more
investors. We believe these changes will any materially false or misleading free flexibility to issuers to conduct
encourage more road shows and other writing prospectus in accordance with registered securities offerings. The
information in these offerings to be Section 10(b). amount of flexibility accorded by the
provided to more investors. The rules allowing automatic shelf rules will depend on the characteristics
registration statements to become of the issuer. The rules provide the most
2. Investor Protection flexibility under the communications
effective immediately will allow the
Another benefit of the rules is that Commission to shift its resources more rules and the automatic shelf
they will maintain investor protection toward the review of issuers’ Exchange registration system to eligible well-
against misleading or inaccurate Act reports. Because we believe that an known seasoned issuers. Other issuers
disclosures. Investor protection is of issuer’s Exchange Act record often also will benefit, albeit to a lesser
paramount importance in maintaining provides the most detailed source of degree, from the other revisions to the
fair, orderly, and efficient capital information to the market and to communications and registration
markets. The rules regarding liability potential purchasers regarding the process.
and disclosure in Exchange Act periodic The rules may lower the cost of
issuer, its business, its financial
reports, as well as the filing conditions capital because they will provide
condition, and its prospects, we believe
and record retention conditions for significant flexibility to issuers and
that investors will benefit from the
unfiled free writing prospectuses, will underwriters in marketing their
staff’s ability to review Exchange Act
maintain and enhance investor securities. The communications rules
reports more frequently.
protection in connection with registered will allow well-known seasoned issuers
The inclusion of additional
securities offerings. to communicate at any time regarding
disclosures in Exchange Act periodic
A central premise underlying the reports also will promote investor
an offering and will allow other issuers
liability rules is that communications to more freedom in communicating after a
investors at the time of sale (including 629 Recent research has examined the effect of registration statement is filed. For well-
the time of the contract of sale) should securities laws on stock market development in 49 known seasoned issuers, automatic shelf
not include material misstatements or countries and found strong evidence that laws registration will facilitate immediate
fail to include material information that facilitating private enforcement through disclosure market access and promote efficient
and liability rules are positively correlated with
is necessary to make the communication more developed stock markets. See, La Porta, Lopez
capital formation, without diminishing
not misleading in light of the de Silanes, and Shleifer, ‘‘What Works in Securities investor protection. The automatic shelf
circumstances in which the Laws?’’ Forthcoming in Journal of Finance. registration process will allow eligible
issuers to add additional classes of The prospectus delivery rules are availability of historical information
securities and eligible majority-owned designed to facilitate effective access to that may be useful to investors.
subsidiaries as additional registrants information, while taking into account The rules affecting the shelf
after an automatic shelf registration advancements in technology and the registration procedures will codify in a
statement is effective. The ‘‘pay-as-you- practicalities of the offering process. single location permissible omissions
go’’ system will allow well-known These changes are intended to alleviate from shelf registration statements and
seasoned issuers to pay at the time of timing difficulties that may arise under the permissible methods to include the
each takedown off the shelf registration the current securities clearance and omitted information. This will promote
statement or in advance. The automatic settlement system, and also to facilitate efficiency by providing certainty about
shelf registration rules will provide the successful delivery of, and payment the content of base prospectuses in shelf
these issuers with significant latitude in for, securities in a registered offering. registration statements and the methods
determining the types and amounts of Given that the final prospectus delivery by which required information may be
their securities or those of their eligible obligations generally affect investors included, thereby reducing divergent
subsidiaries that could be offered only after they have made their practices and eliminating possible
without any potential time delay or investment decisions and that investors inadvertent mistakes. In addition, we
other obstacles imposed by the and the market have access to the final believe the rules will address the
registration process. The rules will prospectus upon its filing, we believe disparate treatment of underwriters
provide the flexibility to take advantage that the obligation can be satisfied from a liability standpoint by
of market windows, to structure through a means other than physical establishing a new effective date for
securities on a real-time basis to delivery. Because the contract of sale liability purposes for issuers and
accommodate issuer needs or investor will have already occurred by the time persons who are underwriters at that
demand, and to determine or change the the final prospectus is filed, we also time in connection with takedowns off
plan of distribution of securities as believe that delivery of a confirmation shelf registration statements, as reflected
issuers elect in response to changing and the delivery of the final prospectus in prospectus supplements filed for
market conditions. need not be linked. Receiving such takedowns. On the other hand, the
The other rules to the shelf confirmations earlier in the settlement new rules regarding prospectus
registration procedures and expansion process will enable investors to review supplement filings will not trigger a
of incorporation by reference also will the confirmation and verify trade data new effective date for officers or
provide flexibility to issuers to enable closer to the time of the investment directors of the issuer or for experts,
them to access the capital markets at a decision. including accountants.
lower cost. For example, removing the
current restrictions on at-the-market 4. Reduced Regulatory Uncertainty 5. Lower Costs
offerings of equity securities will allow The rules modify the federal The prospectus delivery rules and the
issuers eligible to use Form S–3 or Form securities laws related to rules related to the registered securities
F–3 for primary equity offerings to offer communications, liability, shelf offering process will provide cost-saving
securities directly to the marketplace, registration, and the use of electronic options to issuers, underwriters, and
without using the underwriting or media during a registered offering. The dealers. We believe that allowing
syndication process. Under the rules to rules, by enhancing issuers’ certainty reporting issuers to incorporate by
expand Form S–3 eligibility to cover about the regulatory treatment of and reference their previously filed
additional majority-owned subsidiaries, liability provisions attached to the Exchange Act reports and other
issuers will have greater flexibility to communication of information to the materials into a Form S–1 or Form F–
structure offerings of guaranteed marketplace, could encourage issuers to 1 provides them a more cost-effective
securities without losing the benefits of increase the dissemination of readily way to raise capital without the cost of
shelf registration. In addition, the rules available information useful to duplicating the information contained
to expand incorporation by reference to investors, such as management’s plans in their filed reports and other
Form S–1 and Form F–1 will enable and objectives for future operations. The materials. The rules affecting final
eligible issuers to use their Exchange 30-day bright-line exclusion and the prospectus delivery should also result
Act filings to satisfy their disclosure exemption from the prohibition on in lower costs to issuers because of
requirements without having to incur offers prior to filing for well-known reduced printing costs for a smaller
costs to replicate information in the seasoned issuers will provide these number of final prospectuses.
prospectus. issuers with the ability to communicate For purposes of the PRA analysis, we
Providing flexibility for registered information prior to filing a registration have estimated that the rules to the
offerings may encourage issuers to raise statement without risk of violating the registered securities offering processes
capital through the registration process gun-jumping provisions. will reduce the total current annual
instead of through private placements. The safe harbors for regularly released compliance costs by approximately
Typically, registered securities enjoy factual business information and $87,664,000.630 In addition, we believe
more liquid markets than unregistered forward-looking information will allow
that issuers and underwriters will
securities. Therefore, registered issuers to continue ordinary
benefit from not having to print and
securities are less likely to be subject to communications without fear of
deliver final prospectuses. We estimate
a liquidity discount. In addition, violating the gun-jumping provisions.
that the cost savings per prospectus will
registered securities offerings provide a At the same time, these communications
be approximately $0.75 per prospectus.
potentially larger investor base than that could benefit all investors because there
For purposes of the PRA, we have
available to those who participate in will be more current information and
estimated 232.45 million instances in
private placements. Accordingly, issuers analysis available upon which to make
which broker dealers will be able to rely
may incur lower transaction costs when investment decisions. We also are
on the ‘‘access equals delivery’’
raising capital because they will have clarifying the treatment of information
access to a much deeper market for their located on or hyperlinked to an issuer’s 630 For purposes of monetizing the cost of issuer
securities and may have to expend website around the time of a registered personnel time, we estimate the average hourly cost
fewer resources to locate investors. offering, to allow for the continued of issuer personnel time to be $125.
provisions. Investors may request the adequate records of any free writing registration statements to satisfy the risk
final prospectus, and we estimate that prospectuses used and not filed. We factor disclosure requirements.
they will do so 25% of the time. have revised the proposed record Parties also may incur additional
Therefore, we estimate the total annual retention condition so that it costs due to the requirement to notify
cost savings will be approximately encompasses only free writing investors that they have purchased in a
$130,753,000. prospectuses that have not been filed on registered offering. In addition, these
EDGAR, so this should ease the burden same parties will incur costs to establish
E. Costs procedures for receiving and complying
for issuers and offering participants.
While the overall goal of the reforms The disclosures may increase the cost with requests for final prospectuses. We
is to make the registration system more to issuers of preparing their Exchange believe that providing the notice to
workable for issuers and underwriters Act reports. We do not expect the costs investors will not impose a significant
and more effective for investors in to accelerated filers and well-known incremental cost because the notice can
today’s capital markets, we do believe seasoned issuers of including disclosure consist of a pre-printed message that is
that there will be costs to the rules. of certain unresolved staff comments to automatically delivered with or as part
These include costs for compliance with of the confirmation required by
be significant because the information
the rules, potential behavioral changes Exchange Act Rule 10b–10.
will be readily available to the issuer.633
resulting from the liability rules, and Accordingly, we estimate that the cost
certain other costs. Including risk factor disclosure may
for complying with Rule 173 will be
impact issuers who do not already
1. Compliance Costs approximately $0.05 per notice. We
include this disclosure in their
estimate the annual cost of providing
One potential cost of the rules is that Exchange Act reports for other
the notifications will be approximately
issuers may incur increased filing costs reasons.634 Because issuers already are
$11,622,500.636 The cost savings
associated with issuer free writing required to prepare financial statements
resulting from the elimination of the
prospectuses or making a version of an and other information about their
requirement to supply a final prospectus
electronic road show publicly business, financial condition, and
to each investor will offset the costs
available.631 These costs should be prospects in their annual and quarterly
incurred, however.
mitigated somewhat by the fact that free reports, some of which will include
writing prospectuses are not required to these risk factors, we believe that issuers 2. Potential for Increased Liability
be filed as part of the registration will have already analyzed the issues The rules to deem prospectus
statement and therefore will not have to that might be addressed in the risk supplements to be part of and included
be conformed to meet all the factor disclosure. In addition, issuers in effective registration statements, and
requirements for an amendment to the may already include risk factor to modify, for liability purposes for the
registration statement. In addition, disclosure in their Exchange Act reports issuer and underwriters only, the
because oral communications are not for varying reasons, including to take effective date of shelf registration
written and, therefore, not free writing advantage of the safe harbor for forward- statements to link them to individual
prospectuses, the rules should not result looking statements in Securities Act offerings or takedowns off the shelf
in significant incremental costs from Section 27A of the Securities Act 635 registration statement may cause issuers
existing regulations. We also are and the ‘‘bespeaks caution’’ defense to evaluate more carefully the
conditioning the use of free writing developed through case law. We information contained in prospectuses
prospectuses on the inclusion of a recognize, however, that issuers will and the information conveyed to
legend that notifies investors that they incur costs in preparing, reviewing, investors. We have sought to minimize
can receive a copy of the prospectus by filing, printing, and disseminating this the potential costs by limiting the rule
calling a toll-free number. Accordingly, information. In particular, in addition to so that it affects the issuer and
there may be some costs for issuers and involving in-house preparers, in-house underwriters only, and therefore have
offering participants associated with legal and accounting staff, and senior not changed the effective date for
establishing a toll-free number for management, issuers may consult with liability purposes for officers, directors,
investors, although the toll-free number outside legal counsel in preparing this and experts, other than when new
does not have to be issuer specific. disclosure. We believe, however, that expertized information is included in
Another potential compliance cost is the potential compliance costs for the the prospectus.
the additional expenditures that issuers risk factor disclosure should be In response to commenters’ concerns
and offering participants may incur in considered in light of the fact that about cross-liability for free writing
storing and archiving information to requiring risk factor disclosure in prospectuses, the rules provide greater
satisfy the record retention Exchange Act registration statements clarity for when an offering participant
conditions.632 Parties will need to and annual reports will enhance the would be liable for a free writing
implement appropriate mechanisms to ability of reporting issuers to prospectus.
ensure that they retain for three years incorporate risk factor disclosure from With respect to the risk factor
Exchange Act reports into Securities Act disclosure, a potential cost might be that
631 For example, for purposes of the PRA analysis,
we estimate that the aggregate total annual issuers may be concerned about
paperwork burden for issuers arising from the
633 For example, as we discussed in the Proposing
increased liability for a material
preparation, review, and filing of free writing Release, for purposes of the PRA analysis, we misstatement or omission in their
prospectuses or making a version of an electronic estimated that the aggregate total annual paperwork
burden of preparing, reviewing and filing the disclosure. In view of existing liability
road show available under the new
communications rules will be approximately disclosure of unresolved comments in Exchange for information in registration
$301,993. Act reports will be approximately $138,713. statements and Exchange Act reports, as
well as existing safe-harbors for
Release, for purposes of the PRA analysis, we Release, for purposes of the PRA analysis, we
estimated that the aggregate total annual paperwork
forward-looking information, in drafting
estimated that the aggregate total annual paperwork
burden of complying with the record retention burden of preparing, reviewing and filing the the current rules, however, we were
conditions for free writing prospectuses used in disclosure of risk factors in Exchange Act reports
reliance on Rule 433 will be approximately will be approximately $9,743,417. 636 ($0.05 per notice) multiplied by (232.45
$948,900. 635 17 U.S.C. 77z–2. million confirmations) = $11,622,500.
sensitive to potential additional costs to incorporate by reference will have to Act, enhance communications between
that the disclosure requirement might make these reports readily available on public issuers and investors, and
impose. For example, for liability a web site maintained by or for the promote investor protection. We
purposes, we are not treating risk factor issuer in addition to availability on anticipate these rules will improve
disclosure any differently than other EDGAR. Because most companies today investors’ ability to make informed
disclosures in Exchange Act reports that maintain web sites for their businesses investment decisions and, therefore,
may be incorporated by reference into and other entities maintain web sites for lead to increased efficiency and
Securities Act registration statements. companies, we do not believe that this competitiveness of the U.S. capital
We also note that the safe harbor for cost will be significant. markets. We anticipate that this
forward-looking statements contained in We also recognize that relaxing increased market efficiency and investor
Securities Act Section 27A and restrictions on communications may confidence also may encourage more
Exchange Act Section 21E may apply to impose a burden on investors. For efficient capital formation. Specifically,
this disclosure for eligible issuers. In example, today, for some offerings, such we believe that the rules will:
addition, the risk factor disclosure is as those on Form S–1, much of the • Facilitate greater availability of
based on an evaluation of the material relevant information regarding an information to investors and the market
risks facing an issuer. Issuers currently offering is required to be contained in with regard to all issuers;
disclose significant information about one document comprising the • Eliminate barriers to open
themselves in their Exchange Act registration statement. Under the rules, communications that have been made
reports, including in management’s some offerings will require an investor increasingly outmoded by technological
discussion and analysis of financial to assemble and assimilate information advances;
condition and results of operations and, from various free writing prospectuses, • Reflect the increased importance of
as a result, already analyze their Exchange Act reports, and the Securities electronic dissemination of information,
business and operations. Moreover, we Act registration statement in order to get including the use of the Internet;
note that issuers already are subject to the relevant information regarding an • Make the capital formation process
disclosure requirements regarding this offering. Investors will have to compile more efficient; and
information in Securities Act the information integrated into the • Define more clearly both the
registration statements. registration statement or delivered by information and the timeliness of the
means outside of the prospectus. We availability of information against
3. Other Potential Costs which a seller’s statements are
note, however, that Securities Act
We are allowing registration Forms S–3 and F–3 have long permitted evaluated for liability purposes.
statements by well-known seasoned incorporation by reference from the To the extent that some of these
issuers to become effective issuer’s Exchange Act reports and reforms will be available to well-known
automatically, rather than being subject investors have not complained they are seasoned issuers, smaller issuers may
to review by the staff of the Division of unduly burdened when investing in not be able to use all of the reforms. In
Corporation Finance. As a result, offerings registered on these Forms. addition, it is possible that investors
registrants may not have the same will favor issuers that are able to take
incentive to remedy deficient disclosure X. Consideration of Burden on advantage of the reforms. We believe,
in Exchange Act reports or in the Competition and Promotion of however, that these potential unequal
registration statement itself than they Efficiency, Competition and Capital effects are justified in order to ensure
would if their registration statements Formation that investors have appropriate access to
were subject to pre-effective staff Exchange Act Section 23(a)(2) 637 required information about all issuers.
review. We have sought to minimize requires us, when adopting rules under We requested comment on whether
this possibility by requiring accelerated the Exchange Act, to consider the the rules would promote efficiency,
filers and well-known seasoned issuers impact that any new rule would have on competition, and capital formation or
to disclose, on an annual basis, written competition. In addition, Section have an impact or burden on
staff comments on their periodic report 23(a)(2) prohibits us from adopting any competition. We received no comments
disclosures, that were issued more than rule that would impose a burden on on this subject directly, but some
180 days prior to the fiscal year end competition not necessary or comments touched on these issues.
covered by the report, that the issuer appropriate in furtherance of the Commenters expressed strong support
believes to be material, and that remain purposes of the Exchange Act. for the proposals to streamline the
unresolved at the time of the filing of Furthermore, Securities Act Section registration process by providing well-
the annual report. 2(b),638 Exchange Act Section 3(f),639 known seasoned issuers the ability to
The rules also may impose certain and Investment Company Act Section use automatic shelf registration
costs on underwriters. For example, 2(c) 640 require us, when engaging in statements.641 They generally believed
removing the restrictions on at-the- rulemaking where we are required to that the streamlined registration process
market equity offerings by unseasoned consider or determine whether an action will aid issuers in capital formation by
issuers on Form S–3 or Form F–3 may is necessary or appropriate in the public providing them with quick access to the
affect underwriters adversely because interest, to consider, in addition to the capital markets. In addition, one
issuers may decide not to hire an protection of investors, whether the commenter believed the proposals have
underwriter to conduct an at-the-market action will promote efficiency, the potential to draw more offerings
equity offering. competition, and capital formation. from 144A and other unregistered
The rules permit reporting issuers The rules are intended to modify and markets into public market, improve
with the ability to incorporate by advance the Commission’s regulatory efficiency of U.S. public market, and
reference historical filings into Form S– system for offerings under the Securities possibly enhance global
1 or Form F–1, provided that the issuer competitiveness of U.S. public capital
post its Exchange Act reports on a web 637 15 U.S.C. 78w(a)(2). markets.642
site maintained by or for the issuer and 638 15 U.S.C. 77b(b).
containing issuer information. Issuers 639 15 U.S.C. 78c(f). 641 See note 509, above.
wishing to take advantage of this ability 640 15 U.S.C. 80a–2(c). 642 See letter from SIA.
Two commenters believed that the today’s capital markets. The rules reflect In addition to small issuers, small
proposed rules, which created an our view that revisions to the Securities broker-dealers may be affected by the
exception to the conditions to the free Act registration and offering processes rules. Paragraph (c)(1) of Rule 0–10 651
writing prospectus rules for are not only appropriate in light of states that the term ‘‘small business’’ or
publications by unaffiliated media significant developments in the offering ‘‘small organization,’’ when referring to
would create a competitive and capital formation processes, but a broker-dealer, means a broker or
disadvantage for issuers who are in the also are necessary for the proper dealer that had total capital (net worth
media business.643 We have addressed protection of investors under the statute. plus subordinated liabilities) of less
these concerns by providing an This view is based on our belief that than $500,000 on the date in the prior
exclusion for media companies and today’s rules will: fiscal year as of which its audited
their affiliates if certain conditions are • Facilitate greater availability of financial statements were prepared
met, including that the company or its information to investors and the market pursuant to § 240.17a–5(d); and is not
affiliate is a bona fide media publisher with regard to all issuers; affiliated with any person (other than a
or broadcaster.644 • Eliminate barriers to open natural person) that is not a small
communications that have been made business or small organization. As of
XI. Final Regulatory Flexibility Act
increasingly outmoded by technological 2003, we estimated that there were
Analysis
advances; approximately 900 broker-dealers that
This Final Regulatory Flexibility Act • Reflect the increased importance of qualified as small entities as defined
Analysis has been prepared in electronic dissemination of information, above. To the extent a small broker-
accordance with 5 U.S.C. 603. It relates including the use of the Internet; dealer participates in a securities
to revisions to the rules and forms under • Make the capital formation process offering or prepares research reports, it
the Securities Act and the Exchange Act more efficient; and may be affected by the rules. Generally,
that will (1) alter shelf registration • Define more clearly both the we believe larger broker-dealers engage
procedures; (2) allow more information and the timeliness of the in these activities. We requested
communications between offering availability of information against comment on whether and how these
participants than currently permitted; which a seller’s statements are rules will affect small broker-dealers
and (3) enable offering participants to evaluated for liability purposes. and did not receive any responses.
satisfy their prospectus delivery For purposes of the rules, we
obligations through means other than B. Significant Issues Raised by Public categorize issuers into tiers, consisting
actual physical delivery. These rules are Comment of non-reporting issuers, unseasoned
intended to modify and advance the The Initial Regulatory Flexibility issuers, seasoned issuers, and well-
Commission’s regulatory system for Analysis, or IRFA, appeared in the known seasoned issuers. The first three
offerings under the Securities Act, Proposing Release.646 We requested tiers of issuers are identified by pre-
enhance communications between comment on any aspect of the IRFA, existing criteria under the existing
public issuers and investors, and including the number of small entities federal securities laws. A non-reporting
promote investor protection. that would be affected by the rules, the issuer is an issuer that is not required
A. Reasons for and Objectives of the nature of the impact, how to quantify to file reports pursuant to Sections 13 or
Rules and Amendments the number of small entities that would 15(d) of the Exchange Act.652 An
be affected and how to quantify the unseasoned issuer is an issuer that is
On November 3, 2004, we issued impact of the proposals. We received no required to file reports pursuant to
proposed rule and form changes under comment letters responding to that Sections 13 or 15(d) of the Exchange
the Securities Act and the Exchange Act request. Act, but does not satisfy the
that would modernize the securities requirements of Form S–3 or Form F–3
offering and communication processes C. Small Entities Subject to the Rules for a primary offering of its securities. A
while maintaining protection of The rules will affect issuers that are seasoned issuer is an issuer that uses
investors under the Securities Act.645 small entities. Securities Act Rule Form S–3 or Form F–3 to register
We are revising the registration, 157 647 and Exchange Act Rule 0– offerings of securities.
communications, and offering processes 10(a) 648 define an issuer, other than an Under the rules, a well-known
under the Securities Act that we believe, investment company, to be a ‘‘small seasoned issuer will have the greatest
while limited in scope, properly address business’’ or ‘‘small organization’’ for flexibility. The largest issuers are
the areas that are in need of purposes of the Regulatory Flexibility followed by sophisticated institutional
modernization. The rules involve three Act if it had total assets of $5 million and retail investors, members of the
main areas: or less on the last day of its most recent financial press, and numerous sell-side
• Communications related to fiscal year.649 We estimate that there and buy-side analysts that actively seek
registered securities offerings; were approximately 2,500 public new information on a continual basis.
• Procedural restrictions in the Unlike smaller or less mature issuers,
issuers, other than investment
offering and capital formation processes; large, seasoned public issuers tend to
companies, that may be considered
and have a more regular dialogue with
• Delivery of information to investors. small entities as of the end of fiscal year
The overall objective of the reforms is 2004.650 investors and market participants
to make the registration system more through the press and other media. The
646 See
the Proposing Release at Section VII.
workable for issuers and underwriters 647 17
CFR 230.157. small entities. We believe the impact on these
and more effective for investors in 648 17 CFR 240.0–10(a). investment companies will be minimal because
649 An investment company is a small entity if it, they generally are not covered by the new rules.
643 See letters from Davis Polk and NYSBA. together with other investment companies in the 651 17 CFR 240.0–10(c)(1).
644 See the discussion in Section III.D.3 above same group of related investment companies, has 652 Under the rules, an issuer that is voluntarily
under ‘‘Issuers in the Media Business.’’ net assets of $50 million or less as of the end of filing Exchange Act reports, but is not required to
645 Securities Offering Reform, Release No. 33– its most recent fiscal year. 17 CFR 270.0–10. do so, will be an unseasoned issuer for purposes of
8501 (Nov. 3, 2004)[69 FR 67392] (‘‘Proposing 650 We estimate that there are approximately 233 the communications and procedural rules and rule
Release’’). investment companies that may be considered rules.
communications of these well-known not be required to disclose outstanding XII. Statutory Authority—Text of the
seasoned issuers are subject to scrutiny staff comments in their annual reports. Rules and Amendments
by investors, the financial press, The rules also will affect broker- We are adopting the new rules and
analysts, and others who evaluate dealers participating in a registered amendments pursuant to Sections 7, 10,
disclosure when it is made. offering, as they will no longer be 19, 27A and 28 of the Securities Act, as
To the extent that some of these required to deliver a final prospectus, amended, Sections 3, 10, 12, 13, 15, 17,
reforms are designed for well-known but will be able to send a notice of 21E, 23 and 36 of the Securities
seasoned issuers, smaller issuers may allocation and notice of prospectus Exchange Act, as amended, and
not benefit from all of the reforms to the availability. They also will be permitted Sections 8, 24(a), 30, and 38 of the
registration process. We believe, to prepare and use free writing Investment Company Act of 1940, as
however, that these potential unequal prospectuses. If a free writing is not amended.
effects are justified in order to ensure required to be filed publicly, the broker-
that investors have access to required dealer will have to retain copies of the List of Subjects
information about all issuers. Therefore, free writing prospectus for three years. 17 CFR Part 200
allowing smaller entities to take (Such retention requirements may
advantage of all of the reforms to the already exist in most cases). Finally, the Administrative practice and
registration process may not address broker-dealer will be permitted to issue procedure, Authority delegations
issues of investor protection. The research reports with respect to a (Government agencies), Organization
reforms are not available to offerings by broader class of issuers and securities and functions (Government agencies).
a blank check company, offerings by a than currently permitted. 17 CFR Part 228
shell company, and offerings of penny
stock by an issuer. These offerings are E. Agency Action To Minimize Effect on Reporting and recordkeeping
more likely to be made by issuers that Small Entities requirements, Securities, Small
are small issuers. We have excluded businesses.
The Regulatory Flexibility Act directs
these offerings from the reforms because us to consider significant alternatives 17 CFR Parts 229, 230, 239, 240, 243,
they pose the greatest risk of abuse of that would accomplish the stated and 249
the reforms. objectives, while minimizing any
To the extent the rules are not Reporting and recordkeeping
significant adverse impact on small requirements, Securities.
available to smaller issuers, the entities. In connection with the rules,
establishment of any differing we considered the following 17 CFR Part 274
compliance or reporting requirements or alternatives: Investment companies, Reporting and
timetables or any exemptions for small
1. Establishing different compliance recordkeeping requirements, Securities.
business issuers may not be in keeping
or reporting requirements that take into ■ For the reasons set out in the preamble,
with the objectives of the rules. We
account the resources available to small title 17, chapter II of the Code of Federal
believe that the rules are a cost-effective
entities; Regulations is amended as follows:
initial approach to address specific
concerns related to small entities. 2. Clarifying, consolidating, or
simplifying compliance and reporting PART 200—ORGANIZATION;
D. Reporting, Recordkeeping, and Other obligations for small entities; CONDUCT AND ETHICS; AND
Compliance Requirements 3. Using performance standards rather INFORMATION AND REQUESTS
The rules are expected to impact all than design standards; and
issuers raising capital and selling 4. Including smaller entities in some Subpart A—Organization and Program
security holder transactions that are of the reforms. Management
registered under the Securities Act, as We have considered a variety of ■ 1. The authority citation for Part 200,
well as all issuers that file annual reforms to achieve our regulatory subpart A, continues to read, in part, as
reports on Exchange Act Form 10–K or objectives and, where possible, have follows:
Form 20–F. taken steps to minimize the effects of
For smaller issuers, we are not the rules and amendments on small Authority: 15 U.S.C. 77s, 77o, 77sss, 78d,
78d–1, 78d–2, 78w, 78ll(d), 78mm, 79t, 80a–
imposing any new restrictions on entities. For example, we are not 37, 80b–11, and 7202, unless otherwise
communications. In fact, small issuers requiring small business issuers to noted.
will be able to take advantage of the new include disclosure of risk factors or
* * * * *
bright-line rule permitting unresolved staff comments in their
■ 2. Amend § 200.30–1 to add
communications more than 30 days Exchange Act periodic reports. We are
paragraphs (a)(9) and (a)(10) to read as
before filing a registration statement and liberalizing generally the restrictions
follows:
the clarification that they can continue regarding communications around the
to make factual business time of a Securities Act registered § 200.30–1 Delegation of authority to
communications and, if they are offering of securities. As discussed Director of Division of Corporation Finance.
reporting companies, communications above, the flexibility will be greatest for * * * * *
of forward-looking information. Small larger, more seasoned issuers; however, (a) * * *
issuers, like larger issuers, will have to the rules will provide greater flexibility (9) To determine whether to object,
file any free writing prospectus they for all issuers, including small entities. pursuant to Rule 401(g)(1)
use. We requested comment on whether As we implement these changes, we (§ 230.401(g)(1) of this chapter), and to
issuers that file on Form 10–KSB, who will consider the available information notify issuers, pursuant to Rule
tend to be smaller issuers, should be to determine whether greater flexibility 401(g)(2) (§ 230.401(g)(2) of this
required to disclose risk factors in their is warranted, consistent with investor chapter), of an objection to the use of an
annual reports, and have decided not to protections. In this regard, we have automatic shelf registration as defined
extend this requirement to these issuers. established an Advisory Committee on in Rule 405 (§ 230.405 of this chapter)
Unlike larger companies that are Smaller Public Companies to examine or any post-effective amendment thereto
‘‘accelerated filers,’’ smaller issuers will these and other related issues. that becomes effective immediately
pursuant to Rule 462 (§ 230.462 of this undersigned small business issuer will deemed to be the initial bona fide
chapter). be a seller to the purchaser and will be offering thereof. Provided, however, that
(10) To authorize the granting or considered to offer or sell such no statement made in a registration
denial of applications, upon a showing securities to such purchaser: statement or prospectus that is part of
of good cause, that it is not necessary (i) Any preliminary prospectus or the registration statement or made in a
under the circumstances that the issuer prospectus of the undersigned small document incorporated or deemed
be considered an ineligible issuer as business issuer relating to the offering incorporated by reference into the
defined in Rule 405. required to be filed pursuant to Rule 424 registration statement or prospectus that
* * * * * (§ 230.424 of this chapter); is part of the registration statement will,
(ii) Any free writing prospectus as to a purchaser with a time of contract
PART 228—INTEGRATED relating to the offering prepared by or on of sale prior to such effective date,
DISCLOSURE SYSTEM FOR SMALL behalf of the undersigned small supersede or modify any statement that
BUSINESS ISSUERS business issuer or used or referred to by was made in the registration statement
■ 3. The authority citation for part 228 the undersigned small business issuer; or prospectus that was part of the
continues to read in part as follows: (iii) The portion of any other free registration statement or made in any
writing prospectus relating to the such document immediately prior to
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, offering containing material information such effective date; or
77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), about the undersigned small business (2) If the small business issuer is
77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn,
77sss, 78l, 78m, 78n, 78o, 78u–5, 78w, 78ll, issuer or its securities provided by or on subject to Rule 430C (§ 230.430C of this
78mm, 80a–8, 80a–29, 80a–30, 80a–37, 80b– behalf of the undersigned small chapter), include the following:
11, and 7201 et seq.; and 18 U.S.C. 1350. business issuer; and Each prospectus filed pursuant to Rule
* * * * * (iv) Any other communication that is 424(b)(§ 230.424(b) of this chapter) as part of
■ 4. Amend § 228.512 as follows: an offer in the offering made by the a registration statement relating to an
■ a. Revise the Note after paragraph undersigned small business issuer to the offering, other than registration statements
(a)(1)(iii); purchaser. relying on Rule 430B or other than
■ b. Add paragraph (a)(4); and * * * * * prospectuses filed in reliance on Rule 430A
■ c. Add paragraph (g). (§ 230.430A of this chapter), shall be deemed
(g) That, for the purpose of to be part of and included in the registration
The additions read as follows: determining liability under the statement as of the date it is first used after
§ 228.512 (Item 512) Undertakings. Securities Act to any purchaser: effectiveness. Provided, however, that no
(1) If the small business issuer is statement made in a registration statement or
* * * * *
relying on Rule 430B (§ 230.430B of this prospectus that is part of the registration
(a) * * *
chapter): statement or made in a document
Notes to paragraph (a)(1): (i) Each prospectus filed by the incorporated or deemed incorporated by
1. Small business issuers do not need to undersigned small business issuer reference into the registration statement or
give the statements in paragraphs (a)(1)(i) and prospectus that is part of the registration
(a)(1)(ii) of this Item if the registration
pursuant to Rule 424(b)(3)
statement will, as to a purchaser with a time
statement is on Form S–8 (§ 239.16b of this (§ 230.424(b)(3) of this chapter) shall be of contract of sale prior to such first use,
chapter), and the information required in a deemed to be part of the registration supersede or modify any statement that was
post-effective amendment is incorporated by statement as of the date the filed made in the registration statement or
reference from periodic reports filed by the prospectus was deemed part of and prospectus that was part of the registration
small business issuer under the Exchange included in the registration statement; statement or made in any such document
Act; and and immediately prior to such date of first use.
2. Small business issuers do not need to (ii) Each prospectus required to be
give the statements in paragraphs (a)(1)(i), PART 229—STANDARD
filed pursuant to Rule 424(b)(2), (b)(5),
(a)(1)(ii), and (a)(1)(iii) of this Item if the INSTRUCTIONS FOR FILING FORMS
registration statement is on Form S–3 or (b)(7) (§ 230.424(b)(2), (b)(5), or (b)(7)
of this chapter) as part of a registration UNDER SECURITIES ACT OF 1933,
(§ 239.13 of this chapter) and the information
statement in reliance on Rule 430B SECURITIES EXCHANGE ACT OF 1934
required in a post-effective amendment is
incorporated by reference from periodic relating to an offering made pursuant to AND ENERGY POLICY AND
reports filed by the small business issuer Rule 415(a)(1)(i), (vii), or (x) CONSERVATION ACT OF 1975—
under the Exchange Act, or is contained in (§ 230.415(a)(1)(i), (vii), or (x) of this REGULATION S–K
a form of prospectus filed pursuant to Rule chapter) for the purpose of providing
424(b) (§ 230.424(b) of this chapter) that is ■ 5. The authority citation for part 229
the information required by section continues to read in part as follows:
deemed part of and included in the
10(a) of the Securities Act shall be
registration statement. Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j,
deemed to be part of and included in
77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26),
* * * * * the registration statement as of the 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
(4) For determining liability of the earlier of the date such form of 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n,
undersigned small business issuer prospectus is first used after 78o, 78u–5, 78w, 78ll, 78mm, 79e, 79j, 79n,
under the Securities Act to any effectiveness or the date of the first 79t, 80a–8, 80a–9, 80a–20, 80a–29, 80a–30,
purchaser in the initial distribution of contract of sale of securities in the 80a–31(c), 80a–37, 80a–38(a), 80a–39, 80b–
the securities, the undersigned small offering described in the prospectus. As 11, and 7201 et seq.; and 18 U.S.C. 1350,
business issuer undertakes that in a provided in Rule 430B, for liability unless otherwise noted.
primary offering of securities of the purposes of the issuer and any person * * * * *
undersigned small business issuer that is at that date an underwriter, such ■ 6. Amend § 229.512 as follows:
pursuant to this registration statement, date shall be deemed to be a new ■ a. Revise the first proviso immediately
regardless of the underwriting method effective date of the registration following paragraph (a)(1)(iii);
used to sell the securities to the statement relating to the securities in ■ b. Redesignate the second proviso
purchaser, if the securities are offered or the registration statement to which that immediately following paragraph
sold to such purchaser by means of any prospectus relates, and the offering of (a)(1)(iii) as paragraph (a)(1)(iii)(C);
of the following communications, the such securities at that time shall be ■ c. Add paragraph (a)(5); and
■ d. Add paragraph (a)(6). contract of sale of securities in the undersigned registrant will be a seller to
The revision and additions read as offering described in the prospectus. As the purchaser and will be considered to
follows: provided in Rule 430B, for liability offer or sell such securities to such
purposes of the issuer and any person purchaser:
§ 229.512 (Item 512) Undertakings. (i) Any preliminary prospectus or
that is at that date an underwriter, such
(a) * * * date shall be deemed to be a new prospectus of the undersigned registrant
(1) * * * effective date of the registration relating to the offering required to be
(iii) * * * statement relating to the securities in filed pursuant to Rule 424 (§ 230.424 of
Provided, however, That: this chapter);
(A) Paragraphs (a)(1)(i) and (a)(1)(ii) of the registration statement to which that
prospectus relates, and the offering of (ii) Any free writing prospectus
this section do not apply if the relating to the offering prepared by or on
such securities at that time shall be
registration statement is on Form S–8 behalf of the undersigned registrant or
deemed to be the initial bona fide
(§ 239.16b of this chapter), and the used or referred to by the undersigned
offering thereof. Provided, however, that
information required to be included in registrant;
no statement made in a registration
a post-effective amendment by those (iii) The portion of any other free
statement or prospectus that is part of
paragraphs is contained in reports filed writing prospectus relating to the
the registration statement or made in a
with or furnished to the Commission by offering containing material information
document incorporated or deemed
the registrant pursuant to section 13 or about the undersigned registrant or its
incorporated by reference into the
section 15(d) of the Securities Exchange securities provided by or on behalf of
registration statement or prospectus that
Act of 1934 (15 U.S.C. 78m or 78o(d)) the undersigned registrant; and
is part of the registration statement will,
that are incorporated by reference in the as to a purchaser with a time of contract (iv) Any other communication that is
registration statement; and of sale prior to such effective date, an offer in the offering made by the
(B) Paragraphs (a)(1)(i), (a)(1)(ii) and undersigned registrant to the purchaser.
supersede or modify any statement that
(a)(1)(iii) of this section do not apply if * * * * *
was made in the registration statement
the registration statement is on Form S–
or prospectus that was part of the
3 (§ 239.13 of this chapter) or Form F– PART 230—GENERAL RULES AND
registration statement or made in any
3 (§ 239.33 of this chapter) and the REGULATIONS, SECURITIES ACT OF
such document immediately prior to
information required to be included in such effective date; or 1933
a post-effective amendment by those (ii) If the registrant is subject to Rule
paragraphs is contained in reports filed ■ 7. The authority citation for part 230
430C (§ 230.430C of this chapter), each continues to read in part as follows:
with or furnished to the Commission by prospectus filed pursuant to Rule 424(b)
the registrant pursuant to section 13 or as part of a registration statement Authority: 15 U.S.C. 77b, 77c, 77d, 77f,
section 15(d) of the Securities Exchange 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d,
relating to an offering, other than 78j, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d),
Act of 1934 that are incorporated by registration statements relying on Rule 78mm, 79t, 80a–8, 80a–24, 80a–28, 80a–29,
reference in the registration statement, 430B or other than prospectuses filed in 80a–30, and 80a–37, unless otherwise noted.
or is contained in a form of prospectus reliance on Rule 430A (§ 230.430A of
filed pursuant to Rule 424(b) * * * * *
this chapter), shall be deemed to be part ■ 8. Revise § 230.134 to read as follows:
(§ 230.424(b) of this chapter) that is part of and included in the registration
of the registration statement. statement as of the date it is first used § 230.134 Communications not deemed a
* * * * * after effectiveness. Provided, however, prospectus.
(5) That, for the purpose of that no statement made in a registration Except as provided in paragraphs (e)
determining liability under the statement or prospectus that is part of and (g) of this section, the terms
Securities Act of 1933 to any purchaser: the registration statement or made in a ‘‘prospectus’’ as defined in section
(i) If the registrant is relying on Rule document incorporated or deemed 2(a)(10) of the Act or ‘‘free writing
430B (§ 230.430B of this chapter): incorporated by reference into the prospectus’’ as defined in Rule 405
(A) Each prospectus filed by the registration statement or prospectus that (§ 230.405) shall not include a
registrant pursuant to Rule 424(b)(3) is part of the registration statement will, communication limited to the
(§ 230.424(b)(3) of this chapter) shall be as to a purchaser with a time of contract statements required or permitted by this
deemed to be part of the registration of sale prior to such first use, supersede section, provided that the
statement as of the date the filed or modify any statement that was made communication is published or
prospectus was deemed part of and in the registration statement or transmitted to any person only after a
included in the registration statement; prospectus that was part of the registration statement relating to the
and registration statement or made in any offering that includes a prospectus
(B) Each prospectus required to be such document immediately prior to satisfying the requirements of section 10
filed pursuant to Rule 424(b)(2), (b)(5), such date of first use. of the Act (except as otherwise
or (b)(7) (§ 230.424(b)(2), (b)(5), or (b)(7) (6) That, for the purpose of permitted in paragraph (a) of this
of this chapter) as part of a registration determining liability of the registrant section) has been filed.
statement in reliance on Rule 430B under the Securities Act of 1933 to any (a) Such communication may include
relating to an offering made pursuant to purchaser in the initial distribution of any one or more of the following items
Rule 415(a)(1)(i), (vii), or (x) the securities: of information, which need not follow
(§ 230.415(a)(1)(i), (vii), or (x) of this The undersigned registrant the numerical sequence of this
chapter) for the purpose of providing undertakes that in a primary offering of paragraph, provided that, except as to
the information required by section securities of the undersigned registrant paragraphs (a)(4), (a)(5), (a)(6), and
10(a) of the Securities Act of 1933 shall pursuant to this registration statement, (a)(17) of this section, the prospectus
be deemed to be part of and included in regardless of the underwriting method included in the filed registration
the registration statement as of the used to sell the securities to the statement does not have to include a
earlier of the date such form of purchaser, if the securities are offered or price range otherwise required by rule:
prospectus is first used after sold to such purchaser by means of any (1) Factual information about the legal
effectiveness or the date of the first of the following communications, the identity and business location of the
issuer limited to the following: the name participating, or expects to participate, this chapter) and the name or names of
of the issuer of the security, the address, in the distribution of the security; the nationally recognized statistical
phone number, and e-mail address of (9) The type of underwriting, if then rating organization(s) that assigned or is
the issuer’s principal offices and contact included in the disclosure in the or are reasonably expected to assign the
for investors, the issuer’s country of prospectus that is part of the filed rating(s); and
organization, and the geographic areas registration statement; (ii) If registered on Form F–9 (§ 239.39
in which it conducts business; (10) The names of underwriters of this chapter), any security rating
(2) The title of the security or participating in the offering of the assigned, or reasonably expected to be
securities and the amount or amounts securities, and their additional roles, if assigned, by any other rating
being offered, which title may include a any, within the underwriting syndicate; organization specified in the Instruction
designation as to whether the securities (11) The anticipated schedule for the to paragraph A.(2) of General Instruction
are convertible, exercisable, or offering (including the approximate date I of Form F–9;
exchangeable, and as to the ranking of upon which the proposed sale to the (18) The names of selling security
the securities; public will begin) and a description of holders, if then disclosed in the
(3) A brief indication of the general marketing events (including the dates, prospectus that is part of the filed
type of business of the issuer, limited to times, locations, and procedures for registration statement;
the following: attending or otherwise accessing them); (19) The names of securities
(i) In the case of a manufacturing (12) A description of the procedures exchanges or other securities markets
company, the general type of by which the underwriters will conduct where any class of the issuer’s securities
manufacturing, the principal products the offering and the procedures for are, or will be, listed;
or classes of products manufactured, transactions in connection with the (20) The ticker symbols, or proposed
and the segments in which the company offering with the issuer or an ticker symbols, of the issuer’s securities;
conducts business; underwriter or participating dealer (21) The CUSIP number as defined in
(ii) In the case of a public utility (including procedures regarding Rule 17Ad–19(a)(5) of the Securities
company, the general type of services account-opening and submitting Exchange Act of 1934 (§ 240.17Ad–
rendered, a brief indication of the area indications of interest and conditional 19(a)(5) of this chapter) assigned to the
served, and the segments in which the offers to buy), and procedures regarding securities being offered; and
company conducts business; directed share plans and other (22) Information disclosed in order to
(iii) In the case of an asset-backed participation in offerings by officers, correct inaccuracies previously
issuer, the identity of key parties, such directors, and employees of the issuer; contained in a communication
(13) Whether, in the opinion of
as sponsor, depositor, issuing entity, permissibly made pursuant to this
counsel, the security is a legal
servicer or servicers, and trustee, the section.
investment for savings banks,
asset class of the transaction, and the (b) Except as provided in paragraph
fiduciaries, insurance companies, or
identity of any credit enhancement or (c) of this section, every communication
similar investors under the laws of any
other support; and used pursuant to this section shall
State or Territory or the District of
(iv) In the case of any other type of contain the following:
Columbia, and the permissibility or
company, a corresponding statement; (1) If the registration statement has
status of the investment under the
(4) The price of the security, or if the not yet become effective, the following
Employee Retirement Income Security
price is not known, the method of its statement:
Act of 1974 [29 U.S.C. 1001 et seq.];
determination or the bona fide estimate (14) Whether, in the opinion of A registration statement relating to these
of the price range as specified by the counsel, the security is exempt from securities has been filed with the Securities
issuer or the managing underwriter or specified taxes, or the extent to which and Exchange Commission but has not yet
underwriters; the issuer has agreed to pay any tax with become effective. These securities may not be
(5) In the case of a fixed income sold nor may offers to buy be accepted prior
respect to the security or measured by to the time the registration statement
security, the final maturity and interest the income therefrom;
rate provisions or, if the final maturity becomes effective; and
(15) Whether the security is being
or interest rate provisions are not offered through rights issued to security (2) The name and address of a person
known, the probable final maturity or holders, and, if so, the class of securities or persons from whom a written
interest rate provisions, as specified by the holders of which will be entitled to prospectus for the offering meeting the
the issuer or the managing underwriter subscribe, the subscription ratio, the requirements of section 10 of the Act
or underwriters; actual or proposed record date, the date (other than a free writing prospectus as
(6) In the case of a fixed income upon which the rights were issued or defined in Rule 405) including as to the
security with a fixed (non-contingent) are expected to be issued, the actual or identified paragraphs above a price
interest rate provision, the yield or, if anticipated date upon which they will range where required by rule, may be
the yield is not known, the probable expire, and the approximate obtained.
yield range, as specified by the issuer or subscription price, or any of the (c) Any of the statements or
the managing underwriter or foregoing; information specified in paragraph (b) of
underwriters and the yield of fixed (16) Any statement or legend required this section may, but need not, be
income securities with comparable by any state law or administrative contained in a communication which:
maturity and security rating as referred authority; (1) Does no more than state from
to in paragraph (a)(17) of this section; (17) With respect to the securities whom and include the uniform resource
(7) A brief description of the intended being offered: locator (URL) where a written
use of proceeds of the offering, if then (i) Any security rating assigned, or prospectus meeting the requirements of
disclosed in the prospectus that is part reasonably expected to be assigned, by section 10 of the Act (other than a free
of the filed registration statement; a nationally recognized statistical rating writing prospectus as defined in Rule
(8) The name, address, phone number, organization as defined in Rule 15c3– 405) may be obtained, identify the
and e-mail address of the sender of the 1(c)(2)(vi)(F) of the Securities Exchange security, state the price thereof and state
communication and the fact that it is Act of 1934 (§ 240.15c3–1(c)(2)(vi)(F) of by whom orders will be executed; or
(2) Is accompanied or preceded by a statement that the issuer proposes to § 230.138 Publications or distributions of
prospectus or a summary prospectus, file, or has filed, or that is effective: research reports by brokers or dealers
other than a free writing prospectus as about securities other than those they are
(a) The broker or dealer (and any distributing.
defined in Rule 405, which meets the affiliate) that has distributed the report
requirements of section 10 of the Act, and, if different, the person (and any (a) Registered offerings. Under the
including a price range where required affiliate) that has published the report following conditions, a broker’s or
by rule, at the date of such preliminary have not participated, are not dealer’s publication or distribution of
communication. participating, and do not propose to research reports about securities of an
(d) A communication sent or participate in the distribution of the issuer shall be deemed for purposes of
delivered to any person pursuant to this securities that are or will be the subject sections 2(a)(10) and 5(c) of the Act not
section which is accompanied or of the registered offering. to constitute an offer for sale or offer to
preceded by a prospectus which meets (b) In connection with the publication sell a security which is the subject of an
the requirements of section 10 of the Act or distribution of the research report, offering pursuant to a registration
(other than a free writing prospectus as the broker or dealer (and any affiliate) statement that the issuer proposes to
defined in Rule 405), including a price that has distributed the report and, if file, or has filed, or that is effective,
range where required by rule, at the date different, the person (and any affiliate) even if the broker or dealer is
of such communication, may solicit that has published the report are not participating or will participate in the
from the recipient of the communication receiving and have not received registered offering of the issuer’s
an offer to buy the security or request consideration directly or indirectly securities:
the recipient to indicate whether he or from, and are not acting under any (1)(i) The research report relates
she might be interested in the security, direct or indirect arrangement or solely to the issuer’s common stock, or
if the communication contains understanding with: debt securities or preferred stock
substantially the following statement: convertible into its common stock, and
(1) The issuer of the securities;
No offer to buy the securities can be the offering involves solely the issuer’s
accepted and no part of the purchase price
(2) A selling security holder; non-convertible debt securities or non-
can be received until the registration (3) Any participant in the distribution convertible, non-participating preferred
statement has become effective, and any such of the securities that are or will be the stock; or
offer may be withdrawn or revoked, without subject of the registration statement; or (ii) The research report relates solely
obligation or commitment of any kind, at any (4) Any other person interested in the to the issuer’s non-convertible debt
time prior to notice of its acceptance given securities that are or will be the subject securities or non-convertible, non-
after the effective date.
of the registration statement. participating preferred stock, and the
Provided, that such statement need not Instruction to § 230.137(b). This paragraph offering involves solely the issuer’s
be included in such a communication to (b) does not preclude payment of: common stock, or debt securities or
a dealer. 1. The regular price being paid by the preferred stock convertible into its
(e) A section 10 prospectus included broker or dealer for independent research, so common stock.
in any communication pursuant to this long as the conditions of this paragraph (b)
Instruction to paragraph (a)(1): If the issuer
section shall remain a prospectus for all are satisfied; or
has filed a shelf registration statement under
purposes under the Act. 2. The regular subscription or purchase
Rule 415(a)(1)(x) (§ 230.415(a)(1)(x)) or
(f) The provision in paragraphs (c)(2) price for the research report.
pursuant to General Instruction I.D. of Form
and (d) of this section that a prospectus (c) The broker or dealer publishes or S–3 or General Instruction I.C. of Form F–3
that meets the requirements of section distributes the research report in the (§ 239.13 or § 239.33 of this chapter) with
10 of the Act precede or accompany a respect to multiple classes of securities, the
regular course of its business.
communication will be satisfied if such conditions of paragraph (a)(1) of this section
(d) The issuer is not and during the must be satisfied for the offering in which the
communication is an electronic
past three years neither the issuer nor broker or dealer is participating or will
communication containing an active
any of its predecessors was: participate.
hyperlink to such prospectus.
(g) This section does not apply to a (1) A blank check company as defined (2) The issuer as of the date of
communication relating to an in Rule 419(a)(2) (§ 230.419(a)(2)); reliance on this section:
investment company registered under (2) A shell company, other than a (i) Is required to file reports, and has
the Investment Company Act of 1940 business combination related shell filed all periodic reports required during
(15 U.S.C. 80a–1 et seq.) or a business company, each as defined in Rule 405 the preceding 12 months (or such
development company as defined in (§ 230.405); or shorter time that the issuer was required
section 2(a)(48) of the Investment (3) An issuer for an offering of penny to file such reports) on Forms 10–K
Company Act of 1940 (15 U.S.C. 80a– stock as defined in Rule 3a51–1 of the (§ 249.310 of this chapter), 10–KSB
2(a)(48)) Securities Exchange Act of 1934 (§ 249.310b of this chapter), 10–Q
■ 9. Revise § 230.137 to read as follows: (§ 240.3a51–1 of this chapter). (§ 249.308a of this chapter), 10–QSB
§ 230.137 Publications or distributions of (e) Definition of research report. For (§ 249.308b of this chapter), and 20–F
research reports by brokers or dealers that purposes of this section, research report (§ 249.220f of this chapter) pursuant to
are not participating in an issuer’s means a written communication, as section 13 or section 15(d) of the
registered distribution of securities. defined in Rule 405, that includes Securities Exchange Act of 1934 (15
Under the following conditions, the information, opinions, or U.S.C. 78m or 78o(d)); or
terms ‘‘offers,’’ ‘‘participates,’’ or recommendations with respect to (ii) Is a foreign private issuer that:
‘‘participation’’ in section 2(a)(11) of the securities of an issuer or an analysis of (A) Meets all of the registrant
Act shall not be deemed to apply to the a security or an issuer, whether or not requirements of Form F–3 other than the
publication or distribution of research it provides information reasonably reporting history provisions of General
reports with respect to the securities of sufficient upon which to base an Instructions I.A.1. and I.A.2(a) of Form
an issuer which is the subject of an investment decision. F–3;
offering pursuant to a registration ■ 10. Revise § 230.138 to read as follows: (B) Either:
(1) Satisfies the public float threshold § 230.139 Publications or distributions of and has had them so traded for at least
in General Instruction I.B.1. of Form F– research reports by brokers or dealers 12 months; or
3; or distributing securities. (ii) Has a worldwide market value of
(2) Is issuing non-convertible (a) Registered offerings. Under the its outstanding common equity held by
investment grade securities meeting the conditions of paragraph (a)(1) or (a)(2) of non-affiliates of $700 million or more;
provisions of General Instruction I.B.2. this section, a broker’s or dealer’s (ii) The issuer is not and during the
of Form F–3; and publication or distribution of a research past three years neither the issuer nor
(C) Either: report about an issuer or any of its any of its predecessors was:
(1) Has its equity securities trading on securities shall be deemed for purposes (A) A blank check company as
a designated offshore securities market of sections 2(a)(10) and 5(c) of the Act defined in Rule 419(a)(2)
as defined in Rule 902(b) (§ 230.902(b)) not to constitute an offer for sale or offer (§ 230.419(a)(2));
and has had them so traded for at least to sell a security that is the subject of (B) A shell company, other than a
12 months; or an offering pursuant to a registration business combination related shell
(2) Has a worldwide market value of statement that the issuer proposes to company, each as defined in Rule 405
its outstanding common equity held by file, or has filed, or that is effective, (§ 230.405); or
non-affiliates of $700 million or more. even if the broker or dealer is (C) An issuer for an offering of penny
(3) The broker or dealer publishes or participating or will participate in the stock as defined in Rule 3a51–1 of the
distributes research reports on the types registered offering of the issuer’s Securities Exchange Act of 1934
of securities in question in the regular securities: (§ 240.3a51–1 of this chapter); and
course of its business; and (1) Issuer-specific research reports. (iii) The broker or dealer publishes or
(4) The issuer is not, and during the (i) The issuer either: distributes research reports in the
past three years neither the issuer nor (A)(1) At the later of the time of filing
regular course of its business and such
any of its predecessors was: its most recent Form S–3 (§ 239.13 of
publication or distribution does not
this chapter) or Form F–3 (§ 239.33 of
(i) A blank check company as defined represent the initiation of publication of
this chapter) or the time of its most
in Rule 419(a)(2) (§ 230.419(a)(2)); research reports about such issuer or its
recent amendment to such registration
(ii) A shell company, other than a securities or reinitiation of such
statement for purposes of complying
business combination related shell publication following discontinuation of
with section 10(a)(3) of the Act, meets
company, each as defined in Rule 405 publication of such research reports.
the registrant requirements of such
(§ 230.405); or (2) Industry reports.
Form S–3 or Form F–3 and either at
(iii) An issuer for an offering of penny (i) The issuer is required to file
such date meets the minimum float
stock as defined in Rule 3a51–1 of the reports pursuant to section 13 or section
provisions of General Instruction I.B.1
Securities Exchange Act of 1934 15(d) of the Securities Exchange Act of
of such Forms or, at the date of reliance
(§ 240.3a51–1 of this chapter). 1934 or satisfies the conditions in
on this section, is offering securities
(b) Rule 144A offerings. If the paragraph (a)(1)(i)(B) of this section;
meeting the requirements for the
conditions in paragraph (a) of this (ii) The condition in paragraph
offering of investment grade securities
section are satisfied, a broker’s or (a)(1)(ii) of this section is satisfied;
pursuant to General Instruction I.B.2 of
dealer’s publication or distribution of a (iii) The research report includes
Form S–3 or Form F–3; and
research report shall not be considered similar information with respect to a
(2) As of the date of reliance on this
an offer for sale or an offer to sell a substantial number of issuers in the
section, has filed all periodic reports
security or general solicitation or issuer’s industry or sub-industry, or
required during the preceding 12
general advertising, in connection with contains a comprehensive list of
months on Forms 10–K (§ 249.310 of
an offering relying on Rule 144A securities currently recommended by
this chapter), 10–KSB (§ 249.310b of this
(§ 230.144A). the broker or dealer;
chapter), 10–Q (§ 249.308a of this
(c) Regulation S offerings. If the chapter), 10–QSB (§ 249.308b of this (iv) The analysis regarding the issuer
conditions in paragraph (a) of this chapter), and 20–F (§ 249.220f of this or its securities is given no materially
section are satisfied, a broker’s or chapter) pursuant to section 13 or greater space or prominence in the
dealer’s publication or distribution of a section 15(d) of the Securities Exchange publication than that given to other
research report shall not: Act of 1934 (15 U.S.C. 78m or 78o(d)); securities or issuers; and
(1) Constitute directed selling efforts or (v) The broker or dealer publishes or
as defined in Rule 902(c) (§ 230.902(c)) (B) Is a foreign private issuer that as distributes research reports in the
for offerings under Regulation S of the date of reliance on this section: regular course of its business and, at the
(§ 230.901 through § 230.905); or (1) Meets all of the registrant time of the publication or distribution of
(2) Be inconsistent with the offshore requirements of Form F–3 other than the the research report, is including similar
transaction requirement in Rule 902(h) reporting history provisions of General information about the issuer or its
(§ 230.902(h)) for offerings under Instructions I.A.1. and I.A.2(a) of Form securities in similar reports.
Regulation S. F–3; (b) Rule 144A offerings. If the
(d) Definition of research report. For (2) Either: conditions in paragraph (a)(1) or (a)(2)
purposes of this section, research report (i) Satisfies the public float threshold of this section are satisfied, a broker’s or
means a written communication, as in General Instruction I.B.1. of Form F– dealer’s publication or distribution of a
defined in Rule 405, that includes 3; or research report shall not be considered
information, opinions, or (ii) Is issuing non-convertible an offer for sale or an offer to sell a
recommendations with respect to investment grade securities meeting the security or general solicitation or
securities of an issuer or an analysis of provisions of General Instruction I.B.2. general advertising, in connection with
a security or an issuer, whether or not of Form F–3; and an offering relying on Rule 144A
it provides information reasonably (3) Either: (§ 230.144A).
sufficient upon which to base an (i) Has its equity securities trading on (c) Regulation S offerings. If the
investment decision. a designated offshore securities market conditions in paragraph (a)(1) or (a)(2)
■ 11. Revise § 230.139 to read as follows: as defined in Rule 902(b) (§ 230.902(b)) of this section are satisfied, a broker’s or
dealer’s publication or distribution of a (1) Securities of the same class as the aggregate, represent a fundamental
research report shall not: securities that are the subject of the change in the information set forth in
(1) Constitute directed selling efforts transaction are trading on that national the registration statement;
as defined in Rule 902(c) (§ 230.902(c)) securities exchange or facility thereof, (3) The date of filing of the last report
for offerings under Regulation S trading facility of a national securities of the issuer incorporated by reference
(§§ 230.901 through 230.905); or association, or alternative trading into the prospectus that is part of the
(2) Be inconsistent with the offshore system; registration statement or the date that a
transaction requirement in Rule 902(h) (2) The registration statement relating form of prospectus filed pursuant to
(§ 230.902(h)) for offerings under to the offering is effective and is not the Rule 424(b) or Rule 497(b), (c), (d), or (e)
Regulation S. subject of any pending proceeding or (§ 230.424(b) or § 230.497(b), (c), (d), or
(d) Definition of research report. For examination under section 8(d) or 8(e) (e)) is deemed part of and included in
purposes of this section, research report of the Act; the registration statement, and relied
means a written communication, as (3) Neither the issuer, nor any upon in either case in lieu of filing a
defined in Rule 405, that includes underwriter or participating dealer is post-effective amendment for purposes
information, opinions, or the subject of a pending proceeding of paragraphs (c)(2)(i) and (ii) of this
recommendations with respect to under section 8A of the Act in section next preceding a particular sale
securities of an issuer or an analysis of connection with the offering; and of the issuer’s registered securities to the
a security or an issuer, whether or not (4) The issuer has filed or will file public; or
it provides information reasonably with the Commission a prospectus that (4) As to the issuer and any
sufficient upon which to base an satisfies the requirements of section underwriter at that time only, the most
investment decision. 10(a) of the Act. recent effective date of the registration
Instruction to § 230.139. (c) Definitions. statement for purposes of liability under
Projections. A projection constitutes an (1) The term national securities section 11 of the Act of the issuer and
analysis or information falling within the exchange, as used in this section, shall any such underwriter only at the time
definition of research report. When a broker mean a securities exchange registered as of or next preceding a particular sale of
or dealer publishes or distributes projections the issuer’s registered securities to the
a national securities exchange under
of an issuer’s sales or earnings in reliance on public determined pursuant to Rule
paragraph (a)(2) of this section, it must: section 6 of the Securities Exchange Act
1. Have previously published or of 1934 (15 U.S.C. 78f). 430B (§ 230.430B).
distributed projections on a regular basis in (2) The term trading facility, as used * * * * *
order to satisfy the ‘‘regular course of its in this section, shall mean a trading ■ 15. Add § 230.159 to read as follows:
business’’ condition; facility sponsored and governed by the
2. At the time of publishing or § 230.159 Information available to
rules of a registered securities
disseminating a research report, be purchaser at time of contract of sale.
association or a national securities
publishing or distributing projections with
exchange. (a) For purposes of section 12(a)(2) of
respect to that issuer; and the Act only, and without affecting any
3. For purposes of paragraph (a)(2)(iii) of (3) The term alternative trading
system, as used in this section, shall other rights a purchaser may have, for
this section, include projections covering the
mean an alternative trading system as purposes of determining whether a
same or similar periods with respect to either
a substantial number of issuers in the issuer’s defined in Rule 300(a) of Regulation prospectus or oral statement included
industry or sub-industry or substantially all ATS under the Securities Exchange Act an untrue statement of a material fact or
issuers represented in the comprehensive list of 1934 (§ 242.300(a) of this chapter) omitted to state a material fact necessary
of securities contained in the research report. registered with the Commission in order to make the statements, in the
pursuant to Rule 301 of Regulation ATS light of the circumstances under which
§ 230.139a [Amended]
under the Securities Exchange Act of they were made, not misleading at the
■ 12. Amend § 230.139a as follows: time of sale (including, without
■ a. Remove paragraph (c); and 1934 (§ 242.301(a) of this chapter).
■ 14. Amend § 230.158 to revise limitation, a contract of sale), any
■ b. Redesignate paragraphs (d) and (e)
paragraph (c) to read as follows: information conveyed to the purchaser
as paragraphs (c) and (d).
■ 13. Revise § 230.153 to read as follows:
only after such time of sale (including
§ 230.158 Definitions of certain terms in such contract of sale) will not be taken
§ 230.153 Definition of ‘‘preceded by a the last paragraph of section 11(a). into account.
prospectus’’ as used in section 5(b)(2) of * * * * * (b) For purposes of section 17(a)(2) of
the Act, in relation to certain transactions. (c) For purposes of the last paragraph the Act only, and without affecting any
(a) Definition of preceded by a of section 11(a) of the Act only, the other rights the Commission may have
prospectus. The term preceded by a effective date of the registration to enforce that section, for purposes of
prospectus as used in section 5(b)(2) of statement is deemed to be the date of determining whether a statement
the Act, regarding any requirement of a the latest to occur of: includes or represents any untrue
broker or dealer to deliver a prospectus (1) The effective date of the statement of a material fact or any
to a broker or dealer as a result of a registration statement; omission to state a material fact
transaction effected between such (2) The effective date of the last post- necessary in order to make the
parties on or through a national effective amendment to the registration statements made, in light of the
securities exchange or facility thereof, statement next preceding a particular circumstances under which they were
trading facility of a national securities sale of the issuer’s registered securities made, not misleading at the time of sale
association, or an alternative trading to the public filed for the purposes of: (including, without limitation, a
system, shall mean the satisfaction of (i) Including any prospectus required contract of sale), any information
the conditions in paragraph (b) of this by section 10(a)(3) of the Act; or conveyed to the purchaser only after
section. (ii) Reflecting in the prospectus any such time of sale (including such
(b) Conditions. Any requirement of a facts or events arising after the effective contract of sale) will not be taken into
broker or dealer to deliver a prospectus date of the registration statement (or the account.
for transactions covered by paragraph most recent post-effective amendment (c) For purposes of section 12(a)(2) of
(a) of this section will be satisfied if: thereof) which, individually or in the the Act only, knowing of such untruth
or omission in respect of a sale whether any person other than an issuer is the Act relating to a public offering of
(including, without limitation, a a ‘‘seller’’ for purposes of section 12(a)(2) of securities to be covered by the
contract of sale), means knowing at the the Act. registration statement to be filed; and
time of such sale (including such (b) Definition of by means of for (2) The exemption from section 5(c) of
contract of sale). purposes of section 12(a)(2) of the Act. the Act provided in this section for such
16. Add § 230.159A to read as follows: (1) For purposes of section 12(a)(2) of written communication that is an offer
the Act only, an offering participant shall be conditioned on satisfying the
§ 230.159A Certain definitions for conditions in paragraph (b) of this
purposes of section 12(a)(2) of the Act. other than the issuer shall not be
section.
(a) Definition of seller for purposes of considered to offer or sell securities that
(b) Conditions. (1) Legend. (i) Every
section 12(a)(2) of the Act. For purposes are the subject of a registration
written communication that is an offer
of section 12(a)(2) of the Act only, in a statement by means of a free writing made in reliance on this exemption
primary offering of securities of the prospectus as to a purchaser unless one shall contain substantially the following
issuer, regardless of the underwriting or more of the following circumstances legend:
method used to sell the issuer’s shall exist:
(i) The offering participant used or The issuer may file a registration statement
securities, seller shall include the issuer (including a prospectus) with the SEC for the
of the securities sold to a person as part referred to the free writing prospectus in
offering to which this communication relates.
of the initial distribution of such offering or selling the securities to the Before you invest, you should read the
securities, and the issuer shall be purchaser; prospectus in that registration statement and
considered to offer or sell the securities (ii) The offering participant offered or other documents the issuer has filed with the
to such person, if the securities are sold securities to the purchaser and SEC for more complete information about the
offered or sold to such person by means participated in planning for the use of issuer and this offering. You may get these
the free writing prospectus by one or documents for free by visiting EDGAR on the
of any of the following communications: SEC Web site at www.sec.gov. Alternatively,
(1) Any preliminary prospectus or more other offering participants and
the company will arrange to send you the
prospectus of the issuer relating to the such free writing prospectus was used prospectus after filing if you request it by
offering required to be filed pursuant to or referred to in offering or selling calling toll-free 1–8[xx-xxx-xxxx].
Rule 424 (§ 230.424) or Rule 497 securities to the purchaser by one or
more of such other offering participants; (ii) The legend also may provide an e-
(§ 230.497); mail address at which the documents
(2) Any free writing prospectus as or
(iii) The offering participant was can be requested and may indicate that
defined in Rule 405 (§ 230.405) relating
required to file the free writing the documents also are available by
to the offering prepared by or on behalf
prospectus pursuant to the conditions to accessing the issuer’s Web site, and
of the issuer or used or referred to by the
provide the Internet address and the
issuer and, in the case of an issuer that use in Rule 433 (§ 230.433).
particular location of the documents on
is an open-end management company (2) For purposes of section 12(a)(2) of
the Web site.
registered under the Investment the Act only, a person will not be (iii) An immaterial or unintentional
Company Act of 1940 (15 U.S.C. 80a–1 considered to offer or sell securities by failure to include the specified legend in
et seq.), any profile relating to the means of a free writing prospectus a free writing prospectus required by
offering provided pursuant to Rule 498 solely because another person has used this section will not result in a violation
(§ 230.498); or referred to the free writing prospectus of section 5(c) of the Act or the loss of
(3) The portion of any other free or filed the free writing prospectus with the ability to rely on this section so long
writing prospectus (or, in the case of an the Commission pursuant to Rule 433. as:
issuer that is an investment company ■ 17. Add § 230.163 to read as follows: (A) A good faith and reasonable effort
registered under the Investment was made to comply with the specified
Company Act of 1940 or a business § 230.163 Exemption from section 5(c) of
the Act for certain communications by or on legend condition;
development company as defined in behalf of well-known seasoned issuers. (B) The free writing prospectus is
section 2(a)(48) of the Investment amended to include the specified legend
Company Act of 1940 (15 U.S.C. 80a– Preliminary Note to § 230.163. Attempted as soon as practicable after discovery of
2(a)(48)), any advertisement pursuant to compliance with this section does not act as the omitted or incorrect legend; and
Rule 482 (§ 230.482)) relating to the an exclusive election and the issuer also may (C) If the free writing prospectus has
offering containing material information claim the availability of any other applicable been transmitted without the specified
about the issuer or its securities exemption or exclusion. Reliance on this
section does not affect the availability of any
legend, the free writing prospectus is
provided by or on behalf of the issuer; other exemption or exclusion from the retransmitted with the legend by
and requirements of section 5 of the Act. substantially the same means as, and
(4) Any other communication that is directed to substantially the same
an offer in the offering made by the (a) In an offering by or on behalf of a prospective purchasers to whom, the
issuer to such person. well-known seasoned issuer, as defined free writing prospectus was originally
in Rule 405 (§ 230.405), that will be or transmitted.
Notes to paragraph (a) of Rule 159A.
1. For purposes of paragraph (a) of this is at the time intended to be registered (2) Filing condition. (i) Subject to
section, information is provided or a under the Act, an offer by or on behalf paragraph (b)(2)(ii) of this section, every
communication is made by or on behalf of an of such issuer is exempt from the written communication that is an offer
issuer if an issuer or an agent or prohibitions in section 5(c) of the Act on made in reliance on this exemption
representative of the issuer authorizes or offers to sell, offers for sale, or offers to shall be filed by the issuer with the
approves the information or communication buy its securities before a registration Commission promptly upon the filing of
before its provision or use. An offering statement has been filed, provided that: the registration statement, if one is filed,
participant other than the issuer shall not be
an agent or representative of the issuer solely
(1) Any written communication that is or an amendment, if one is filed,
by virtue of its acting as an offering an offer made in reliance on this covering the securities that have been
participant. exemption will be a free writing offered in reliance on this exemption.
2. Paragraph (a) of this section shall not prospectus as defined in Rule 405 and (ii) The condition that an issuer shall
affect in any respect the determination of a prospectus under section 2(a)(10) of file a free writing prospectus with the
Commission under this section shall not section will not be considered to be in (4) Communications made by an
apply in respect of any communication connection with a securities offering issuer that is:
that has previously been filed with, or registered under the Securities Act for (i) An investment company registered
furnished to, the Commission or that the purposes of Rule 100(b)(2)(iv) of under the Investment Company Act of
issuer would not be required to file with Regulation FD under the Securities 1940 (15 U.S.C. 80a–1 et seq.); or
the Commission pursuant to the Exchange Act of 1934 (ii) A business development company
conditions of Rule 433 (§ 230.433) if the (§ 243.100(b)(2)(iv) of this chapter). as defined in section 2(a)(48) of the
communication was a free writing ■ 18. Add § 230.163A to read as follows: Investment Company Act of 1940 (15
prospectus used after the filing of the U.S.C. 80a–2(a)(48)).
§ 230.163A Exemption from section 5(c) of
registration statement. The condition the Act for certain communications made (c) For purposes of this section, a
that the issuer shall file a free writing by or on behalf of issuers more than 30 communication is made by or on behalf
prospectus with the Commission under days before a registration statement is filed. of an issuer if the issuer or an agent or
this section shall be satisfied if the representative of the issuer, other than
issuer satisfies the filing conditions Preliminary Note to § 230.163A.
Attempted compliance with this section does an offering participant who is an
(other than timing of filing which is underwriter or dealer, authorizes or
provided in this section) that would not act as an exclusive election and the issuer
also may claim the availability of any other approves the communication before it is
apply under Rule 433 if the applicable exemption or exclusion. Reliance made.
communication was a free writing on this section does not affect the availability (d) A communication exempt from
prospectus used after the filing of the of any other exemption or exclusion from the section 5(c) of the Act pursuant to this
registration statement. requirements of section 5 of the Act. section will not be considered to be in
(iii) An immaterial or unintentional
(a) Except as excluded pursuant to connection with a securities offering
failure to file or delay in filing a free
paragraph (b) of this section, in all registered under the Securities Act for
writing prospectus to the extent
registered offerings by issuers, any purposes of Rule 100(b)(2)(iv) of
provided in this section will not result
communication made by or on behalf of Regulation FD under the Securities
in a violation of section 5(c) of the Act
an issuer more than 30 days before the Exchange Act of 1934
or the loss of the ability to rely on this
date of the filing of the registration (§ 243.100(b)(2)(iv) of this chapter).
section so long as:
(A) A good faith and reasonable effort statement that does not reference a ■ 19. Add § 230.164 to read as follows:
was made to comply with the filing securities offering that is or will be the
§ 230.164 Post-filing free writing
condition; and subject of a registration statement shall prospectuses in connection with certain
(B) The free writing prospectus is not constitute an offer to sell, offer for registered offerings.
filed as soon as practicable after sale, or offer to buy the securities being
discovery of the failure to file. offered under the registration statement Preliminary Notes to § 230.164.
(3) Ineligible offerings. The exemption for purposes of section 5(c) of the Act, 1. This section is not available for any
in paragraph (a) of this section shall not provided that the issuer takes communication that, although in technical
reasonable steps within its control to compliance with this section, is part of a plan
be available to:
or scheme to evade the requirements of
(i) Communications relating to prevent further distribution or section 5 of the Act.
business combination transactions that publication of such communication 2. Attempted compliance with this section
are subject to Rule 165 (§ 230.165) or during the 30 days immediately does not act as an exclusive election and the
Rule 166 (§ 230.166); preceding the date of filing the person relying on this section also may claim
(ii) Communications by an issuer that registration statement. the availability of any other applicable
is an investment company registered (b) The exemption in paragraph (a) of exemption or exclusion. Reliance on this
under the Investment Company Act of this section shall not be available with section does not affect the availability of any
1940 (15 U.S.C. 80a–1 et seq.); or respect to the following other exemption or exclusion from the
(iii) Communications by an issuer that communications: requirements of section 5 of the Act.
is a business development company as (1) Communications relating to
(a) In connection with a registered
defined in section 2(a)(48) of the business combination transactions that
offering of an issuer meeting the
Investment Company Act of 1940 (15 are subject to Rule 165 (§ 230.165) or
requirements of this section, a free
U.S.C. 80a–2(a)(48)). Rule 166 (§ 230.166);
(c) For purposes of this section, a writing prospectus, as defined in Rule
(2) Communications made in
communication is made by or on behalf 405 (§ 230.405), of the issuer or any
connection with offerings registered on
of an issuer if the issuer or an agent or other offering participant, including any
Form S–8 (§ 239.16b of this chapter),
representative of the issuer, other than underwriter or dealer, after the filing of
other than by well-known seasoned
an offering participant who is an the registration statement will be a
issuers;
underwriter or dealer, authorizes or (3) Communications in offerings of section 10(b) prospectus for purposes of
approves the communication before it is securities of an issuer that is, or during section 5(b)(1) of the Act provided that
made. the past three years was (or any of the conditions set forth in Rule 433
(d) For purposes of this section, a whose predecessors during the last three (§ 230.433) are satisfied.
communication for which disclosure years was): (b) An immaterial or unintentional
would be required under section 17(b) (i) A blank check company as defined failure to file or delay in filing a free
of the Act as a result of consideration in Rule 419(a)(2) (§ 230.419(a)(2)); writing prospectus as necessary to
given or to be given, directly or (ii) A shell company, other than a satisfy the filing conditions contained in
indirectly, by or on behalf of an issuer business combination related shell Rule 433 will not result in a violation
is deemed to be an offer by the issuer company, each as defined in Rule 405 of section 5(b)(1) of the Act or the loss
and, if a written communication, is (§ 230.405); or of the ability to rely on this section so
deemed to be a free writing prospectus (iii) An issuer for an offering of penny long as:
of the issuer. stock as defined in Rule 3a51–1 of the (1) A good faith and reasonable effort
(e) A communication exempt from Securities Exchange Act of 1934 was made to comply with the filing
section 5(c) of the Act pursuant to this (§ 240.3a51–1 of this chapter); or condition; and
(2) The free writing prospectus is filed (i) A blank check company as defined 3. The availability of this section for a
as soon as practicable after discovery of in Rule 419(a)(2) (§ 230.419(a)(2)); release or dissemination of a communication
the failure to file. (ii) A shell company, other than a that contains or incorporates factual business
(c) An immaterial or unintentional information or forward-looking information
business combination related shell
failure to include the specified legend in will not be affected by another release or
company, as defined in Rule 405; or dissemination of a communication that
a free writing prospectus as necessary to (iii) An issuer for an offering of penny contains all or a portion of the same factual
satisfy the legend condition contained stock as defined in Rule 3a51–1 of the business information or forward-looking
in Rule 433 will not result in a violation Securities Exchange Act of 1934 information that does not satisfy the
of section 5(b)(1) of the Act or the loss (§ 240.3a51–1 of this chapter). conditions of this section.
of the ability to rely on this section so (f) Excluded issuers. This section and
long as: (a) For purposes of sections 2(a)(10)
Rule 433 are not available if the issuer
(1) A good faith and reasonable effort and 5(c) of the Act, the regular release
is an investment company registered
was made to comply with the legend or dissemination by or on behalf of an
under the Investment Company Act of
condition; issuer (and, in the case of an asset-
1940 (15 U.S.C. 80a–1 et seq.) or a
(2) The free writing prospectus is backed issuer, the other persons
business development company as
amended to include the specified legend specified in paragraph (a)(3) of this
defined in section 2(a)(48) of the
as soon as practicable after discovery of section) of communications containing
Investment Company Act of 1940 (15
the omitted or incorrect legend; and factual business information or forward-
U.S.C. 80a–2(a)(48)).
(3) If the free writing prospectus has looking information shall be deemed not
(g) Excluded offerings. This section
been transmitted without the specified to constitute an offer to sell or offer for
and Rule 433 are not available if the
legend, the free writing prospectus must sale of a security which is the subject of
issuer is registering a business
be retransmitted with the legend by an offering pursuant to a registration
substantially the same means as, and combination transaction as defined in
statement that the issuer proposes to
directed to substantially the same Rule 165(f)(1) (§ 230.165(f)(1)) or the
file, or has filed, or that is effective, if
prospective purchasers to whom, the issuer, other than a well-known
the conditions of this section are
free writing prospectus was originally seasoned issuer, is registering an
satisfied by any of the following:
transmitted. offering on Form S–8 (§ 239.16b of this
(1) An issuer that is required to file
(d) Solely for purposes of this section, chapter).
reports pursuant to section 13 or section
an immaterial or unintentional failure to (h) For purposes of this section and
15(d) of the Securities Exchange Act of
retain a free writing prospectus as Rule 433, the determination date as to
1934 (15 U.S.C. 78m or 78o(d));
necessary to satisfy the record retention whether an issuer is an ineligible issuer (2) A foreign private issuer that:
condition contained in Rule 433 will in respect of an offering shall be: (i) Meets all of the registrant
not result in a violation of section (1) Except as provided in paragraph requirements of Form F–3 (§ 239.33 of
5(b)(1) of the Act or the loss of the (h)(2) of this section, the time of filing this chapter) other than the reporting
ability to rely on this section so long as of the registration statement covering history provisions of General
a good faith and reasonable effort was the offering; or Instructions I.A.1. and I.A.2.(a) of Form
made to comply with the record (2) If the offering is being registered F–3;
retention condition. Nothing in this pursuant to Rule 415 (§ 230.415), the (ii) Either:
paragraph will affect, however, any earliest time after the filing of the (A) Satisfies the public float threshold
other record retention provisions registration statement covering the in General Instruction I.B.1. of Form F–
applicable to the issuer or any offering offering at which the issuer, or in the 3; or
participant. case of an underwritten offering the (B) Is issuing non-convertible
(e) Ineligible issuers. (1) This section issuer or another offering participant, investment grade securities meeting the
and Rule 433 are available only if at the makes a bona fide offer, including provisions of General Instruction I.B.2.
eligibility determination date for the without limitation through the use of a of Form F–3; and
offering in question, determined free writing prospectus, in the offering. (iii) Either:
pursuant to paragraph (h) of this ■ 20. Add § 230.168 to read as follows: (A) Has its equity securities trading on
section, the issuer is not an ineligible § 230.168 Exemption from sections a designated offshore securities market
issuer as defined in Rule 405 (or in the 2(a)(10) and 5(c) of the Act for certain as defined in Rule 902(b) (§ 230.902(b))
case of any offering participant, other communications of regularly released and has had them so traded for at least
than the issuer, the participant has a factual business information and forward- 12 months; or
reasonable belief that the issuer is not looking information (B) Has a worldwide market value of
an ineligible issuer); its outstanding common equity held by
(2) Notwithstanding paragraph (e)(1) Preliminary Notes to § 230.168. non-affiliates of $700 million or more;
of this section, this section and Rule 433 1. This section is not available for any
communication that, although in technical
or
are available to an ineligible issuer with compliance with this section, is part of a plan (3) An asset-backed issuer or a
respect to a free writing prospectus that or scheme to evade the requirements of depositor, sponsor, or servicer (as such
contains only descriptions of the terms section 5 of the Act. terms are defined in Item 1101 of
of the securities in the offering or the 2. This section provides a non-exclusive Regulation AB (§ 229.1101 of this
offering (or in the case of an offering of safe harbor for factual business information chapter)) or an affiliated depositor,
asset-backed securities, contains only and forward-looking information released or whether or not such other person is the
information specified in paragraphs disseminated as provided in this section. issuer.
(a)(1), (2), (3), (4), (6), (7), and (8) of the Attempted compliance with this section does (b) Definitions.
definition of ABS informational and not act as an exclusive election and the issuer (1) Factual business information
also may claim the availability of any other
computational materials in Item 1101 of applicable exemption or exclusion. Reliance
means some or all of the following
Regulation AB (§ 229.1101 of this on this section does not affect the availability information that is released or
chapter), unless the issuer is or during of any other exemption or exclusion from the disseminated under the conditions in
the last three years the issuer or any of definition of prospectus in section 2(a)(10) or paragraph (d) of this section, including,
its predecessors was: the requirements of section 5 of the Act. without limitation, such factual
business information contained in approves such release or dissemination which is the subject of an offering
reports or other materials filed with, before it is made. pursuant to a registration statement that
furnished to, or submitted to the (c) Exclusion. A communication the issuer proposes to file, or has filed,
Commission pursuant to the Securities containing information about the or that is effective, if the conditions of
Exchange Act of 1934 (15 U.S.C. 78a et registered offering or released or this section are satisfied.
seq.): disseminated as part of the offering (b) Definitions.
(i) Factual information about the activities in the registered offering is (1) Factual business information
issuer, its business or financial excluded from the exemption of this means some or all of the following
developments, or other aspects of its section. information that is released or
business; (d) Conditions to exemption. The disseminated under the conditions in
(ii) Advertisements of, or other following conditions must be satisfied: paragraph (d) of this section:
information about, the issuer’s products (1) The issuer (or in the case of an (i) Factual information about the
or services; and asset-backed issuer, the issuer and the issuer, its business or financial
(iii) Dividend notices. other persons specified in paragraph developments, or other aspects of its
(2) Forward-looking information (a)(3) of this section, taken together) has business; and
means some or all of the following previously released or disseminated (ii) Advertisements of, or other
information that is released or information of the type described in this information about, the issuer’s products
disseminated under the conditions in section in the ordinary course of its or services.
paragraph (d) of this section, including, business; (2) For purposes of this section, the
without limitation, such forward- (2) The timing, manner, and form in release or dissemination of a
looking information contained in which the information is released or communication is by or on behalf of the
reports or other materials filed with, disseminated is consistent in material issuer if the issuer or an agent or
furnished to, or submitted to the respects with similar past releases or representative of the issuer, other than
Commission pursuant to the Securities disseminations; and an offering participant who is an
(3) The issuer is not an investment underwriter or dealer, authorizes or
Exchange Act of 1934:
company registered under the approves such release or dissemination
(i) Projections of the issuer’s revenues,
Investment Company Act of 1940 (15 before it is made.
income (loss), earnings (loss) per share,
U.S.C. 80a–1 et seq.) or a business (c) Exclusions. A communication
capital expenditures, dividends, capital
development company as defined in containing information about the
structure, or other financial items;
section 2(a)(48) of the Investment registered offering or released or
(ii) Statements about the issuer
Company Act of 1940 (15 U.S.C. 80a– disseminated as part of the offering
management’s plans and objectives for
2(a)(48)). activities in the registered offering is
future operations, including plans or ■ 21. Add § 230.169 to read as follows:
objectives relating to the products or excluded from the exemption of this
services of the issuer; § 230.169 Exemption from sections
section.
2(a)(10) and 5(c) of the Act for certain (d) Conditions to exemption. The
(iii) Statements about the issuer’s
communications of regularly released following conditions must be satisfied:
future economic performance, including
factual business information. (1) The issuer has previously released
statements of the type contemplated by
or disseminated information of the type
the management’s discussion and Preliminary Notes to § 230.169. described in this section in the ordinary
analysis of financial condition and 1. This section is not available for any course of its business;
results of operation described in Item communication that, although in technical (2) The timing, manner, and form in
303 of Regulations S–B and S–K compliance with this section, is part of a plan
which the information is released or
(§ 228.303 and § 229.303 of this chapter) or scheme to evade the requirements of
section 5 of the Act. disseminated is consistent in material
or the operating and financial review respects with similar past releases or
and prospects described in Item 5 of 2. This section provides a non-exclusive
safe harbor for factual business information disseminations;
Form 20–F (§ 249.220f of this chapter); released or disseminated as provided in this (3) The information is released or
and section. Attempted compliance with this disseminated for intended use by
(iv) Assumptions underlying or section does not act as an exclusive election persons, such as customers and
relating to any of the information and the issuer also may claim the availability suppliers, other than in their capacities
described in paragraphs (b)(2)(i), of any other applicable exemption or
as investors or potential investors in the
(b)(2)(ii) and (b)(2)(iii) of this section. exclusion. Reliance on this section does not
affect the availability of any other exemption issuer’s securities, by the issuer’s
(3) For purposes of this section, the employees or agents who historically
or exclusion from the definition of
release or dissemination of a have provided such information; and
prospectus in section 2(a)(10) or the
communication is by or on behalf of the requirements of section 5 of the Act. (4) The issuer is not an investment
issuer if the issuer or an agent or 3. The availability of this section for a company registered under the
representative of the issuer, other than release or dissemination of a communication Investment Company Act of 1940 (15
an offering participant who is an that contains or incorporates factual business U.S.C. 80a–1 et seq.) or a business
underwriter or dealer, authorizes or information will not be affected by another development company as defined in
approves such release or dissemination release or dissemination of a communication
that contains all or a portion of the same
section 2(a)(48) of the Investment
before it is made. Company Act of 1940 (15 U.S.C. 80a–
factual business information that does not
(4) For purposes of this section, in the 2(a)(48)).
satisfy the conditions of this section.
case of communications of a person ■ 22. Add § 230.172 to read as follows:
specified in paragraph (a)(3) of this (a) For purposes of sections 2(a)(10)
section other than the asset-backed and 5(c) of the Act, the regular release § 230.172 Delivery of prospectuses.
issuer, the release or dissemination of a or dissemination by or on behalf of an (a) Sending confirmations and notices
communication is by or on behalf of issuer of communications containing of allocations. After the effective date of
such other person if such other person factual business information shall be a registration statement, the following
or its agent or representative, other than deemed not to constitute an offer to sell are exempt from the provisions of
an underwriter or dealer, authorizes or or offer for sale of a security by an issuer section 5(b)(1) of the Act if the
conditions set forth in paragraph (c) of (3) A business combination § 230.174 Delivery of prospectus by
this section are satisfied: transaction as defined in Rule 165(f)(1) dealers; exemptions under section 4(3) of
(1) Written confirmations of sales of (§ 230.165(f)(1); or the Act.
securities in an offering pursuant to a (4) Offering registered on Form S–8 * * * * *
registration statement that contain (§ 239.16b of this chapter). (h) Any obligation pursuant to Section
information limited to that called for in ■ 23. Add § 230.173 to read as follows: 4(3) of the Act and this section to
Rule 10b–10 under the Securities § 230.173 Notice of registration.
deliver a prospectus, other than
Exchange Act of 1934 (§ 240.10b–10 of pursuant to paragraph (g) of this section,
(a) In a transaction that represents a
this chapter) and other information may be satisfied by compliance with the
sale by the issuer or an underwriter, or
customarily included in written provisions of Rule 172 (§ 230.172).
a sale where there is not an exclusion
confirmations of sales of securities, ■ 25. Amend § 230.401 by removing the
or exemption from the requirement to
which may include notices provided authority citations following the section
deliver a final prospectus meeting the
pursuant to Rule 173 (§ 230.173); and requirements of section 10(a) of the Act and revising paragraph (g) to read as
(2) Notices of allocation of securities pursuant to section 4(3) of the Act or follows:
sold or to be sold in an offering Rule 174 (§ 230.174), each underwriter
pursuant to the registration statement § 230.401 Requirements as to proper form.
or dealer selling in such transaction * * * * *
that may include information shall provide to each purchaser from it,
identifying the securities (including the (g)(1) Subject to paragraph (g)(2) of
not later than two business days
CUSIP number) and otherwise may this section, except for registration
following the completion of such sale, a
include only information regarding statements and post-effective
copy of the final prospectus or, in lieu
pricing, allocation and settlement, and amendments that become effective
of such prospectus, a notice to the effect
information incidental thereto. immediately pursuant to Rule 462 and
that the sale was made pursuant to a
(b) Transfer of the security. Any Rule 464 (§ 230.462 and § 230.464), a
registration statement or in a transaction
obligation under section 5(b)(2) of the registration statement or any
in which a final prospectus would have
Act to have a prospectus that satisfies been required to have been delivered in amendment thereto is deemed filed on
the requirements of section 10(a) of the the absence of Rule 172 (§ 230.172). the proper registration form unless the
Act precede or accompany the carrying (b) If the sale was by the issuer and Commission objects to the registration
or delivery of a security in a registered was not effected by or through an form before the effective date.
offering is satisfied if the conditions in underwriter or dealer, the responsibility (2) An automatic shelf registration
paragraph (c) of this section are met. to send a prospectus, or in lieu of such statement as defined in Rule 405
(c) Conditions. (1) The registration prospectus, such notice as set forth in (§ 230.405) and any post-effective
statement relating to the offering is paragraph (a) of this section, shall be the amendment thereto are deemed filed on
effective and is not the subject of any issuer’s. the proper registration form unless and
pending proceeding or examination (c) Compliance with the requirements until the Commission notifies the issuer
under section 8(d) or 8(e) of the Act; of this section is not a condition to of its objection to the use of such form.
(2) Neither the issuer, nor an reliance on Rule 172. Following any such notification, the
underwriter or participating dealer is (d) A purchaser may request from the issuer must amend its automatic shelf
the subject of a pending proceeding person responsible for sending a notice registration statement onto the
under section 8A of the Act in a copy of the final prospectus if one has registration form it is then eligible to
connection with the offering; and not been sent. use, provided, however, that any
(3) The issuer has filed with the (e) After the effective date of the continuous offering of securities
Commission a prospectus with respect registration statement with respect to an pursuant to Rule 415 (§ 230.415) that the
to the offering that satisfies the offering, notices as set forth in issuer has commenced pursuant to the
requirements of section 10(a) of the Act paragraph (a) of this section, are exempt registration statement before the
or the issuer will make a good faith and from the provisions of section 5(b)(1) of Commission has notified the issuer of
reasonable effort to file such a the Act. its objection to the use of such form may
prospectus within the time required (f) Exclusions. This section shall not continue until the effective date of a
under Rule 424 (§ 230.424) and, in the apply to any: new registration statement or post-
event that the issuer fails to file timely (1) Transaction solely between effective amendment to the registration
such a prospectus, the issuer files the brokers or dealers in reliance on Rule statement that the issuer has filed on the
153 (§ 230.153); proper registration form, if the issuer
prospectus as soon as practicable
(2) Offering of any investment files promptly after notification the new
thereafter.
company registered under the registration statement or post-effective
(4) The condition in paragraph (c)(3) Investment Company Act of 1940 (15
of this section shall not apply to amendment and if the offering is
U.S.C. 80a–1 et seq.); permitted to be made under the new
transactions by dealers requiring (3) Offering of any business
delivery of a final prospectus pursuant registration statement or post-effective
development company as defined in
to section 4(3) of the Act. amendment.
section 2(a)(48) of the Investment
(d) Exclusions. This section shall not ■ 26. Amend § 230.405 as follows:
Company Act of 1940 (15 U.S.C. 80a–
apply to any: ■ a. Add new definitions of ‘‘automatic
2(a)(48));
(1) Offering of any investment (4) A business combination shelf registration statement,’’ ‘‘free
company registered under the transaction as defined in Rule 165(f)(1) writing prospectus,’’ ‘‘ineligible issuer,’’
Investment Company Act of 1940 (15 (§ 230.165(f)(1)); or ‘‘well-known seasoned issuer,’’ and
U.S.C. 80a–1 et seq.); (5) Offering registered on Form S–8 ‘‘written communication,’’ in
(2) Offering of any business (§ 239.16b of this chapter). alphabetical order; and
development company as defined in ■ 24. Amend § 230.174 by removing the ■ b. Revise the definition of ‘‘graphic
section 2(a)(48) of the Investment authority citations following the section communication.’’
Company Act of 1940 (15 U.S.C. 80a– and adding paragraph (h) to read as The additions and revision read as
2(a)(48)); follows: follows:
§ 230.405 Definition of terms. of the Securities Exchange Act of 1934 (2) The conversion of the case to a
* * * * * (15 U.S.C. 78m or 78o(d)) that has not voluntary proceeding under federal
Automatic shelf registration filed all reports and other materials bankruptcy or state insolvency laws;
statement. The term automatic shelf required to be filed during the preceding and
registration statement means a 12 months (or for such shorter period (B) Ineligibility will terminate under
registration statement filed on Form S– that the issuer was required to file such this paragraph (1)(iv) if an issuer has
3 or Form F–3 (§ 239.13 or § 239.33 of reports pursuant to sections 13 or 15(d) filed an annual report with audited
this chapter) by a well-known seasoned of the Securities Exchange Act of 1934), financial statements subsequent to its
issuer pursuant to General Instruction other than reports on Form 8–K emergence from that bankruptcy,
I.D. or I.C. of such forms, respectively. (§ 249.308 of this chapter) required insolvency, or receivership process;
* * * * * solely pursuant to an item specified in (v) Within the past three years, the
Free writing prospectus. Except as General Instruction I.A.3(b) of Form S– issuer or any entity that at the time was
otherwise specifically provided or the 3 (§ 239.13 of this chapter) (or in the a subsidiary of the issuer was convicted
context otherwise requires, a free case of an asset-backed issuer, to the of any felony or misdemeanor described
writing prospectus is any written extent the depositor or any issuing in paragraphs (i) through (iv) of section
communication as defined in this entity previously established, directly or 15(b)(4)(B) of the Securities Exchange
section that constitutes an offer to sell indirectly, by the depositor (as such Act of 1934 (15 U.S.C. 78o(b)(4)(B)(i)
or a solicitation of an offer to buy the terms are defined in Item 1101 of through (iv));
securities relating to a registered Regulation AB (§ 229.1101 of this (vi) Within the past three years (but in
offering that is used after the registration chapter) are or were at any time during the case of a decree or order agreed to
statement in respect of the offering is the preceding 12 calendar months in a settlement, not before December 1,
filed (or, in the case of a well-known required to file reports pursuant to 2005), the issuer or any entity that at the
seasoned issuer, whether or not such section 13 or 15(d) of the Securities time was a subsidiary of the issuer was
registration statement is filed) and is Exchange Act of 1934 with respect to a made the subject of any judicial or
made by means other than: class of asset-backed securities administrative decree or order arising
(1) A prospectus satisfying the involving the same asset class, such out of a governmental action that:
requirements of section 10(a) of the Act, depositor and each such issuing entity (A) Prohibits certain conduct or
Rule 430 (§ 230.430), Rule 430A must have filed all reports and other activities regarding, including future
(§ 230.430A), Rule 430B (§ 230.430B), material required to be filed for such violations of, the anti-fraud provisions
Rule 430C (§ 230.430C), or Rule 431 period (or such shorter period that each of the federal securities laws;
(§ 230.431); such entity was required to file such (B) Requires that the person cease and
(2) A written communication used in reports), other than reports on Form 8– desist from violating the anti-fraud
reliance on Rule 167 and Rule 426 K required solely pursuant to an item provisions of the federal securities laws;
(§ 230.167 and § 230.426); or specified in General Instruction I.A.4 of or
(3) A written communication that Form S–3); (C) Determines that the person
constitutes an offer to sell or solicitation (ii) The issuer is, or during the past violated the anti-fraud provisions of the
of an offer to buy such securities that
three years the issuer or any of its federal securities laws;
falls within the exception from the
predecessors was: (vii) The issuer has filed a registration
definition of prospectus in clause (a) of
(A) A blank check company as statement that is the subject of any
section 2(a)(10) of the Act.
Graphic communication. The term defined in Rule 419(a)(2) pending proceeding or examination
graphic communication, which appears (§ 230.419(a)(2)); under section 8 of the Act or has been
in the definition of ‘‘write, written’’ in (B) A shell company, other than a the subject of any refusal order or stop
section 2(a)(9) of the Act and in the business combination related shell order under section 8 of the Act within
definition of written communication in company, each as defined in this the past three years; or
this section, shall include all forms of section; (viii) The issuer is the subject of any
electronic media, including, but not (C) An issuer in an offering of penny pending proceeding under section 8A of
limited to, audiotapes, videotapes, stock as defined in Rule 3a51–1 of the the Act in connection with an offering.
facsimiles, CD–ROM, electronic mail, Securities Exchange Act of 1934 (2) An issuer shall not be an ineligible
Internet Web sites, substantially similar (§ 240.3a51–1 of this chapter); issuer if the Commission determines,
messages widely distributed (rather than (iii) The issuer is a limited upon a showing of good cause, that it is
individually distributed) on telephone partnership that is offering and selling not necessary under the circumstances
answering or voice mail systems, its securities other than through a firm that the issuer be considered an
computers, computer networks and commitment underwriting; ineligible issuer. Any such
other forms of computer data (iv) Within the past three years, a determination shall be without
compilation. Graphic communication petition under the federal bankruptcy prejudice to any other action by the
shall not include a communication that, laws or any state insolvency law was Commission in any other proceeding or
at the time of the communication, filed by or against the issuer, or a court matter with respect to the issuer or any
originates live, in real-time to a live appointed a receiver, fiscal agent or other person.
audience and does not originate in similar officer with respect to the (3) The date of determination of
recorded form or otherwise as a graphic business or property of the issuer whether an issuer is an ineligible issuer
communication, although it is subject to the following: is as follows:
transmitted through graphic means. (A) In the case of an involuntary (i) For purposes of determining
Ineligible issuer. (1) An ineligible bankruptcy in which a petition was whether an issuer is a well-known
issuer is an issuer with respect to which filed against the issuer, ineligibility will seasoned issuer, at the date specified for
any of the following is true as of the occur upon the earlier to occur of: purposes of such determination in
relevant date of determination: (1) 90 days following the date of the paragraph (2) of the definition of well-
(i) Any issuer that is required to file filing of the involuntary petition (if the known seasoned issuer in this section;
reports pursuant to section 13 or 15(d) case has not been earlier dismissed); or and
(ii) For purposes of determining securities and the securities are non- television broadcast, or a graphic
whether an issuer or offering participant convertible securities, other than communication as defined in this
may use free writing prospectuses in common equity; section.
respect of an offering in accordance (B) The securities are guarantees of:
Note: Note to definition of ‘‘written
with the provisions of Rules 164 and (1) Non-convertible securities, other communication.’’
433 (§ 230.164 and § 230.433), at the than common equity, of its parent being A communication that is a radio or
date in respect of the offering specified registered; or television broadcast is a written
in paragraph (h) of Rule 164. (2) Non-convertible securities, other communication regardless of the means of
* * * * * than common equity, of another transmission of the broadcast.
Well-known seasoned issuer. A well- majority-owned subsidiary being ■ 27. Amend § 230.408 as follows:
known seasoned issuer is an issuer that, registered where there is a full and ■ a. Designate the current text as
as of the most recent determination date unconditional guarantee, as defined in paragraph (a); and
determined pursuant to paragraph (2) of Rule 3–10 of Regulation S–X, of such ■ b. Add paragraph (b).
this definition: non-convertible securities by the parent; The addition reads as follows:
(1)(i) Meets all the registrant or
(C) The securities of the majority- § 230.408 Additional information.
requirements of General Instruction I.A.
of Form S–3 or Form F–3 (§ 239.13 or owned subsidiary meet the conditions * * * * *
§ 239.33 of this chapter) and either: of General Instruction I.B.2 of Form S– (b) Notwithstanding paragraph (a) of
(A) As of a date within 60 days of the 3 or Form F–3. this section, unless otherwise required
determination date, has a worldwide (iii) Is not an ineligible issuer as to be included in the registration
market value of its outstanding voting defined in this section. statement, the failure to include in a
and non-voting common equity held by (iv) Is not an asset-backed issuer as registration statement information
non-affiliates of $700 million or more; defined in Item 1101 of Regulation AB included in a free writing prospectus
or (§ 229.1101(b) of this chapter). will not, solely by virtue of inclusion of
(B)(1) As of a date within 60 days of (v) Is not an investment company the information in a free writing
the determination date, has issued in registered under the Investment prospectus (as defined in Rule 405
the last three years at least $1 billion Company Act of 1940 (15 U.S.C. 80a–1 (§ 230.405)), be considered an omission
aggregate principal amount of non- et seq.) or a business development of material information required to be
convertible securities, other than company as defined in section 2(a)(48) included in the registration statement.
of the Investment Company Act of 1940 ■ 28. Amend § 230.412 as follows:
common equity, in primary offerings for ■ a. Remove the authority citation
cash, not exchange, registered under the (15 U.S.C. 80a–2(a)(48)).
(2) For purposes of this definition, the following the section; and
Act; and ■ b. Revise paragraph (a).
(2) Will register only non-convertible determination date as to whether an
The revision reads as follows:
securities, other than common equity, issuer is a well-known seasoned issuer
and full and unconditional guarantees shall be the latest of: § 230.412 Modified or superseded
permitted pursuant to paragraph (1)(ii) (i) The time of filing of its most recent documents.
of this definition unless, at the shelf registration statement; or (a) Any statement contained in a
determination date, the issuer also is (ii) The time of its most recent document incorporated or deemed to be
eligible to register a primary offering of amendment (by post-effective incorporated by reference or deemed to
its securities relying on General amendment, incorporated report filed be part of a registration statement or the
Instruction I.B.1. of Form S–3 or Form pursuant to section 13 or 15(d) of the prospectus that is part of the registration
F–3. Securities Exchange Act of 1934 (15 statement shall be deemed to be
(3) Provided that as to a parent issuer U.S.C. 78m or 78o(d) of this chapter), or modified or superseded for purposes of
only, for purposes of calculating the form of prospectus) to a shelf the registration statement or the
aggregate principal amount of registration statement for purposes of prospectus that is part of the registration
outstanding non-convertible securities complying with section 10(a)(3) of the statement to the extent that a statement
under paragraph (1)(i)(B)(2) of this Act (or if such amendment has not been contained in the prospectus that is part
definition, the parent issuer may made within the time period required of the registration statement or in any
include the aggregate principal amount by section 10(a)(3) of the Act, the date other subsequently filed document
of non-convertible securities, other than on which such amendment is required); which also is or is deemed to be
common equity, of its majority-owned or incorporated by reference or deemed to
subsidiaries issued in registered primary (iii) In the event that the issuer has be part of the registration statement or
offerings for cash, not exchange, that it not filed a shelf registration statement or prospectus that is part of the registration
has fully and unconditionally amended a shelf registration statement statement modifies or replaces such
guaranteed, within the meaning of Rule for purposes of complying with section statement. Any statement contained in a
3–10 of Regulation S–X (§ 210.3–10 of 10(a)(3) of the Act for sixteen months, document that is deemed to be
this chapter) in the last three years; or the time of filing of the issuer’s most incorporated by reference or deemed to
(ii) Is a majority-owned subsidiary of recent annual report on Form 10–K be part of a registration statement or the
a parent that is a well-known seasoned (§ 249.310 of this chapter) or Form 20– prospectus that is part of the registration
issuer pursuant to paragraph (1)(i) of F (§ 249.220f of this chapter) (or if such statement after the most recent effective
this definition and, as to the report has not been filed by its due date, date or after the date of the most recent
subsidiaries’ securities that are being or such due date). prospectus that is part of the registration
may be offered on that parent’s * * * * * statement may modify or replace
registration statement: Written communication. Except as existing statements contained in the
(A) The parent has provided a full and otherwise specifically provided or the registration statement or the prospectus
unconditional guarantee, as defined in context otherwise requires, a written that is part of the registration statement.
Rule 3–10 of Regulation S–X, of the communication is any communication * * * * *
payment obligations on the subsidiary’s that is written, printed, a radio or ■ 29. Revise § 230.413 to read as follows:
§ 230.413 Registration of additional statement becomes effective, is registration statement and prospectus
securities and additional classes of reasonably expected to be offered and included therein must include all the
securities. sold within two years from the initial information that would be required at
(a) Except as provided in section 24(f) effective date of the registration. that time in a prospectus relating to all
of the Investment Company Act of 1940 (3) The registrant furnishes the offering(s) that it covers. Prior to the
(15 U.S.C. 80a–24(f)) and in paragraph undertakings required by Item 512(a) of effective date of the new registration
(b) of this section, where a registration Regulation S–K (§ 229.512(a) of this statement (including at the time of filing
statement is already in effect, the chapter) or Item 512(a) or Item 512(g) of in the case of an automatic shelf
registration of additional securities shall Regulation S–B (§ 228.512(a) or (g) of registration statement), the issuer may
only be effected through a separate this chapter), except that a registrant include on such new registration
registration statement relating to the that is an investment company filing on statement any unsold securities covered
additional securities. Form N–2 (§§ 239.14 and 274.11a–1 of by the earlier registration statement by
(b) Notwithstanding paragraph (a) of this chapter) must furnish the identifying on the bottom of the facing
this section, the following additional undertakings required by Item 34.4 of page of the new registration statement or
securities or additional classes of Form N–2. latest amendment thereto the amount of
securities may be added to an automatic (4) In the case of a registration such unsold securities being included
shelf registration statement already in statement pertaining to an at the market and any filing fee paid in connection
effect by filing a post-effective offering of equity securities by or on with such unsold securities, which will
amendment to that automatic shelf behalf of the registrant, the offering continue to be applied to such unsold
registration statement: must come within paragraph (a)(1)(x) of securities. The offering of securities on
(1) Securities of a class different than this section. As used in this paragraph, the earlier registration statement will be
those registered on the effective the term ‘‘at the market offering’’ means deemed terminated as of the date of
automatic shelf registration statement an offering of equity securities into an effectiveness of the new registration
identified as provided in Rule 430B(a) existing trading market for outstanding statement.
(§ 230.430B(a)); or shares of the same class at other than a * * * * *
(2) Securities of a majority-owned fixed price. ■ 31. Amend § 230.418 as follows:
subsidiary that are permitted to be (5) Securities registered on an ■ a. Revise the introductory text of
included in an automatic shelf automatic shelf registration statement paragraph (a)(3);
registration statement, provided that the and securities described in paragraphs ■ b. Remove the word ‘‘and’’ at the end
subsidiary and the securities are (a)(1)(vii), (ix), and (x) of this section of paragraph (a)(6);
identified as provided in Rule 430B and may be offered and sold only if not more ■ c. Remove the period at the end of the
the subsidiary satisfies the signature than three years have elapsed since the paragraph (a)(7) and in its place add ‘‘;
requirements of an issuer in the post- initial effective date of the registration and’’;
effective amendment. statement under which they are being ■ d. Add paragraph (a)(8); and
■ 30. Amend § 230.415 as follows: offered and sold, provided, however, ■ e. Revise the introductory text of
■ a. Remove the authority citations that if a new registration statement has paragraph (b).
following the section; been filed pursuant to paragraph (a)(6) The addition and revisions read as
■ b. Revise paragraph (a)(1)(x); of this section: follows:
■ c. Revise paragraph (a)(2); (i) If the new registration statement is
an automatic shelf registration § 230.418 Supplemental information.
■ d. Revise paragraph (a)(3);
■ e. Revise paragraph (a)(4) including the statement, it shall be immediately (a) * * *
undesignated paragraph; effective pursuant to Rule 462(e) (3) Except in the case of a registrant
■ f. Add paragraph (a)(5); and (§ 230.462(e)); or eligible to use Form S–3 (§ 239.13 of this
■ g. Add paragraph (a)(6). (ii) If the new registration statement is chapter), any engineering, management
The revisions and addition read as not an automatic shelf registration or similar reports or memoranda relating
follows: statement: to broad aspects of the business,
(A) Securities covered by the prior operations or products of the registrant,
§ 230.415 Delayed or continuous offering registration statement may continue to which have been prepared within the
and sale of securities. past twelve months for or by the
be offered and sold until the earlier of
(a) * * * the effective date of the new registration registrant and any affiliate of the
(1) * * * statement or 180 days after the third registrant or any principal underwriter,
(x) Securities registered (or qualified anniversary of the initial effective date as defined in Rule 405 (§ 230.405), of
to be registered) on Form S–3 or Form of the prior registration statement; and the securities being registered except
F–3 (§ 239.13 or § 239.33 of this chapter) (B) A continuous offering of securities for:
which are to be offered and sold on an covered by the prior registration * * * * *
immediate, continuous or delayed basis statement that commenced within three (8) Any free writing prospectuses
by or on behalf of the registrant, a years of the initial effective date may used in connection with the offering.
majority-owned subsidiary of the continue until the effective date of the (b) Supplemental information
registrant or a person of which the new registration statement if such described in paragraph (a) of this
registrant is a majority-owned offering is permitted under the new section shall not be required to be filed
subsidiary; or registration statement. with or deemed part of and included in
* * * * * (6) Prior to the end of the three-year the registration statement, unless
(2) Securities in paragraph (a)(1)(viii) period described in paragraph (a)(5) of otherwise required. The information
of this section and securities in this section, an issuer may file a new shall be returned to the registrant upon
paragraph (a)(1)(ix) of this section that registration statement covering request, provided that:
are not registered on Form S–3 or Form securities described in such paragraph * * * * *
F–3 (§ 239.13 or § 239.33 of this chapter) (a)(5) of this section, which may, if ■ 32. Amend § 230.424 as follows:
may only be registered in an amount permitted, be an automatic shelf ■ a. Revise the introductory text of
which, at the time the registration registration statement. The new paragraph (b);
■ b. Revise paragraph (b)(2); (7) A form of prospectus that information that is unknown or not
■ c. Revise paragraph (b)(7); identifies selling security holders and reasonably available to the issuer
■ d. Add paragraph (b)(8) before the the amounts to be sold by them that was pursuant to Rule 409 (§ 230.409). In
Instruction 1; previously omitted from the registration addition, a form of prospectus filed as
■ e. Remove Instruction 2; statement and the prospectus in reliance part of an automatic shelf registration
■ f. Revise the heading to ‘‘Instruction 1’’ upon Rule 430B (§ 230.430B) shall be statement for offerings pursuant to Rule
to read ‘‘Instruction;’’ and filed with the Commission no later than 415(a) (§ 230.415(a)), other than Rule
■ g. Add paragraph (g). the second business day following the 415(a)(1)(vii) or (viii), also may omit
The additions and revisions read as earlier of the date of sale or the date of information as to whether the offering is
follows: first use or transmitted by a means a primary offering or an offering on
reasonably calculated to result in filing behalf of persons other than the issuer,
§ 230.424 Filing of prospectuses, number with the Commission by that date. or a combination thereof, the plan of
of copies. (8) A form of prospectus otherwise distribution for the securities, a
* * * * * required to be filed pursuant to description of the securities registered
(b) Ten copies of each form of paragraph (b) of this section that is not other than an identification of the name
prospectus purporting to comply with filed within the time frames specified in or class of such securities, and the
section 10 of the Act, except for paragraph (b) of this section must be identification of other issuers. Each
documents constituting a prospectus filed pursuant to this paragraph as soon such form of prospectus shall be
pursuant to Rule 428(a) (§ 230.428(a)) or as practicable after the discovery of such deemed to have been filed as part of the
free writing prospectuses pursuant to failure to file. registration statement for the purpose of
Rule 164 and Rule 433 (§ 230.164 and section 7 of the Act.
§ 230.433), shall be filed with the Note to paragraph (b)(8) of Rule 424. A
form of prospectus required to be filed (b) A form of prospectus filed as part
Commission in the form in which it is pursuant to another paragraph of Rule 424(b) of a registration statement for offerings
used after the effectiveness of the that is filed under Rule 424(b)(8) shall pursuant to Rule 415(a)(1)(i) by an
registration statement and identified as nonetheless be ‘‘required to be filed’’ under issuer eligible to use Form S–3 or Form
required by paragraph (e) of this section; such other paragraph. F–3 (§ 239.13 or § 239.33 of this chapter)
provided, however, that only a form of for primary offerings pursuant to
prospectus that contains substantive * * * * *
(g) A form of prospectus filed General Instruction I.B.1 of such forms,
changes from or additions to a may omit the information specified in
previously filed prospectus is required pursuant to this section that operates to
reflect the payment of filing fees for an paragraph (a) of this section, and may
to be filed; Provided, further, that this also omit the identities of selling
paragraph (b) shall not apply in respect offering or offerings pursuant to Rule
456(b) (§ 230.456(b)) must include on its security holders and amounts of
of a form of prospectus contained in a securities to be registered on their behalf
registration statement and relating cover page the calculation of registration
fee table reflecting the payment of such if:
solely to securities offered at (1) The registration statement is an
competitive bidding, which prospectus filing fees for the securities that are the
subject of the payment. automatic shelf registration statement as
is intended for use prior to the opening defined in Rule 405 (§ 230.405); or
■ 33. Amend § 230.426 by adding
of bids. Ten copies of the form of (2) All of the following conditions are
prospectus shall be filed or transmitted paragraph (c)(8) to read as follows:
satisfied:
for filing as follows: § 230.426 Filing of certain prospectuses (i) The initial offering transaction of
* * * * * under § 230.167 in connection with certain the securities (or securities convertible
(2) A form of prospectus that is used offerings of asset-backed securities. into such securities) the resale of which
in connection with a primary offering of * * * * * are being registered on behalf of each of
securities pursuant to Rule 415(a)(1)(x) (c) * * * the selling security holders, was
(§ 230.415(a)(1)(x)) or a primary offering (8) Any free writing prospectus used completed;
of securities registered for issuance on a in reliance on Rule 164 and Rule 433 (ii) The securities (or securities
delayed basis pursuant to Rule (§ 230.164 and § 230.433). convertible into such securities) were
415(a)(1)(vii) or (viii) * * * * * issued and outstanding prior to the
(§ 230.415(a)(1)(vii) or (viii)) and that, in ■ 34. Amend § 230.430A to add original date of filing the registration
the case of Rule 415(a)(1)(viii) discloses paragraph (f) immediately preceding the statement covering the resale of the
the public offering price, description of note to read as follows: securities;
securities or similar matters, and in the (iii) The registration statement refers
§ 230.430A Prospectus in a registration
case of Rule 415(a)(1)(vii) and (x) to any unnamed selling security holders
statement at the time of effectiveness.
discloses information previously in a generic manner by identifying the
omitted from the prospectus filed as * * * * * initial offering transaction in which the
part of an effective registration (f) This section may apply to
securities were sold; and
statement in reliance on Rule 430B registration statements that are
(iv) The issuer is not and during the
(§ 230.430B), shall be filed with the immediately effective pursuant to Rule
past three years neither the issuer nor
Commission no later than the second 462(e) and (f) (§ 230.462(e) and (f)).
■ 35. Add § 230.430B to read as follows:
any of its predecessors was:
business day following the earlier of the (A) A blank check company as
date of the determination of the offering § 230.430B Prospectus in a registration defined in Rule 419(a)(2)
price or the date it is first used after statement after effective date. (§ 230.419(a)(2));
effectiveness in connection with a (a) A form of prospectus filed as part (B) A shell company, other than a
public offering or sales, or transmitted of a registration statement for offerings business combination related shell
by a means reasonably calculated to pursuant to Rule 415(a)(1)(vii) or company, each as defined in Rule 405;
result in filing with the Commission by (a)(1)(x) (§ 230.415(a)(1)(vii) or (a)(1)(x)) or
that date. may omit from the information required (C) An issuer in an offering of penny
* * * * * by the form to be in the prospectus stock as defined in Rule 3a51–1 of the
Securities Exchange Act of 1934 pursuant to paragraph (f)(1) of this for such a report or document
(§ 240.3a51–1 of this chapter). section shall be deemed, for purposes of incorporated by reference for purposes
(c) A form of prospectus that is part liability under section 11 of the Act of of including information required by
of a registration statement that omits the issuer and any underwriter at the section 10(a)(3) of the Act or pursuant
information in reliance upon paragraph time only, to be a new effective date of to Item 512(a)(1)(ii) of Regulation S–K or
(a) or (b) of this section meets the the part of such registration statement Regulation S–B (such person except for
requirements of section 10 of the Act for relating to the securities to which such such reports being deemed not to be a
the purpose of section 5(b)(1) thereof. form of prospectus relates, such part of person who signed the registration
This provision shall not limit the the registration statement consisting of statement within the meaning of section
information required to be contained in all information included in the 11(a) of the Act).
a form of prospectus in order to meet registration statement and any (5) The date a form of prospectus is
the requirements of section 10(a) of the prospectus relating to the offering of deemed part of and included in the
Act for the purposes of section 5(b)(2) such securities (including information registration statement pursuant to
thereof or exception (a) of section relating to the offering in a prospectus paragraph (f)(2) of this section shall not
2(a)(10) thereof. already included in the registration be an effective date established pursuant
(d) Information omitted from a form of statement) as of such date and all to paragraph (f)(2) of this section as to:
prospectus that is part of an effective information relating to the offering (i) Any accountant with respect to
registration statement in reliance on included in reports and materials financial statements or other financial
paragraph (a) or (b) of this section may incorporated by reference into such information contained in the
be included subsequently in the registration statement and prospectus as registration statement as of a prior
prospectus that is part of a registration of such date, and in each case not effective date and for which the
statement by: modified or superseded pursuant to accountant previously provided a
(1) A post-effective amendment to the Rule 412 (§ 230.412). The offering of consent to be named as required by
registration statement; such securities at that time shall be section 7 of the Act, unless the form of
(2) A prospectus filed pursuant to deemed to be the initial bona fide prospectus contains new audited
Rule 424(b) (§ 230.424(b)); or offering thereof. financial statements or other financial
(3) If the applicable form permits, (3) If a registration statement is information as to which the accountant
including the information in the issuer’s amended to include or is deemed to is an expert and for which a new
periodic or current reports filed include, through incorporation by consent is required pursuant to section
pursuant to section 13 or 15(d) of the reference or otherwise, except as 7 of the Act or Rule 436; and
Securities Exchange Act of 1934 (15 otherwise provided in Rule 436 (ii) Any other person whose report or
U.S.C. 78m or 78o(d)) that are (§ 230.436), a report or opinion of any opinion as an expert or counsel has,
incorporated or deemed incorporated by person made on such person’s authority with their consent, previously been
reference into the prospectus that is part as an expert whose consent would be included in the registration statement as
of the registration statement in required under section 7 of the Act of a prior effective date, unless the form
accordance with applicable because of being named as having of prospectus contains a new report or
requirements, subject to the provisions prepared or certified part of the opinion for which a new consent is
of paragraph (h) of this section. registration statement, then for purposes required pursuant to section 7 of the Act
(e) Information omitted from a form of of this section and for liability purposes or Rule 436.
prospectus that is part of an effective under section 11 of the Act, the part of (g) Notwithstanding paragraph (e) or
registration statement in reliance on the registration statement for which (f) of this section or paragraph (a) of
paragraph (a) or (b) of this section and liability against such person is asserted Rule 412, no statement made in a
contained in a form of prospectus shall be considered as having become registration statement or prospectus that
required to be filed with the effective with respect to such person as is part of the registration statement or
Commission pursuant to Rule 424(b), of the time the report or opinion is made in a document incorporated or
other than as provided in paragraph (f) deemed to be part of the registration deemed incorporated by reference into
of this section, shall be deemed part of statement and a consent required the registration statement or prospectus
and included in the registration pursuant to section 7 of the Act has that is part of the registration statement
statement as of the date such form of been provided as contemplated by after the effective date of such
filed prospectus is first used after section 11 of the Act. registration statement or portion thereof
effectiveness. (4) Except for an effective date in respect of an offering determined
(f)(1) Information omitted from a form resulting from the filing of a form of pursuant to this section will, as to a
of prospectus that is part of an effective prospectus filed for purposes of purchaser with a time of contract of sale
registration statement in reliance on including information required by prior to such effective date, supersede or
paragraph (a) or (b) of this section and section 10(a)(3) of the Act or pursuant modify any statement that was made in
is contained in a form of prospectus to Item 512(a)(1)(ii) of Regulation S–K or the registration statement or prospectus
required to be filed with the Regulation S–B (§ 229.512(a)(1)(ii) or that was part of the registration
Commission pursuant to Rule 424(b)(2), § 228.512(a)(1)(ii) of this chapter), the statement or made in any such
(b)(5), or (b)(7), shall be deemed to be date a form of prospectus is deemed part document immediately prior to such
part of and included in the registration of and included in the registration effective date.
statement on the earlier of the date such statement pursuant to this paragraph (h) Where a form of prospectus filed
subsequent form of prospectus is first shall not be an effective date established pursuant to Rule 424(b) relating to an
used or the date and time of the first pursuant to paragraph (f)(2) of this offering does not include disclosure of
contract of sale of securities in the section as to: omitted information regarding the terms
offering to which such subsequent form (i) Any director (or person acting in of the offering, the securities, or the plan
of prospectus relates. such capacity) of the issuer; of distribution, or selling security
(2) The date on which a form of (ii) Any person signing any report or holders for the securities that are the
prospectus is deemed to be part of and document incorporated by reference subject of the form of prospectus,
included in the registration statement into the registration statement, except because such omitted information has
been included in periodic or current Regulation S–B (§ 229.512(a) and (g) of (2) Eligibility and prospectus
reports filed pursuant to section 13 or this chapter), or Item 34.4 of Form N– conditions for non-reporting and
15(d) of the Securities Exchange Act of 2 (§§ 239.14 and 274.11a–1 of this unseasoned issuers. If the issuer does
1934 incorporated or deemed chapter), as applicable. not fall within the provisions of
incorporated by reference into the ■ 37. Add § 230.433 to read as follows: paragraph (b)(1) of this section, then,
prospectus, the issuer shall file a form subject to the provisions of Rule 164(e),
of prospectus identifying the periodic or § 230.433 Conditions to permissible post- (f), and (g), any person participating in
filing free writing prospectuses. the offer or sale of the securities may
current reports that are incorporated or
deemed incorporated by reference into (a) Scope of section. This section use a free writing prospectus as follows:
the prospectus that is part of the applies to any free writing prospectus (i) If the free writing prospectus is or
registration statement that contain such with respect to securities of any issuer was prepared by or on behalf of or used
omitted information. Such form of (except as set forth in Rule 164 or referred to by an issuer or any other
prospectus shall be required to be filed, (§ 230.164)) that are the subject of a offering participant, if consideration has
depending on the nature of the registration statement that has been filed been or will be given by the issuer or
incorporated information, pursuant to under the Act. Such a free writing other offering participant for the
Rule 424(b)(2), (b)(5), or (b)(7). prospectus that satisfies the conditions dissemination (in any format) of any
(i) Issuers relying on this section shall of this section may include information free writing prospectus (including any
furnish the undertakings required by the substance of which is not included published article, publication, or
Item 512(a) of Regulation S–K or Item in the registration statement. Such a free advertisement), or if section 17(b) of the
512(a) or (g) of Regulation S–B. writing prospectus that satisfies the Act requires disclosure that
Note to Rule 430B: The provisions of conditions of this section will be a consideration has been or will be given
paragraph (b) of Rule 401 (§ 230.401(b)) shall prospectus permitted under section by the issuer or other offering
apply to any prospectus filed for purposes of 10(b) of the Act for purposes of sections participant for any activity described
including information required by section 2(a)(10), 5(b)(1), and 5(b)(2) of the Act therein in connection with the free
10(a)(3) of the Act. and will, for purposes of considering it writing prospectus, then a registration
■ 36. Add § 230.430C to read as follows: a prospectus, be deemed to be public, statement relating to the offering must
without regard to its method of use or have been filed that includes a
§ 230.430C Prospectus in a registration distribution, because it is related to the prospectus that, other than by reason of
statement pertaining to an offering other public offering of securities that are the this section or Rule 431, satisfies the
than pursuant to Rule 430A or Rule 430B requirements of section 10 of the Act,
subject of a filed registration statement.
after the effective date.
(b) Permitted use of free writing including a price range where required
(a) In offerings made other than in by rule, and the free writing prospectus
prospectus. Subject to the conditions of
reliance on Rule 430B (§ 230.430B) and shall be accompanied or preceded by
this paragraph (b) and satisfaction of the
other than for prospectuses filed in the most recent such prospectus;
conditions set forth in paragraphs (c)
reliance on Rule 430A (§ 230.430A), provided, however, that use of the free
through (g) of this section, a free writing
information contained in a form of writing prospectus is not conditioned
prospectus may be used under this
prospectus required to be filed with the on providing the most recent such
section and Rule 164 in connection with
Commission pursuant to Rule 424(b) prospectus if a prior such prospectus
a registered offering of securities:
(§ 230.424(b)) or Rule 497(b), (c), (d), or has been provided and there is no
(1) Eligibility and prospectus
(e) (§ 230.497(b), (c), (d) or (e)), shall be material change from the prior
conditions for seasoned issuers and
deemed to be part of and included in prospectus reflected in the most recent
well-known seasoned issuers. Subject to
the registration statement on the date it prospectus; provided further, that after
the provisions of Rule 164(e), (f), and
is first used after effectiveness. effectiveness and availability of a final
(b) Notwithstanding paragraph (a) of (g), the issuer or any other offering
participant may use a free writing prospectus meeting the requirements of
this section or paragraph (a) of Rule 412 section 10(a) of the Act, no such earlier
(§ 230.412), no statement made in a prospectus in the following offerings
after a registration statement relating to prospectus may be provided in
registration statement or prospectus that satisfaction of this condition, and such
is part of the registration statement or the offering has been filed that includes
a prospectus that, other than by reason final prospectus must precede or
made in a document incorporated or accompany any free writing prospectus
deemed incorporated by reference into of this section or Rule 431, satisfies the
requirements of section 10 of the Act: provided after such availability,
the registration statement or prospectus whether or not an earlier prospectus had
that is part of the registration statement (i) Offerings of securities registered on
Form S–3 (§ 239.33 of this chapter) been previously provided.
will, as to a purchaser with a time of
contract of sale prior to such first use, pursuant to General Instruction I.B.1, Notes to paragraph (b)(2)(i) of Rule 433.
supersede or modify any statement that I.B.2, I.B.5, I.C., or I.D. thereof; 1. The condition that a free writing
was made in the registration statement (ii) Offerings of securities registered prospectus shall be accompanied or preceded
on Form F–3 (§ 239.13 of this chapter) by the most recent prospectus satisfying the
or prospectus that was part of the requirements of section 10 of the Act would
registration statement or made in any pursuant to General Instruction I.A.5,
be satisfied if a free writing prospectus that
such document immediately prior to I.B.1, I.B.2, or I.C. thereof; is an electronic communication contained an
such date of first use. (iii) Any other offering not excluded active hyperlink to such most recent
(c) Nothing in this section shall affect from reliance on this section and Rule prospectus; and
the information required to be included 164 of securities of a well-known 2. A communication for which disclosure
in an issuer’s registration statement and seasoned issuer; and would be required under section 17(b) of the
prospectus. (iv) Any other offering not excluded Act as a result of consideration given or to
(d) Issuers subject to paragraph (a) of from reliance on this section and Rule be given, directly or indirectly, by or on
behalf of an issuer or other offering
this section shall furnish the 164 of securities of an issuer eligible to participant is an offer by the issuer or such
undertakings required by Item 512(a) of use Form S–3 or Form F–3 for primary other offering participant as the case may be
Regulation S–K (§ 229.512(a) of this offerings pursuant to General and is, if written, a free writing prospectus
chapter), Item 512(a) and (g) of Instruction I.B.1 of such Forms. of the issuer or other offering participant.
(ii) Where paragraph (b)(2)(i) of this the documents also are available by (5) Notwithstanding the provisions of
section does not apply, a registration accessing the issuer’s Web site and paragraph (d)(1) of this section:
statement relating to the offering has provide the Internet address and the (i) To the extent a free writing
been filed that includes a prospectus particular location of the documents on prospectus or portion thereof otherwise
that, other than by reason of this section the Web site. required to be filed contains a
or Rule 431 satisfies the requirements of (d) Filing conditions. (1) Except as description of terms of the issuer’s
section 10 of the Act, including a price provided in paragraphs (d)(3), (d)(4), securities in the offering or of the
range where required by rule. (d)(5), (d)(6), (d)(7), (d)(8), and (f) of this offering that does not reflect the final
(3) Successors. A successor issuer will section, the following shall be filed with terms, such free writing prospectus or
be considered to satisfy the applicable the Commission under this section by a portion thereof is not required to be
provisions of this paragraph (b) if: means reasonably calculated to result in filed; and
(i) Its predecessor and it, taken filing no later than the date of first use. (ii) A free writing prospectus or
together, satisfy the conditions, The free writing prospectus filed for portion thereof that contains only a
provided that the succession was purposes of this section will not be filed description of the final terms of the
primarily for the purpose of changing as part of the registration statement: issuer’s securities in the offering or of
the state or other jurisdiction of (i) The issuer shall file: the offerings shall be filed by the issuer
incorporation of the predecessor or (A) Any issuer free writing within two days of the later of the date
forming a holding company and the prospectus, as defined in paragraph (h) such final terms have been established
assets and liabilities of the successor at of this section; for all classes of the offering and the
the time of succession were (B) Any issuer information that is date of first use.
substantially the same as those of the (6)(i) Notwithstanding the provisions
contained in a free writing prospectus
predecessor; or of paragraph (d) of this section, in an
prepared by or on behalf of or used by
(ii) All predecessors met the offering of asset-backed securities, a free
any other offering participant (but not
conditions at the time of succession and writing prospectus or portion thereof
information prepared by or on behalf of required to be filed that contains only
the issuer has continued to do so since a person other than the issuer on the
the succession. ABS informational and computational
basis of or derived from that issuer materials as defined in Item 1101(a) of
(c) Information in a free writing information); and
prospectus. (1) A free writing Regulation AB (§ 229.1101 of this
(C) A description of the final terms of chapter), may be filed under this section
prospectus used in reliance on this the issuer’s securities in the offering or
section may include information the within the timeframe permitted by Rule
of the offering contained in a free 426(b) (§ 230.426(b)) and such filing will
substance of which is not included in writing prospectus or portion thereof
the registration statement but such satisfy the filing conditions under this
prepared by or on behalf of the issuer section.
information shall not conflict with: or any offering participant, after such
(i) Information contained in the filed (ii) In the event that a free writing
terms have been established for all prospectus is used in reliance on this
registration statement, including any
classes in the offering; and section and Rule 164 and the conditions
prospectus or prospectus supplement
(ii) Any offering participant, other of this section and Rule 164 (which may
that is part of the registration statement
than the issuer, shall file any free include the conditions of paragraph
(including pursuant to Rule 430B or
writing prospectus that is used or (d)(6)(i) of this section) are satisfied
Rule 430C) (§ 230.430B or § 230.430C)
referred to by such offering participant with respect thereto, then the use of that
and not superseded or modified; or
(ii) Information contained in the and distributed by or on behalf of such free writing prospectus shall not be
issuer’s periodic and current reports person in a manner reasonably designed conditioned on satisfaction of the
filed or furnished to the Commission to lead to its broad unrestricted provisions, including without limitation
pursuant to section 13 or 15(d) of the dissemination. the filing conditions, of Rule 167 and
Securities Exchange Act of 1934 (15 (2) Each free writing prospectus or Rule 426 (§ 230.167 and § 230.426). In
U.S.C. 78m or 78o(d)) that are issuer information contained in a free the event that ABS informational and
incorporated by reference into the writing prospectus filed under this computational materials are used in
registration statement and not section shall identify in the filing the reliance on Rule 167 and Rule 426 and
superseded or modified. Commission file number for the related the conditions of those rules are
(2)(i) A free writing prospectus used registration statement or, if that file satisfied with respect thereto, then the
in reliance on this section shall contain number is unknown, a description use of those materials shall not be
substantially the following legend: sufficient to identify the related conditioned on the satisfaction of the
registration statement. conditions of Rule 164 and this section.
The issuer has filed a registration statement (3) The condition to file a free writing (iii) If a free writing prospectus used
(including a prospectus) with the SEC for the prospectus under paragraph (d)(1) of in an offering of asset-backed securities
offering to which this communication relates. this section shall not apply if the free in reliance on this section and Rule 164
Before you invest, you should read the writing prospectus does not contain includes the specific address of or a
prospectus in that registration statement and
substantive changes from or additions to hyperlink to an Internet Web site
other documents the issuer has filed with the
SEC for more complete information about the a free writing prospectus previously containing static pool information and
issuer and this offering. You may get these filed with the Commission. is filed in accordance with this
documents for free by visiting EDGAR on the (4) The condition to file issuer paragraph (d), the static pool
SEC Web site at www.sec.gov. Alternatively, information contained in a free writing information relating to the asset-backed
the issuer, any underwriter or any dealer prospectus of an offering participant securities offering at that specific
participating in the offering will arrange to other than the issuer shall not apply if address is included in the free writing
send you the prospectus if you request it by such information is included (including prospectus, and the filing including
calling toll-free 1–8[xx–xxx–xxxx]. through incorporation by reference) in a such address or hyperlink satisfies the
(ii) The legend also may provide an e- prospectus or free writing prospectus filing conditions under this section.
mail address at which the documents previously filed that relates to the (7) The condition to file a free writing
can be requested and may indicate that offering. prospectus or issuer information
pursuant to this paragraph (d) for a free show, will be a free writing prospectus (2) The filing obligation under
writing prospectus used at the same subject to any applicable filing conditions of paragraph (f)(1)(ii) of this section shall
time as a communication in a business paragraph (d) of this section. be subject to the following:
combination transaction subject to Rule (e) Treatment of information on, or (i) The issuer or other offering
425 (§ 230.425) shall be satisfied if: hyperlinked from, an issuer’s Web site. participant shall not be required to file
(i) The free writing prospectus or (1) An offer of an issuer’s securities a free writing prospectus if the
issuer information is filed in accordance that is contained on an issuer’s Web site substance of that free writing prospectus
with the provisions of Rule 425, or hyperlinked by the issuer from the has previously been filed with the
including the filing timeframe of Rule issuer’s Web site to a third party’s Web Commission;
425; site is a written offer of such securities (ii) Any filing made pursuant to
(ii) The filed material pursuant to by the issuer and, unless otherwise paragraph (f)(1)(ii) of this section may
Rule 425 indicates on the cover page exempt or excluded from the include information that the issuer or
that it also is being filed pursuant to requirements of section 5(b)(1) of the offering participant in question
Rule 433; and Act, the filing conditions of paragraph reasonably believes is necessary or
(iii) The filed material pursuant to (d) of this section apply to such offer. appropriate to correct information
Rule 425 contains the information (2) Notwithstanding paragraph (e)(1) included in the communication; and
specified in paragraph (c)(2) of this of this section, historical issuer (iii) In lieu of filing the actual written
section. information that is identified as such communication as published or
(8) Notwithstanding any other and located in a separate section of the disseminated as required by paragraph
provision of this paragraph (d): issuer’s Web site containing historical (f)(1)(ii) of this section, the issuer or
(i) A road show for an offering that is issuer information, that has not been offering participant in question may file
a written communication is a free incorporated by reference into or a copy of the materials provided to the
writing prospectus, provided that, otherwise included in a prospectus of media, including transcripts of
except as provided in paragraph the issuer for the offering and that has interviews or similar materials,
(d)(8)(ii) of this section, a written not otherwise been used or referred to provided the copy or transcripts contain
communication that is a road show shall in connection with the offering, will not all the information provided to the
not be required to be filed; and be considered a current offer of the media.
(ii) In the case of a road show that is issuer’s securities and therefore will not (3) For purposes of this paragraph (f)
a written communication for an offering be a free writing prospectus. of this section, an issuer that is in the
of common equity or convertible equity (f) Free writing prospectuses business of publishing or radio or
securities by an issuer that is, at the published or distributed by media. Any television broadcasting may rely on this
time of the filing of the registration written offer for which an issuer or any paragraph (f) as to any publication or
statement for the offering, not required other offering participant or any person radio or television broadcast that is a
to file reports with the Commission acting on its behalf provided, free writing prospectus in respect of an
pursuant to section 13 or section 15(d) authorized, or approved information offering of securities of the issuer if the
of the Securities Exchange Act of 1934, that is prepared and published or issuer or an affiliate:
such a road show is required to be filed disseminated by a person unaffiliated (i) Is the publisher of a bona fide
pursuant to this section unless the with the issuer or any other offering newspaper, magazine, or business or
issuer of the securities makes at least participant that is in the business of financial publication of general and
one version of a bona fide electronic publishing, radio or television regular circulation or bona fide
road show available without restriction broadcasting or otherwise disseminating broadcaster of news including business
by means of graphic communication to written communications would be and financial news;
any person, including any potential considered at the time of publication or (ii) Has established policies and
investor in the securities (and if there is dissemination to be a free writing procedures for the independence of the
more than one version of a road show prospectus prepared by or on behalf of content of the publications or broadcasts
for the offering that is a written the issuer or such other offering from the offering activities of the issuer;
communication, the version available participant for purposes of this section and
without restriction is made available no subject to the following: (iii) Publishes or broadcasts the
later than the other versions). (1) The conditions of paragraph communication in the ordinary course.
(b)(2)(i) of this section will not apply (g) Record retention. Issuers and
Note to paragraph (d)(8): A and the conditions of paragraphs (c)(2) offering participants shall retain all free
communication that is provided or and (d) of this section will be deemed writing prospectuses they have used,
transmitted simultaneously with a road show to be satisfied if: and that have not been filed pursuant to
and is provided or transmitted in a manner (i) No payment is made or paragraph (d) or (f) of this section, for
designed to make the communication
consideration given by or on behalf of 3 years following the initial bona fide
available only as part of the road show and
not separately is deemed to be part of the the issuer or other offering participant offering of the securities in question.
road show. Therefore, if the road show is not for the written communication or its Note to paragraph (g) of § 230.433. To the
a written communication, such a dissemination; and extent that the record retention requirements
simultaneous communication (even if it (ii) The issuer or other offering of Rule 17a–4 of the Securities Exchange Act
would otherwise be a graphic participant in question files the written of 1934 (§ 240.17a–4 of this chapter) apply to
communication or other written communication with the Commission, free writing prospectuses required to be
communication) is also deemed not to be and includes in the filing the legend retained by a broker-dealer under this
written. If the road show is written and not required by paragraph (c)(2) of this section, such free writing prospectuses are
required to be filed, such a simultaneous section, within four business days after required to be retained in accordance with
communication is also not required to be such requirements.
filed. Otherwise, a written communication
the issuer or other offering participant
that is an offer contained in a separate file becomes aware of the publication, radio (h) Definitions. For purposes of this
from a road show, whether or not the road or television broadcast, or other section:
show is a written communication, or dissemination of the written (1) An issuer free writing prospectus
otherwise transmitted separately from a road communication. means a free writing prospectus
prepared by or on behalf of the issuer § 230.434 [Removed] registration fee paid or to be paid in
or used or referred to by the issuer and, ■ 38. Remove § 230.434. connection with the offering or offerings
in the case of an asset-backed issuer, ■ 39. Amend § 230.439 by revising either in a post-effective amendment
prepared by or on behalf of a depositor, paragraph (b) to read as follows: filed at the time of the fee payment or
sponsor, or servicer (as defined in Item on the cover page of a prospectus filed
1101 of Regulation AB) or affiliated § 230.439 Consent to use of material pursuant to Rule 424(b) (§ 230.424(b)).
incorporated by reference.
depositor or used or referred to by any (2) A registration statement filed
such person. * * * * * relying on the pay-as-you-go registration
(b) Notwithstanding paragraph (a) of fee payment provisions of paragraph
(2) Issuer information means material this section, any required consent may
information about the issuer or its (b)(1) of this section will be considered
be incorporated by reference into a filed as to the securities or classes of
securities that has been provided by or registration statement filed pursuant to
on behalf of the issuer. securities identified in the registration
Rule 462(b) (§ 230.462(b)) or a post- statement for purposes of this section
(3) A written communication or effective amendment filed pursuant to and section 5 of the Act when it is
information is prepared or provided by Rule 462(e) (§ 230.462(e)) from a received by the Commission, if it
or on behalf of a person if the person or previously filed registration statement complies with all other requirements of
an agent or representative of the person relating to that offering, provided that the Act and the rules with respect to it.
authorizes the communication or the consent contained in the previously (3) The securities sold pursuant to a
information or approves the filed registration statement expressly registration statement will be
communication or information before it provides for such incorporation. considered registered, for purposes of
is used. An offering participant other ■ 40. Amend § 230.456 as follows: section 6(a) of the Act, if the pay-as-you-
than the issuer shall not be an agent or ■ a. Revise the section heading; go registration fee has been paid and the
representative of the issuer solely by ■ b. Designate the current text as post-effective amendment or prospectus
virtue of its acting as an offering paragraph (a); and including the amended ‘‘Calculation of
participant. ■ c. Add paragraph (b). Registration Fee’’ table is filed pursuant
(4) A road show means an offer (other The revisions and additions read as to paragraph (b)(1) of this section.
than a statutory prospectus or a portion follows: ■ 41. Amend § 230.457 by adding
of a statutory prospectus filed as part of § 230.456 Date of filing; timing of fee paragraph (r) to read as follows:
a registration statement) that contains a payment.
presentation regarding an offering by § 230.457 Computation of fee.
* * * * * * * * * *
one or more members of the issuer’s (b)(1) Notwithstanding paragraph (a)
management (and in the case of an (r) Where securities are to be offered
of this section, a well-known seasoned pursuant to an automatic shelf
offering of asset-backed securities, issuer that registers securities offerings
management involved in the registration statement, the registration
on an automatic shelf registration fee is to be calculated in accordance
securitization or servicing function of statement, or registers additional
one or more of the depositors, sponsors, with this section. When the issuer elects
securities or classes of securities thereon to defer payment of the fees pursuant to
or servicers (as such terms are defined pursuant to Rule 413(b) (§ 230.413(b)),
in Item 1101 of Regulation AB) or an Rule 456(b) (§ 230.456(b)), the
may, but is not required to, defer ‘‘Calculation of Registration Fee’’ table
affiliated depositor) and includes payment of all or any part of the
discussion of one or more of the issuer, in the registration statement must
registration fee to the Commission indicate that the issuer is relying on
such management, and the securities required by section 6(b)(2) of the Act on
being offered; and Rule 456(b) but does not need to include
the following conditions: the number of shares or units of
(5) A bona fide electronic road show (i) If the issuer elects to defer payment
means a road show that is a written securities or the maximum aggregate
of the registration fee, it shall pay the offering price of any securities until the
communication transmitted by graphic registration fees (pay-as-you-go
means that contains a presentation by issuer updates the ‘‘Calculation of
registration fees) calculated in Registration Fee’’ table to reflect
one or more officers of an issuer or other accordance with Rule 457(r)
persons in an issuer’s management (and payment of the registration fee,
(§ 230.457(r)) in advance of or in including a pay-as-you-go registration
in the case of an offering of asset-backed connection with an offering of securities
securities, management involved in the fee in accordance with Rule 456(b). The
from the registration statement within registration fee shall be calculated based
securitization or servicing function of the time required to file the prospectus
one or more of the depositors, sponsors, on the fee payment rate in effect on the
supplement pursuant to Rule 424(b) date of the fee payment.
or servicers (as such terms are defined (§ 230.424(b)) for the offering, provided, ■ 42. Amend § 230.462 by adding
in Item 1101 of Regulation AB) or an however, that if the issuer fails, after a paragraphs (e) and (f) to read as follows:
affiliated depositor) and, if more than good faith effort to pay the filing fee
one road show that is a written within the time required by this section, § 230.462 Immediate effectiveness of
communication is being used, includes the issuer may still be considered to certain registration statements and post-
discussion of the same general areas of have paid the fee in a timely manner if effective amendments
information regarding the issuer, such it is paid within four business days of * * * * *
management, and the securities being its original due date; and (e) An automatic shelf registration
offered as such other issuer road show (ii) The issuer reflects the amount of statement, including an automatic shelf
or shows for the same offering that are the pay-as-you-go registration fee paid registration statement filed in
written communications. or to be paid in accordance with accordance with Rule 415(a)(6)
Note to § 230.433. This section does not
paragraph (b)(1)(i) of this section by (§ 230.415(a)(6)), and any post-effective
affect the operation of the provisions of updating the ‘‘Calculation of amendment thereto, including a post-
clause (a) of section 2(a)(10) of the Act Registration Fee’’ table to indicate the effective amendment filed to register
providing an exception from the definition of class and aggregate offering price of additional classes of securities pursuant
‘‘prospectus.’’ securities offered and the amount of to Rule 413(b) (§ 230.413(b)), shall
become effective upon filing with the (4) Notwithstanding paragraph (h)(1) such shorter period that the registrant was
Commission. of this section, publication or required to file such reports and materials).
(f) A post-effective amendment filed distribution of a research report in C. The registrant has filed an annual report
required under Section 13(a) or Section 15(d)
pursuant to paragraph (e) of this section accordance with Rule 138(c)
of the Exchange Act for its most recently
for purposes of adding a new issuer and (§ 230.138(c)) or Rule 139(b) completed fiscal year.
its securities as permitted by Rule (§ 230.139(b)) by a broker or dealer at or D. The registrant is not:
413(b) (§ 230.413(b)) that satisfies the around the time of an offering in 1. And during the past three years neither
requirements of Form S–3 or Form F–3 reliance on Regulation S (§§ 230.901 the registrant nor any of its predecessors was:
(§ 239.13 or § 239.33 of this chapter), as through 230.905) will not cause the (a) A blank check company as defined in
applicable, including the signatures transaction to fail to be an offshore Rule 419(a)(2) (§ 230.419)(a)(2);
required by Rule 402(e) (§ 230.402(e)), transaction as defined in this section. (b) A shell company, other than a business
and contains a prospectus satisfying the combination related shell company, each as
* * * * * defined in Rule 405 (§ 230.405); or
requirements of Rule 430B (§ 230.430B), (c) A registrant for an offering of penny
shall become effective upon filing with PART 239—FORMS PRESCRIBED stock as defined in Rule 3a51–1 of the
the Commission. UNDER THE SECURITIES ACT OF 1933 Exchange Act (§ 240.3a51–1 of this chapter).
■ 43. Amend § 230.473 by revising 2. Registering an offering that effectuates a
paragraph (d) to read as follows: ■ 46. The general authority citation for business combination transaction as defined
part 239 is revised to read as follows: in Rule 165(f)(1) (§ 230.165(f)(1) of this
§ 230.473 Delaying amendments. Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, chapter).
* * * * * 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n, E. If a registrant is a successor registrant it
(d) No amendments pursuant to 78o(d), 78u–5, 78w(a), 78ll(d), 78mm, 79e, shall be deemed to have satisfied conditions,
paragraph (a) of this section may be 79f, 79g, 79j, 79l, 79m, 79n, 79q, 79t, 80a– A., B., C., and D.2 above if:
2(a), 80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 1. Its predecessor and it, taken together, do
filed with a registration statement on
80a–24, 80a–26, 80a–29, 80a–30, and 80a–37, so, provided that the succession was
Form F–7, F–8 or F–80 (§ 239.37, primarily for the purpose of changing the
unless otherwise noted.
§ 239.38 or § 239.41 of this chapter); on state of incorporation of the predecessor or
Form F–9 or F–10 (§ 239.39 or § 239.40 * * * * * forming a holding company and that the
of this chapter) relating to an offering § 239.11 [Amended] assets and liabilities of the successor at the
being made contemporaneously in the time of succession were substantially the
United States and the issuer’s home ■ 47. Remove the authority citation same as those of the predecessor; or
jurisdiction; on Form S–8 (§ 239.16b of following § 239.11. 2. All predecessors met the conditions at
■ 48. Amend Form S–1 (referenced in the time of succession and the registrant has
this chapter); on Form S–3 or F–3
(§ 239.13 or § 239.33 of this chapter) § 239.11) as follows: continued to do so since the succession.
■ a. Remove the sentence and check box F. The registrant makes its periodic and
relating to a dividend or interest current reports filed pursuant to Section 13
immediately preceding the ‘‘Calculation
reinvestment plan; on Form S–3 or or Section 15(d) of the Exchange Act that are
of Registration Fee’’ table;
Form F–3 relating to an automatic shelf incorporate by reference pursuant to Item
■ b. Add General Instruction VII.;
registration statement; or on Form S–4 11A or Item 12 of this Form readily available
■ c. Add Item 11A to Part I;
(§ 239.25 of this chapter) complying and accessible on a Web site maintained by
■ d. Redesignate Item 12 to Part I as Item
with General Instruction G of that Form. or for the registrant and containing
12A; and information about the registrant.
§ 230.497 [Amended] ■ e. Add new Item 12 to Part I.
* * * * *
■ 44. Amend § 230.497 as follows: The additions read as follows:
■ a. Remove paragraph (h)(2); and PART I—INFORMATION REQUIRED IN
Note: The text of Form S–1 does not and
PROSPECTUS
■ b. Redesignate paragraph (h)(1) as this amendment will not appear in the Code
paragraph (h). of Federal Regulations * * * * *
■ 45. Amend § 230.902 as follows: UNITED STATES SECURITIES AND Item 11A. Material Changes.
■ a. Remove the word ‘‘and’’ at the end EXCHANGE COMMISSION If the registrant elects to incorporate
of paragraph (c)(3)(v)(B); Washington, DC 20549 information by reference pursuant to General
■ b. Remove the period at the end of Instruction VII., describe any and all material
FORM S–1—REGISTRATION STATEMENT
paragraph (c)(3)(vi) and add in its place UNDER THE SECURITIES ACT OF 1933 changes in the registrant’s affairs which has
a semi-colon; occurred since the end of the latest fiscal year
■ c. Remove the period at the end of
* * * * * for which audited financial statements were
paragraph (c)(3)(vii) and add in its place GENERAL INSTRUCTIONS included in the latest Form 10–K for Form
‘‘; and’’; and * * * * * 10–KSB and which have not been described
■ d. Add paragraphs (c)(3)(viii) and in a Form 10–Q, Form 10–QSB, or Form 8–
VII. Eligibility To Use Incorporation by
(h)(4). K filed under the Exchange Act.
Reference
The amendments and additions read If a registrant meets the following Item 12. Incorporation of Certain
as follows: requirements immediately prior to the time Information by Reference.
of filing a registration statement on this If the registrant elects to incorporate
§ 230.902 Definitions.
Form, it may elect to provide information information by reference pursuant to General
* * * * * required by Items 3 through 11 of this Form Instruction VII.:
(c) Directed selling efforts. * * * in accordance with Item 11A and Item 12 of (a) It must specifically incorporate by
(3) * * * this Form: reference into the prospectus contained in
(viii) Publication or distribution of a A. The registrant is subject to the the registration statement the following
research report by a broker or dealer in requirement to file reports pursuant to documents by means of a statement to that
accordance with Rule 138(c) Section 13 or Section 15(d) of the Securities effect in the prospectus listing all such
Exchange Act of 1934 (‘‘Exchange Act’’). documents:
(§ 230.138(c)) or Rule 139(b)
B. The registrant has filed all reports and (1) The registrant’s latest annual report on
(§ 230.139(b)). other materials required to be filed by Form 10–K or Form 10–KSB filed pursuant
* * * * * Sections 13(a), 14, or 15(d) of the Exchange to Section 13(a) or Section 15(d) of the
(h) Offshore transaction.* * * Act during the preceding 12 months (or for Exchange Act which contains financial
statements for the registrant’s latest fiscal § 239.13 Form S–3, for registration under statement as are the guaranteed non-
year for which a Form 10–K for Form 10– the Securities Act of 1933 of securities of convertible securities.
KSB was required to have been filed; and certain issuers offered pursuant to certain
(2) All other reports filed pursuant to types of transactions. (d) Automatic shelf offerings by well-
Section 13(a) or 15(d) of the Exchange Act or known seasoned issuers. Any registrant
This instruction sets forth registrant
proxy or information statements filed that is a well-known seasoned issuer as
pursuant to Section 14 of the Exchange Act requirements and transaction
requirements for the use of Form S–3. defined in Rule 405 (§ 230.405 of this
since the end of the fiscal year covered by the
Any registrant which meets the chapter) at the most recent eligibility
annual report referred to in paragraph (a)(1)
above. requirements of paragraph (a) of this determination date specified in
Note to Item 12(a). Attention is directed to section (‘‘Registrant Requirements’’) paragraph (2) of that definition may use
Rule 439 (§ 230.439) regarding consent to use may use this Form for the registration of this Form for registration under the
of material incorporated by reference. securities under the Securities Act of Securities Act of securities offerings,
(b)(1) The registrant must state: 1933 (‘‘Securities Act’’) which are other than pursuant to Rule
(i) That it will provide to each person, offered in any transaction specified in 415(a)(1)(vii) or (viii)
including any beneficial owner, to whom a paragraph (b) of this section (§ 230.415(a)(1)(vii) or (viii) of this
prospectus is delivered, a copy of any or all (‘‘Transaction Requirement’’) provided chapter), as follows:
of the reports or documents that have been (1) The securities to be offered are:
incorporated by reference in the prospectus
that the requirement applicable to the
specified transaction are met. With (i) Any securities to be offered
contained in the registration statement but pursuant to Rule 415, Rule 430A, or
not delivered with the prospectus; respect to majority-owned subsidiaries,
see paragraph (c) of this section. With Rule 430B (§ 230.415, § 230.430A, or
(ii) That it will provide these reports or
documents upon written or oral request; respect to well-known seasoned issuers § 230.430B of this chapter) by:
(iii) That it will provide these reports or and majority-owned subsidiaries of (A) A registrant that is a well-known
documents at no cost to the requester; well-known seasoned issuers, see seasoned issuer by reason of paragraph
(iv) The name, address, telephone number, paragraph (d) of this section. (1)(i)(A) of the definition in Rule 405; or
and e-mail address, if any, to which the (B) A registrant that is a well-known
request for these reports or documents must * * * * * seasoned issuer only by reason of
be made; and (c) * * * paragraph (1)(i)(B) of the definition in
(v) The registrant’s Web site address, (3) The parent of the registrant- Rule 405 if the registrant also is eligible
including the uniform resource locator (URL) subsidiary meets the Registrant to register a primary offering of its
where the incorporated reports and other Requirements and the applicable securities pursuant to paragraph (b)(1)
documents may be accessed. Transaction Requirement, and provides of this section;
Note to Item 12(b)(1). If the registrant sends a full and unconditional guarantee, as (ii) Non-convertible securities, other
any of the information that is incorporated by defined in Rule 3–10 of Regulation S–
reference in the prospectus contained in the
than common equity, to be offered
X (§ 210.3–10 of this chapter), of the pursuant to Rule 415, Rule 430A, or
registration statement to security holders, it
also must send any exhibits that are payment obligations on the securities Rule 430B by a registrant that is a well-
specifically incorporated by reference in that being registered, and the securities known seasoned issuer only by reason
information. being registered are non-convertible of paragraph (1)(i)(B) of the definition in
(2) The registrant must: securities, other than common equity; Rule 405 and does not fall within
(i) Identify the reports and other (4) The parent of the registrant- paragraph (b)(1) of this section;
information that it files with the SEC; and subsidiary meets the Registrant (iii) Securities of majority-owned
(ii) State that the public may read and copy Requirements and the applicable subsidiaries of the parent registrant to
any materials it files with the SEC at the Transaction Requirement, and the be offered pursuant to Rule 415, Rule
SEC’s Public Reference Room at 100 F Street, securities of the registrant-subsidiary 430A, or Rule 430B if the parent
NE., Washington, DC 20549. State that the
being registered are full and registrant is a well-known seasoned
public may obtain information on the
operation of the Public Reference Room by unconditional guarantees, as defined in issuer and the securities of the majority-
calling the SEC at 1–800–SEC–0330. If the Rule 3–10 of Regulation S–X, of the owned subsidiary being registered meet
registrant is an electronic filer, state that the payment obligations on the parent’s the following requirements:
SEC maintains an Internet site that contains non-convertible securities, other than (A) Securities of a majority-owned
reports, proxy and information statements, common equity, being registered; or subsidiary that is a well-known
and other information regarding issuers that (5) The parent of the registrant- seasoned issuer at the time it becomes
file electronically with the SEC and state the subsidiary meets the Registrant a registrant, other than by virtue of
address of that site (http://www.sec.gov). Requirements and the applicable paragraph (1)(ii) of the definition of
* * * * * Transaction Requirement, and the well-known seasoned issuer in Rule
securities of the registrant-subsidiary 405;
§ 239.12 [Removed and reserved]
being registered are guarantees of the (B) Securities of a majority-owned
■ 49. Remove and reserve § 239.12 and subsidiary that are non-convertible
payment obligations on the non-
remove Form S–2 referenced in that securities, other than common equity,
convertible securities, other than
section. and the parent registration provides a
■ 50. Amend § 239.13 as follows:
common equity, being registered by
another majority-owned subsidiary of full and unconditional guarantee, as
■ a. Revise the introductory paragraph;
■ b. Remove the word ‘‘or’’ at the end of the parent, where the parent provides a defined in Rule 3–10 of Regulation S–
paragraph (c)(2); full and unconditional guarantee, as X, of the payment obligations on the
■ c. Revise paragraph (c)(3); defined in Rule 3–10 of Regulation S– non-convertible securities;
■ d. Add paragraphs (c)(4) and (c)(5); X, of such non-convertible securities. (C) Securities of a majority-owned
■ e. Add a note to paragraph (c); Note to paragraph (c): With regard to
subsidiary that are a guarantee of:
■ f. Redesignate paragraph (d) as paragraphs (c)(3), (c)(4), and (c)(5) of this (1) Non-convertible securities, other
paragraph (e); and section, the guarantor is the issuer of a than common equity, of the parent
■ g. Add new paragraph (d). separate security consisting of the guarantee, registrant being registered;
The revision and additions read as which must be concurrently registered, but (2) Non-convertible securities, other
follows: may be registered on the same registration than common equity, of another
majority-owned subsidiary being ■ 51. Amend Form S–3 (referenced in upon, if the basis of the calculation is not
registered and the parent has provided § 239.13) as follows: otherwise evident from the information
a full and unconditional guarantee, as ■ a. Remove the sentence and check box presented in the Fee Table.
immediately preceding the ‘‘Calculation 2. If the filing fee is calculated pursuant to
defined in Rule 3–10 of Regulation S–
Rule 457(o) under the Securities Act, only
X, of the payment obligations on such of Registration Fee’’ table; the title of the class of securities to be
non-convertible securities; or ■ b. Add two check boxes to the cover registered, the proposed maximum aggregate
(D) Securities of a majority-owned page immediately before ‘‘Calculation of offering price for that class of securities, and
subsidiary that meet the conditions of Registration Fee’’ table; the amount of registration fee need to appear
the Transaction Requirement set forth in ■ c. Revise the Note to the ‘‘Calculation in the Fee Table. Where two or more classes
paragraph (b)(2) of this section (Primary of Registration Fee’’ Table; of securities are being registered pursuant to
offerings of non-convertible investment ■ d. Revise the introductory paragraph to General Instruction II.D., however, the Fee
General Instruction I; Table need only specify the maximum
grade securities).
■ e. Remove the word ‘‘or’’ at the end of aggregate offering price for all classes; the Fee
(iv) Securities to be offered for the Table need not specify by each class the
account of any person other than the General Instruction I.C.2.;
proposed maximum aggregate offering price
issuer (‘‘selling security holders’’), ■ f. Revise paragraph 3., and add
(see General Instruction II.D.).
provided that the registration statement paragraphs 4., and 5. to General 3. If the filling fee is calculated pursuant
and the prospectus are not required to Instruction I.C.; to Rule 457(r) under the Securities Act, the
separately identify the selling security ■ g. Add a note to General Instruction Fee Table must state that it registers an
holders or the securities to be sold by 1.C.; unspecified amount of securities of each
■ h. Add paragraph D. to General identified class of securities and must
such persons until the filing of a
Instruction I.; provide that the issuer is relying on Rule
prospectus, prospectus supplement, 456(b) and Rule 457(r). If the Fee Table is
■ i. Revise paragraph D. of General
post-effective amendment to the amended in a post-effective amendment to
registration statement, or periodic or Instruction II.;
■ j. Add paragraphs E., F., and G. to the registration statement or in a prospectus
current report under the Exchange Act filed in accordance with Rule 456(b)(1)(ii)
General Instruction II.;
that is incorporated by reference into (§ 230.456(b)(1)(ii) of chapter), the Fee Table
■ k. Revise the heading of General
the registration statement and must specify the aggregate offering price for
Instruction IV.; all classes of securities in the referenced
prospectus, identifying the selling ■ l. Designate the current text under
security holders and the amount of offering or offerings and the applicable
General Instruction IV. as paragraph A; registration fee.
securities to be sold by each of them ■ m. Add a heading to paragraph A to 4. Any difference between the dollar
and, if included in a periodic or current General Instruction IV.; amount of securities registered for such
report, a prospectus or prospectus ■ n. Add paragraph B. to General offerings and the dollar amount of securities
supplement is filed, as required by Rule Instruction IV.; sold may be carried forward on a future
430B, pursuant to Rule 424(b)(7) ■ o. In Item 12(c)(2)(ii) to Part I revise the registration statement pursuant to Rule 457
(§ 230.424(b)(7) of this chapter); phrase ‘‘450 Fifth Street, NW.,’’ to read under the Securities Act.
(2) The registrant pays the registration ‘‘100 F Street, NE.,’’; and General Instructions
fee pursuant to Rule 456(b) and Rule ■ p. Add paragraph (d) of Item 12 to Part
457(r) (§ 230.456(b) and § 230.457(r) of I. Eligibility Requirements for Use of Form
I.
this chapter) or in accordance with Rule S–3
The revisions and additions read as
456(a) (§ 230.456(a) of this chapter); follows: This instruction sets forth registrant
(3) If the registrant is a majority- requirements and transaction requirements
owned subsidiary, it is required to file Note: The text of Form S–3 does not and for the use of Form S–3. Any registrant which
and has filed reports pursuant to section this amendment will not appear in the Code meets the requirements of I.A. below
of Federal Regulations. (‘‘Registrant Requirements’’) may use this
13 or section 15(d) of the Exchange Act Form for the registration of securities under
(15 U.S.C. 78m or 78o(d)) and satisfies UNITED STATES SECURITIES AND
the Securities Act of 1933 (‘‘Securities Act’’)
the requirements of this Form with EXCHANGE COMMISSION
which are offered in any transaction
regard to incorporation by reference or Washington, DC 20549
specified in I.B. below (‘‘Transaction
information about the majority-owned FORM S–3—REGISTRATION STATEMENT Requirement’’) provided that the requirement
subsidiary is included in the registration UNDER THE SECURITIES ACT OF 1933 applicable to the specified transaction are
statement (or a post-effective * * * * * met. With respect to majority-owned
amendment to the registration If this Form is a registration statement subsidiaries, see Instruction I.C. below. With
statement); pursuant to General Instruction I.D. or a post- respect to well-known seasoned issuers and
effective amendment thereto that shall majority-owned subsidiaries of well-known
(4) The registrant may register seasoned issuers, see Instruction I.D. below.
additional securities or classes of its or become effective upon filing with the
its majority-owned subsidiaries’ Commission pursuant to Rule 462(e) under * * * * *
the Securities Act, check the following
securities on a post-effective box. b C. Majority-Owned Subsidiaries
amendment pursuant to Rule 413(b) If this Form is a post-effective amendment If a registrant is a majority-owned
(§ 230.413(b) of this chapter); and to a registration statement filed pursuant to subsidiary, security offerings may be
(5) An automatic shelf registration General Instruction I.D. filed to register registered on this Form if:
statement and post-effective amendment additional securities or additional classes of * * * * *
will become effective immediately securities pursuant to Rule 413(b) under the 3. The parent of the registrant-subsidiary
pursuant to Rule 462(e) and (f) Securities Act, check the following box. b meets the Registrant Requirements and the
(§ 230.462(e) and (f) of this chapter) * * * * * applicable Transaction Requirement, and
upon filing. All filings made on or in provides a full and unconditional guarantee,
Notes to the ‘‘Calculation of Registration as defined in Rule 3–10 of Regulation S–X
connection with automatic shelf Fee’’ Table (‘‘Fee Table’’)
registration statements on this Form (§ 210.3–10 of this chapter), of the payment
1. Specific details relating to the fee obligations on the securities being registered,
become public upon filing with the calculation shall be furnished in notes to the and the securities being registered are non-
Commission. Fee Table, including references to provisions convertible securities, other than common
* * * * * of Rule 457 (§ 230.457 of this chapter) relied equity;
4. The parent of the registrant-subsidiary (ii) Securities of a majority-owned D. Non-Automatic Shelf Registration
meets the Registrant Requirements and the subsidiary that are non-convertible securities, Statements
applicable Transaction Requirement, and the other than common equity, and the parent Where two or more classes of securities
securities of the registrant-subsidiary being registrant provides a full and unconditional being registered on this Form pursuant to
registered are full and unconditional guarantee, as defined in Rule 3–10 of General Instruction I.B.1. or I.B.2. are to be
guarantees, as defined in Rule 3–10 of Regulation S–X, of the payment obligations offered pursuant to Rule 415(a)(1)(x)
Regulation S–X, of the payment obligations on the non-convertible securities; (§ 230.415(a)(1)(x) of this chapter), and where
on the parent’s non-convertible securities, (iii) Securities of a majority-owned this Form is not an automatic shelf
other than common equity, being registered; subsidiary that are a guarantee of: registration statement, Rule 457(o) permits
or
(A) Non-convertible securities, other than the registration fee to be calculated on the
5. The parent of the registrant-subsidiary
common equity, of the parent registrant being basis of the maximum offering price of all the
meets the Registrant Requirements and the
registered; securities listed in the Fee Table. In this
applicable Transaction Requirement, and the
(B) Non-convertible securities, other than event, while the Fee Table would list each of
securities of the registrant-subsidiary being
common equity, of another majority-owned the classes of securities being registered and
registered are guarantees of the payment
subsidiary being registered and the parent the aggregate proceeds to be raised, the Fee
obligations on the non-convertible securities,
registrant has provided a full and Table need not specify by each class
other than common equity, being registered
unconditional guarantee, as defined in Rule information as to the amount to be registered,
by another majority-owned subsidiary of the
parent where the parent provides a full and 3–10 of Regulation S–X, of the payment proposed maximum offering price per unit,
unconditional guarantee, as defined in Rule and proposed maximum aggregate offering
obligations on such non-convertible
3–10 of Regulation S–X, of such non- price.
securities; or
convertible securities. (iv) Securities of a majority-owned E. Automatic Shelf Registration Statements
Note to General Instruction I.C.: With subsidiary that meet the conditions of Where securities are being registered on
regard to paragraphs I.C.3, I.C.4, and I.C.5 Transaction Requirement I.B.2. of this Form this Form pursuant to General Instruction
above, the guarantor is the issuer of a (Primary Offerings of Non-Convertible I.D., Rule 456(b) permits, but does not
separate security consisting of the guarantee, Investment Grade Securities). require, the registrant to pay the registration
which must be concurrently registered, but (d) Securities to be offered for the account fee on a pay-as-you-go basis and Rule 457(r)
may be registered on the same registration of any person other than the issuer (‘‘selling permits, but does not require, the registration
statement as are the non-convertible security holders’’), provided that the fee to be calculated on the basis of the
guaranteed securities. registration statement and the prospectus are aggregate offering price of the securities to be
D. Automatic Shelf Offerings by Well-Known not required to separately identify the selling offered in an offering or offerings off the
Seasoned Issuers security holders or the securities to be sold registration statement. If a registrant elects to
by such persons until the filing of a pay all or a portion of the registration fee on
Any registrant that is a well-known prospectus, prospectus supplement, post- a deferred basis, the Fee Table in the initial
seasoned issuer, as defined in Rule 405, at effective amendment to the registration filing must identify the classes of securities
the most recent eligibility determination date being registered and provide that the
statement, or periodic or current report under
specified in paragraph (2) of that definition registrant elects to rely on Rule 456(b) and
the Exchange Act that is incorporated by
may use this Form for registration under the Rule 457(r), but the Fee Table does not need
Securities Act of securities offerings, other reference into the registration statement and
prospectus, identifying the selling security to specify any other information. When the
than pursuant to Rule 415(a)(1)(vii) or (viii)
holders and the amount of securities to be registrant amends the Fee Table in
(§ 230.415(a)(1)(vii) or (viii) of this chapter),
sold by each of them and, if included in a accordance with Rule 456(b)(1)(ii), the
as follows:
periodic or current report, a prospectus or amended Fee Table must include either the
1. The securities to be offered are:
(a) Any securities to be offered pursuant to prospectus supplement is filed, as required dollar amount of securities being registered if
Rule 415, Rule 430A, or Rule 430B by Rule 430B, pursuant to Rule 424(b)(7) paid in advance of or in connection with an
(§ 230.415, § 230.430A, or § 230.430B of this (§ 230.424(b)(7) of this chapter). offering or offerings or the aggregate offering
chapter) by: 2. The registrant pays the registration fee price for all classes of securities referenced
(i) A registrant that is a well-known pursuant to Rules 456(b) and 457(r) or in in the offerings and the applicable
seasoned issuer by reason of paragraph accordance with Rule 456(a). registration fee.
(1)(i)(A) of the definition in Rule 405; or 3. If the registrant is a majority-owned F. Information in Automatic and Non-
(ii) A registrant that is a well-known subsidiary, it is required to file and has filed Automatic Shelf Registration Statements
seasoned issuer only by reason of paragraph reports pursuant to Section 13 or Section
(1)(i)(B) of the definition in Rule 405 if the Where securities are being registered on
15(d) of the Exchange Act and satisfies the
registrant also is eligible to register a primary this Form pursuant to General Instruction
requirements of the Form with regard to
offering of its securities pursuant to I.B.1, I.B.2, I.B.5, I.C., or I.D., information is
incorporation by reference or information only required to be furnished as of the date
Transaction Requirement I.B.I of this Form; about the majority-owned subsidiary is
(b) Non-convertible securities, other than of initial effectiveness of the registration
included in the registration statement (or a statement to the extent required by Rule
common equity, to be offered pursuant to post-effective amendment to the registration
Rule 415, Rule 430A, or Rule 430B by a 430A or Rule 430B. Required information
statement). about a specific transaction must be included
registrant that is a well-known seasoned
4. The registrant may register additional in the prospectus in the registration
issuer only by reason of paragraph (1)(i)(B) of
the definition of Rule 405 and does not fall securities or classes of its or its majority- statement by means of a prospectus that is
within Transaction Requirement I.B.1 of this owned subsidiaries’ securities on a post- deemed to be part of and included in the
Form; effective amendment pursuant to Rule 413(b) registration statement pursuant to Rule 430A
(c) Securities of majority-owned (§ 203.413(b) of this chapter). or Rule 430B, a post-effective amendment to
subsidiaries of the parent registrant to be 5. An automatic shelf registration the registration statement, or a periodic or
offered pursuant to Rule 415, Rule 430A, or statement and post-effective amendment will current report under the Exchange Act
Rule 430B if the parent registrant is a well- become effective immediately pursuant to incorporated by reference into the
known seasoned issuer and the securities of Rule 462(e) and (f) (§ 230.462(e) and (f) of registration statement and the prospectus and
the majority-owned subsidiary being this chapter) upon filing. All filings made on identified in a prospectus filed, as required
registered meet the following requirements: or in connection with automatic shelf by Rule 430B, pursuant to Rule 424(b)
(i) Securities of a majority-owned registration statements on this Form become (§ 230.424(b) of this chapter).
subsidiary that is a well-known seasoned public upon filing with the Commission.
issuer at the time it becomes a registrant, G. Selling Security Holder Offerings
other than by virtue of paragraph (1)(ii) of the II. Application of General Rules and Where a registrant eligible to register
definition of well-known seasoned issuer in Regulations primary offerings on this Form pursuant to
Rule 405; * * * * * General Instruction I.B.1 registers securities
offerings on this Form pursuant to General disclosure required by this Form that is B. Information With Respect to the
Instruction I.B.1 or I.B.3 for the account of necessary to update the registration statement Registrant
persons other than the registrant, if the to reflect the additional securities, additional 1. * * *
offering of the securities, or securities classes of securities, or additional registrants; a. * * *
convertible into such securities, that are any required opinions and consents; and the
b. Items 12 and 13 of this Form, if the
being registered on behalf of the selling signature page. Required information,
registrant meets the requirements for use of
security holders was completed and the consents, or opinions may be included in the
Form S–3 and elects this alternative; or
securities, or securities convertible into such prospectus and the registration statement
securities, were issued and outstanding prior c. Item 14 of this Form, if the registrant
through a post-effective amendment or may
to the original date of filing the registration be provided through a document does not meet the requirements for use of
statement covering the resale of the incorporated or deemed incorporated by Form S–3, or if it otherwise elects to use this
securities, the registrant may, as permitted by reference into the registration statement and alternative.
Rule 430B(b), in lieu of identifying selling the prospectus that is part of the registration * * * * *
security holders prior to effectiveness of the statement, or, as to the required information
resale registration statement, refer to C. Information With Respect to the Company
only, contained in a prospectus filed
unnamed selling security holders in a generic pursuant to Rule 424(b) that is deemed part Being Acquired
manner by identifying the initial transaction of and included in the registration statement 1. * * *
in which the securities were sold. Following and prospectus that is part of the registration b. Item 16 of this Form, if the Company
effectiveness, the registrant must include in statement. being acquired meets the requirements for
a prospectus filed pursuant to Rule 424(b)(7), * * * * * use of Form S–3 and this alternative is
a post-effective amendment to the elected; or
registration statement, or an Exchange Act PART I—INFORMATION REQUIRED IN c. Item 17 of this Form, if the Company
report incorporated by reference into the PROSPECTUS being acquired does not meet the
prospectus that is part of the registration * * * * * requirements for use of Form S–3, or if this
statement (which Exchange Act report is alternative is otherwise elected.
identified in a prospectus filed, as required Item 12. Incorporation of Certain
by Rule 430B, pursuant to Rule 424(b)(7)) the Information by Reference * * * * *
names of previously unidentified selling * * * * * PART I—INFORMATION REQUIRED IN
security holders and amounts of securities (d) Any information required in the PROSPECTUS
that they intend to sell. If this Form is being prospectus in response to Item 3 through * * * * *
filed pursuant to General Instruction I.D. by Item 11 of this Form may be included in the
a well-known seasoned issuer to registerer prospectus through documents filed pursuant B. Information About the Registrant
securities being offered for the account of to Section 13(a), 14, or 15(d) of the Exchange * * * * *
persons other than the issuer, the registration Act that are incorporated or deemed
statement and the prospectus included in the incorporated by reference into the prospectus Item 12. Information with Respect to S–3
registration statement do not need to that is part of the registration statement. Registrants
designate the securities that will be offered If the registrant meets the requirements for
for the account of such persons, identify * * * * *
■ 52. Amend Form S–4 (referenced in use of Form S–3 and elects to comply with
them, or identify the initial transaction in this Item, furnish the information required by
which the securities, or securities convertible § 239.25) as follows:
■ a. Revise paragraphs B.1.b., B.1.c., either paragraph (a) or paragraph (b) of this
into such securities, were sold until the
C.1.b., and C.1.c. to the General Item. The information required by paragraph
registrant files a post-effective amendment to
(b) shall be furnished if the registrant satisfies
the registration statement, a prospectus Instructions; the conditions of paragraph (c) of this Item.
pursuant to Rule 424(b), or an Exchange Act ■ b. In Item 11(c)(2) to Part I revise the
report (and prospectus filed, as required by phrase ‘‘450 Fifth Street, N.W.,’’ to read * * * * *
Rule 430B, pursuant to Rule 434(b)(7)) ‘‘100 F Street, N.E.,’’; Item 13. Incorporation of Certain
containing information for the offering on ■ c. Revise the heading and introductory Information by Reference
behalf of such persons. text of Item 12 of Part I; If the registrant meets the requirements for
* * * * * ■ d. Revise the introductory text of Item use of Form S–3 and elects to furnish
IV. Registration of Additional Securities and 13 of Part I; information in accordance with the
Additional Classes of Securities ■ e. In Item 13(d)(2) to Part I revise the provisions of Item 12 of this Form:
phrase ‘‘450 Fifth Street, N.W.,’’ to read * * * * *
A. Registration of Additional Securities ‘‘100 F Street, N.E.,’’;
Pursuant to Rule 462(b) ■ f. Revise the heading and introductory Item 14. Information With Respect to
* * * * * text of Item 14 of Part I; Registrants Other Than S–3 Registrants
B. Registration of Additional Securities or ■ g. Revise the reading and paragraph (a) If the registrant does not meet the
Classes of Securities or Additional of Item 16 of Part I; requirements for use of Form S–3, or
Registrants After Effectiveness ■ h. Revise the heading and introductory otherwise elects to comply with this Item in
text of Item 17 of Part I; lieu of Item 10 or 12, furnish the information
A well-known seasoned issuer relying on required by:
General Instruction I.D. of this Form may ■ i. Revise paragraph (b) of Item 18 of
register additional securities or classes of Part I; and * * * * *
securities, pursuant to Rule 413(b) by filing ■ j. Revise paragraph (c) of Item 19 of
C. INFORMATION ABOUT THE COMPANY
a post-effective amendment to the effective Part I. BEING ACQUIRED
registration statement. The well-known The revisions read as follows:
seasoned issuer may add majority-owned * * * * *
subsidiaries as additional registrants whose Note: The text of Form S–4 does not and
this amendment will not appear in the Code Item 16. Information With Respect to S–3
securities are eligible to be sold as part of the Companies
automatic shelf registration statement by of Federal Regulations.
filing a post-effective amendment identifying (a) If the company being acquired meets
UNITED STATES SECURITIES AND
the additional registrants, and the registrant the requirements for use of Form S–3 and
EXCHANGE COMMISSION
and the additional registrants and other elects to comply with this Item, furnish the
Washington, DC 20549
persons required to sign the registration information that would be required by Items
statement must sign the post-effective FORM S–4—REGISTRATION STATEMENT 12 and 13 of this Form if securities of such
amendment. The post-effective amendment UNDER THE SECURITIES ACT OF 1933 company were being registered.
must consist of the facing page; any * * * * * * * * * *
Item 17. Information With Respect to Section 13 or Section 15(d) of the Securities i. Information required by Rule 3–05 and
Companies Other Than S–3 Companies Exchange Act of 1934 (‘‘Exchange Act’’); Article 11 of Regulation S–X (§ 210.3–05 and
If the company being acquired does not B. The registrant has filed all reports and § 210.11 et seq. of this chapter);
meet the requirements for use of Form S–3, other materials required to be filed by ii. Restated financial statement if there has
or compliance with this Item is otherwise Section 13(a) or 15(d) of the Exchange Act been a change in accounting principles or a
elected in lieu of Item 15 or 16, furnish the during the preceding 12 months (or for such correction of an error where such change or
information reuqired by paragraph (a) or (b) shorter period that the registrant was correction requires material retroactive
of this Item, whichever is applicable. required to file such reports and materials); restatement of financial statements;
C. The registrant has filed an annual report iii. Restated financial statements where one
* * * * * required under Section 13(a) or 15(d) of the or more business combinations accounted for
D. VOTING AND MANAGEMENT Exchange Act for its most recently completed by the pooling of interest method of
INFORMATION fiscal year; accounting have been consummated
D. The registrant is not: subsequent to the most recent fiscal year and
Item 18. Information if Proxies, Consents or 1. And during the past three years neither the acquired businesses, considered in the
Authorizations Are To Be Solicited the registrant nor any of its predecessors was: aggregate, are significant under Rule 11–01(b)
* * * * * (a) A blank check company as defined in (§ 210.11–01(b) (§ 210.11–01(b) of this
(b) If the registrant or the company being Rule 419(a)(2) (§ 230.419(a)(2) of this chapter); or
acquired meets the requirements for use of chapter); iv. Any financial information required
Form S–3, any information required by (b) A shell company, other than a business because of a material disposition of assets
paragraphs (a)(5)(ii) and (7) of this Item with combination related shell company, each as outside the normal course of business.
respect to such company may be defined in Rule 405 (§ 230.405 of this 2. If the financial statements included in
incorporatated by reference from its latest chapter); or this registration statement in accordance with
annual report on Form 10–K or Form 10– (c) A registrant for an offering of penny Item 5 are not sufficiently current to comply
KSB. stock as defined in Rule 3a51–1 of the with the requirements of Item 8.A of Form
Exchange Act (§ 240.3a51–1 of this chapter); 20–F, financial statements necessary to
* * * * * 2. Registering an offering that effectuates a comply with that Item shall be presented;
Item 19. Information if Proxies, Consents or business combination transaction as defined i. Directly in the prospectus;
Authorizations are not to be Solicited or in in Rule 165(f)(1) (§ 230.165(f)(1) of this ii. Through incorporation by reference and
an Exchange Officer chapter); delivery of a Form 6–K identified in the
E. If a registrant is a successor registrant it prospectus as containing such financial
* * * * * shall be deemed to have satisfied conditions
(c) If the registrant or the company being statements; or
A., B., C., and D.2. above if: iii. Through incorporation by reference of
acquired meets the requirements for use of
1. Its predecessor and it, taken together, do an amended Form 20–F, Form 40–F, or Form
Form S–3, any information required by
so, provided that the succession was 10–K, in which case the prospectus shall
paragraphs (a)(5) and (7) of this Item with
primarily for the purpose of changing the disclose that the Form 20–F, Form 40–F, or
respect to such company may be state or other jurisdiction of incorporation of
incorporated by reference from its latest Form 10–K has been so amended.
the predecessor or forming a holding Instruction. Financial statements or
annual report on Form 10–K or Form 10– company and that the assets and liabilities of
KSB. information required to be furnished by this
the successor at the time of succession were Item shall be reconciled pursuant to either
* * * * * substantially the same as those of the Item 17 or Item 18 of Form 20–F, whichever
■ 53. Amend Form F–1 (referenced in predecessor; or is applicable to the primary financial
§ 239.31) as follows: 2. All predecessors met the conditions at
statements.
■ a. Remove the sentence and check box the time of succession and the registrant has
immediately preceding the ‘‘Calculation continued to do so since the succession; and Item 5. Incorporation of Certain Information
of Registration Fee’’ table; F. The registrant makes it reports filed by Reference
pursuant to Sections 13 or 15(d) of the
■ b. Add General Instruction VI.; If the registrant elects to incorporate
Exchange Act that are incorporated by information by reference pursuant to General
■ c. Add Item 4A to Part I;
reference pursuant to Item 4A of Item 5 of Instruction VI.:
■ d. Redesignate Item 5 as Item 5A to
this Form readily available and accessible on (a) It must specifically incorporate by
Part I.; and a Web site maintained by or for the registrant
■ e. Add new Item 5 to Part I. reference into the prospectus contained in
and containing information about the the registration statement the following
The additions read as follows: registrant. documents by means of a statement to that
Note: The text of Form F–1 does not and * * * * * effect in the prospectus all such documents:
this amendment will not appear in the Code 1. The registrant’s latest annual report on
of Federal Regulations. PART I—INFORMATION REQUIRED
Form 20–F, Form 40–F or Form 10–K filed
PROSPECTUS
UNITED STATES SECURITIES AND under the Exchange Act.
EXCHANGE COMMISSION * * * * * 2. Any report on Form 10–Q or Form 8–
Washington, DC 20549 Item 4A. Material Changes K filed since the date of filing of the annual
report. The registrant may also incorporate by
FORM F–1—REGISTRATION STATEMENT (a) If the registrant elects to incorporate reference any Form 6–K meeting the
UNDER THE SECURITIES ACT OF 1933 information by reference pursuant to General requirements of this Form.
* * * * * Instruction VI., described any and all
material changes in the registrant’s affairs Note to Item 5(a): Attention is directed to
GENERAL INSTRUCTIONS which have occurred since the end of the Rule 439 (§ 230.439) regarding consent to use
latest fiscal year for which audited financial of material incorporated by reference.
* * * * *
statements were included in accordance with (b)1. The registrant must state:
VI. Eligibility To Use Incorporation by Item 5 of this Form and which have not been i. That it will provide to each person,
Reference described in a report on Form 6–K, Form 10– including any beneficial owner, to whom a
If a registrant meets the following Q or Form 8–K filed under the Exchange Act prospectus is delivered, a copy of any or all
requirements immediately prior to the time and incorporated by reference pursuant to of the reports or documents that have been
of filing a registration statement on this Item 5 of this Form. incorporated by reference in the prospectus
Form, it may elect to provide information (b)1. Include in the prospectus contained contained in the registration statement but
required by Item 3 and Item 4 of this Form in the registration statement, if not included not delivered with prospectus;
in accordance with Item 4A and Item 5 of in the reports filed under the Exchange Act ii. That it will provide these reports or
this Form: which are incorporated by reference into the documents upon written or oral request;
A. The registrant is subject to the prospectus contained in the registration iii. That it will provide these reports or
requirement to file reports pursuant to statement pursuant to Item 5: documents at no cost to the requester;
iv. The name, address, telephone number, see paragraph (a)(5) of this section. With defined in Rule 405 (§ 230.405 of this
and e-mail address, if any, to which the respect to well-known seasoned issuers chapter) at the most recent eligibility
request for these reports or documents must and majority-owned subsidiaries of determination date specified in
be made; and well-known seasoned issuers, see paragraph (2) of such definition may use
v. The registrant’s Web site address,
including the uniform resource locator (URL)
paragraph (c) of this section. this Form for registration under the
where the incorporated reports and other * * * * * Securities Act of securities offerings,
documents may be accessed. (a) * * * other then pursuant to Rule
Note to Item 5.(b)1. If the registrant sends (5) * * * 415(a)(1)(vii) or (viii)
any of the information that is incorporated by (iii) The parent of the registrant- (§ 230.415(a)(1)(vii) or (viii) of this
reference in the prospectus contained in the subsidiary meets the Registrant chapter), as follows:
registration statement to security holders, it Requirements and the applicable (1) The securities to be offered are:
also must send any exhibits that are Transaction Requirement, and provides (i) Any securities to be offered
specifically incorporated by reference in that a full and unconditional guarantee, as pursuant to Rule 415, Rule 430A, or
information. Rule 430B (§ 230.415, § 230.430A, or
defined in Rule 3–10 of Regulation S–
2. The registrant must: X (§ 210.33–10 of this chapter), of the § 230.430B of this chapter) by:
i. Identify the reports and other (A) A registrant that is a well-known
payment obligation on the securities
information that it files with the SEC; and
ii. State that the public may read and copy being registered, and the securities seasoned issuer by reason of paragraph
any materials it files with the SEC at the being registered are non-convertible (1)(i)(A) of the definition in rule 405; or
SEC’s Public Reference Room at 100 F Street, securities, other than common equity; (B) A registrant that is a well-known
NE, Washington, DC 20549. State that the (iv) The parent of the registrant- seasoned issuer only by reason of
public may obtain information on the subsidiary meets the Registrant paragraph (1)(i)(B) of the definition in
operation of the Public Reference Room by Requirements and the applicable Rule 405 if the registrant also is eligible
calling the SEC at 1–800–SEC–0330. If the Transaction Requirement, and the to register a primary offering of its
registrant is an electronic filer, state that the securities of the registrant-subsidiary securities pursuant to paragraph (b)(1)
SEC maintains an Internet site that contains of this section;
being registered are full and
reports, proxy and information statements,
and other information regarding issuers that unconditional guarantees, as defined in (ii) Non-convertible securities, other
file electronically with the SEC and state the Rule 3–10 of Regulation S–X, of the than common equity, to be offered
address of that site (http://www.sec.gov). payment obligations on the parent’s pursuant to Rule 415, Rule 430A, or
* * * * * non-convertible securities, other than Rule 430B by a registrant that is a well-
common equity, being registered; or known seasoned issuer only by reason
§ 239.32 [Removed and Reserved] (v) The parent of the registrant- of paragraph (1)(i)(B) of the definition in
■ 54. Remove and reserve § 239.32 and subsidiary meets the Registrant Rule 405 and does not fall within
remove Form F–2 referenced in that Requirements and the applicable paragraph (b)(1) of this section;
section. Transaction Requirement, and the (iii) Securities of majority-owned
■ 55. Amend § 293.33 as follows: securities of the registrant-subsidiary subsidiaries of the parent registrant to
■ a. Revise the introductory paragraph; being registered are guarantees of the be offered pursuant to Rule 415, Rule
■ b. Remove the word ‘‘or’’ at the end of payment obligations on the non- 430A, or Rule 430B if the parent
paragraph (a)(5)(ii); convertible securities, other than registrant is a well-known seasoned
■ c. Revise paragraph (a)(5)(iii) and common equity, being registered by issuer and the securities of the majority-
remove the note following paragraph another majority-owned subsidiary of owned subsidiary being registered meet
(a)(5)(iii); the parent, where the parent provides a the following requirements:
■ d. Add paragraphs (a)(5)(iv) and full and unconditional guarantee, as (A) Securities of a majority-owned
(a)(5)(v); defined in Rule 3–10 of Regulation S– subsidiary that is a well-known
■ e. Add a note to paragraph (a)(5); and X, of such non-convertible securities. seasoned issuer at the time it becomes
■ f. Add paragraph (c). a registrant, other than by virtue of
The revisions and additions read as Note to paragraph (a)(5): In the situations
described in paragraphs (a)(5)(iii), (a)(5)(iv); paragraph (1)(ii) of the definition of
follows: well-known seasoned issuer in Rule
and (a)(5)(v) of this section, the parent or
§ 239.33 Form F–3, for registration under majority-owned subsidiary guarantor is the 405;
the Securities Act of 1933 of securities of issuer of a separate security consisting of the (B) Securities of a majority-owned
certain foreign private issuers offered guarantee, which must be concurrently subsidiary that are non-convertible
pursuant to certain types of transactions registered, but may be registered on the same securities, other than common equity,
This instruction set forth registrant registration statement as are the guaranteed and the parent registrant provides a full
requirements and transaction non-convertible securities. Both the parent and unconditional guarantee, as defined
and majority-owned subsidiary shall each
requirements for the use of Form F–3. in Rule 3–10 of Regulation S–X, of the
disclose the information required by this
Any foreign private issuer, as defined in Form as if each were the only registrant payment obligations on the non-
Rule 405 (§ 230.405 of this chapter), except that if the majority-owned subsidiary convertible securities;
which meets the requirements of will not be eligible to file annual reports on (C) Securities of a majority-owned
paragraph (a) of this section (the Form 20–F or Form 40–F (§ 249.220f or subsidiary that are a guarantee of:
‘‘Registrant Requirements’’) may use § 249.240f of this chapter) after the effective (1) Non-convertible securities, other
this Form for the registration of date of the registration statement, then is than common equity, of the parent
securities under the Securities Act of shall disclose the information specified in registrant being registered;
1933 (the ‘‘Securities Act’’) which are Form S–3 (§ 239.13). Rule 3–10 of Regulation (2) Non-convertible securities, other
S–X specifies the financial statements
offered in any transaction specified in required.
than common equity, of another
paragraph (b) of this section (the majority-owned subsidiary being
‘‘Transaction Requirements’’), provided * * * * * registered and the parent registrant has
that the requirements applicable to the (c) Automatic shelf offerings by well- provided a full and unconditional
specified transaction are met. With known seasoned issuers. Any registrant guarantee, as defined in Rule 3–10 of
respect to majority-owned subsidiaries, that is a well-known seasoned issuer as Regulation S–X, of the payment
obligations on such non-convertible ■ b. Add two check boxes to the cover otherwise evident from the information
securities; or page immediately before ‘‘Calculation of presented in the Fee Table.
Registration Fee’’ table; 2. If the filing fee is calculated pursuant to
(D) Securities of a majority-owned Rule 457(o) under the Securities Act, only
subsidiary that meet the conditions of ■ c. Revise the Note to the ‘‘Calculation
the title of the class of securities to be
the Transaction Requirement set forth in of Registration Fee’’ table; registered, the proposed maximum aggregate
paragraph (b)(2) of this section (Primary ■ d. Revise the introductory paragraph to offering price for that class of securities, and
offerings of non-convertible investment General Instruction I.; the amount of registration fee need to appear
grade securities). ■ e. Remove the word ‘‘or’’ at the end of in the Fee Table. Where two or more classes
paragraph (ii), revise paragraph (iii) and of securities are being registered pursuant to
(iv) Securities to be offered for the General Instruction II.C., however, the Fee
account of any person other than the add paragraphs (iv), (v), and (vi) to
General Instruction I.A.5.; Table need only specify the maximum
issuer (‘‘selling security holders’’), aggregate offering price for all classes; the Fee
■ f. Revise the note to General
provided that the registration statement Table need not specify by each class the
Instruction I.A.5.;
and the prospectus are not required to proposed maximum aggregate offering price
■ g. Add paragraph C. to General
separately identify the selling security (see General Instruction II.C.).
Instruction I.; 3. If the filing fee is calculated pursuant to
holders or the securities to be sold by ■ h. Revise paragraph C. of General
such persons until the filing of a Rule 457(r) of this chapter) under the
Instruction II.; Securities Act, the Fee Table must state that
prospectus, prospectus supplement, ■ i. Revise in paragraph D. to General it registers an unspecified amount of
post-effective amendment to the Instruction II the phrase ‘‘(202) 942– securities of each identified class of
registration statement, or report under 8900.’’ to read ‘‘(202) 551–8900.’’ and the securities and must provide that the issuer is
the Exchange Act that is incorporated by phrase ‘‘(202) 942–2940’’ to read ‘‘(202) relying on Rule 456(b) and Rule 457(r). If the
reference into the registration statement 551–3610.’’; Fee Table is amended in a post-effective
and prospectus, identifying the selling amendment to the registration statement or in
■ j. Add paragraphs F., G., and H. to
security holders and the amount of a prospectus filed in accordance with Rule
General Instruction II.; 456(b)(1)(ii) (§ 230.456(b)(1)(ii) of this
securities to be sold by each of them ■ k. Revise the heading of General chapter), the Fee Table must specify the
and, if included in a report under the Instruction IV. and designate the current aggregate offering price for all classes of
Exchange Act that is incorporated by text under General Instruction IV. as securities in the referenced offering or
reference, a prospectus or prospectus paragraph A.; offerings and the applicable registration fee.
supplement is filed, as required by Rule ■ l. Add a heading to paragraph A. of 4. Any difference between the dollar
430B, pursuant to Rule 424(b)(7) General Instruction IV.; amount of securities registered for such
(§ 230.424(b)(7) of this chapter). ■ m. Add paragraph B. to General offerings and the dollar amount of securities
(2) The registrant pays the registration Instruction IV.; sold may be carried forward on a future
registration statement pursuant to Rule 457
fee pursuant to Rules 456(b) and 457(r) ■ n. In Item 6(e)(2) of Part I revise the
under the Securities Act.
(§ 230.456(b) and § 230.457(r) of this phrase ‘‘450 Fifth Street, NW.,’’ to read
‘‘100 F Street, NE.,’’; and GENERAL INSTRUCTIONS
chapter) or in accordance with Rule
456(a) (§ 230.456(a) of this chapter); ■ o. Add paragraph (f) to Item 6 of Part I. Eligibility Requirements for Use of Form
(3) If the registrant is a majority- I. F–3
owned subsidiary, it is required to file The revisions and additions read as This instruction sets forth registrant
and has filed reports pursuant to section follows: requirements and transaction requirements
13 or section 15(d) of the Exchange Act for the use of Form F–3. Any foreign private
Note: The text of Form F–3 does not and issuer, as defined in Rule 405 (§ 230.405 of
(15 U.S.C. 78m or 78o(d)) and satisfies this amendment will not appear in the Code this chapter), which meets the requirements
the requirements of this Form with of Federal Regulations. of I.A. below (the ‘‘Registrant Requirements’’)
regard to incorporation by reference or UNITED STATES SECURITIES AND may use this Form for the registration of
information about the majority-owned EXCHANGE COMMISSION securities under the Securities Act of 1933
subsidiary is included in the registration Washington, DC 20549 (the ‘‘Securities Act’’) which are offered in
statement (or a post-effective any transaction specified in I.B. below (the
FORM F–3—REGISTRATION STATEMENT ‘‘Transaction Requirements’’), provided that
amendment to the registration UNDER THE SECURITIES ACT OF 1933
statement); the requirements applicable to the specified
* * * * * Transaction are met. With respect to
(4) The registrant may register If this Form is a registration statement majority-owned subsidiaries, see Instruction
additional securities or classes of its or pursuant to General Instruction I.C. or a post- I.A.5 below. With respect to well-known
its subsidiaries’ securities on a post- effective amendment thereto that shall seasoned issuers and majority-owned
effective amendment pursuant to Rule become effective upon filing with the subsidiaries of well-known seasoned issuers,
413(b) (§ 230.413(b) of this chapter); and Commission pursuant to Rule 462(e) under see Instruction I.C. below.
(5) An automatic shelf registration the Securities Act, check the following * * * * *
statement and post-effective amendment box. b
If this Form is a post-effective amendment A. Registrant Requirements
will become effective immediately to a registration statement filed pursuant to * * * * *
pursuant to Rule 462(e) and (f) General Instruction I.C. filed to register
(§ 230.462(e) and (f) of this chapter) additional securities or additional classes of 5. Majority-Owned Subsidiaries
upon filing. All filings made on or in securities pursuant to Rule 413(b) under the If a registrant is a majority-owned
connection with automatic shelf Securities Act, check the following box. b subsidiary, security offerings may be
registration statements on this Form * * * * * registered on this Form if:
become public upon filing with the * * * * *
Commission. Notes to the ‘‘Calculation of Registration (iii) The parent of the registrant-subsidiary
Fee’’ Table (‘‘Fee Table’’) meets the Registrant Requirements and the
■ 56. Amend Form F–3 (referenced in
1. Specific details relating to the fee applicable Transaction Requirement, and
§ 239.33) as follows:
calculation shall be furnished in notes to the provides a full and unconditional guarantee,
■ a. Remove the sentence and check box Fee Table, including reference to provisions as defined in Rule 3–10 of Regulation S–X
immediately preceding the ‘‘Calculation of Rule 457 (§ 230.457 of this chapter) relied (§ 210.3–10 of this chapter), of the payment
of Registration Fee’’ table; upon, if the basis of the calculation is not obligations on the securities being registered,
and the securities being registered are non- the definition in Rule 405 and does not fall 5. An automatic shelf registration
convertible securities, other than common within General Instruction I.B.1 of this Form; statement and post-effective amendment will
equity; (c) Securities of majority-owned become effective immediately pursuant to
(iv) The parent of the registrant-subsidiary subsidiaries of the parent registrant to be Rule 462(e) and (f) (§ 230.462(e) and (f) of
meets the Registrant Requirements and the offered pursuant to Rule 415, Rule 430A, or this chapter) upon filing. All filings made on
applicable Transaction Requirement, and the Rule 430B if the parent registrant is a well- or in connection with automatic shelf
securities of the registrant-subsidiary being known seasoned issuer and the securities of registration statements on this Form become
registered are full and unconditional the majority-owned subsidiary being public upon filing with the Commission.
guarantees, as defined in Rule 3–10 of registered meet the following requirements:
Regulation S–X, of the payment obligations (i) Securities of a majority-owned II. Application of General Rules and
on the parent’s non-convertible securities, subsidiary that is a well-known seasoned Regulations
other than common equity, being registered; issuer at the time it becomes a registrant, * * * * *
or other than by virtue of paragraph (1)(ii) of the
definition of well-known seasoned issuer in C. Non-Automatic Shelf Registration
(v) The parent of the registrant-subsidiary
meets the Registrant Requirements and the Rule 405; Statements
applicable Transaction Requirement, and the (ii) Securities of a majority-owned Where two or more classes of securities
securities of the registrant-subsidiary being subsidiary that are non-convertible securities, being registered on this Form pursuant to
registered are guarantees of the payment other than common equity, and the parent General Instruction I.B.1. or I.B.2. are to be
obligations on the non-convertible securities, registrant provides a full and unconditional offered pursuant to Rule 415(a)(1)(x)
other than common equity, being registered guarantee, as defined in Rule 3–10 of (§ 230.415(a)(1)(x)), and where this Form is
by another majority-owned subsidiary of the Regulation S–X, of the payment obligations not an automatic shelf registration statement,
parent where the parent provides a full and on such non-convertible securities; Rule 457(o) permits the registration fee to be
unconditional guarantee, as defined in Rule (iii) Securities of a majority-owned calculated on the basis of the maximum
3–10 of Regulation S–X, of such non- subsidiary that are a guarantee of: offering price of all the securities listed in the
convertible securities. (A) Non-convertible securities, other than Fee Table. In this event, while the Fee Table
Note: In the situation described in common equity of the parent registrant being would list each of the classes of securities
paragraphs I.A.5(iii), I.A.5(iv), and I.A.5(v) registered; being registered and the aggregate proceeds
above, the parent or majority-owned (B) Non-convertible securities, other than to be raised, the Fee Table need not specify
common equity, of another majority-owned by each class information as to the amount
subsidiary guarantor is the issuer of a
subsidiary being registered and the parent to be registered, proposed maximum offering
separate security consisting of the guarantee,
has provided a full and unconditional price per unit, and proposed maximum
which must be concurrently registered, but
guarantee, as defined in Rule 3–10 of aggregate offering price.
may be registered on the same registration
Regulation S–X, of the payment obligations
statement as are the guaranteed non- * * * * *
on such non-convertible securities; or
convertible securities. Both the parent or
(iv) Securities of a majority-owned F. Automatic Shelf Registration Statements
majority-owned subsidiary shall each
subsidiary that meet the conditions of
disclose the information required by this Where securities are being registered on
Transaction Requirement I.B.2. of this Form
Form as if each were the only registrant this Form pursuant to General Instruction
(Primary Offerings of Non-Convertible
except that if the majority-owned subsidiary I.C., Rule 456(b) permits, but does not
Investment Grade Securities).
will not be eligible to file annual reports on require, the registrant to pay the registration
(d) Securities to be offered for the account
Form 20–F or Form 40–F after the effective fee on a pay-as-you-go basis and Rule 457(r)
of any person other than the issuer (‘‘selling
date of the registration statement, then it permits, but does not require, the registration
security holders’’), provided that the
shall disclose the information specified in fee to be calculated on the basis of the
registration statement and the prospectus are
Form S–3. Rule 3–10 of Regulation S–X aggregate offering price of the securities to be
not required to separately identify the selling
specifies the financial statements required. offered in an offering or offerings off the
security holders or the securities to be sold
* * * * * by such persons until the filing of a registration statement. If a registrant elects to
prospectus, prospectus supplement, post- pay all or a portion of the registration fee on
C. Automatic Shelf Offerings by Well-Known effective amendment to the registration a deferred basis, the Fee Table in the initial
Seasoned Issuers statement, or report under the Exchange Act filing must identify the classes of securities
Any registrant that is a well-known that is incorporated by reference into the being registered and provide that the
seasoned issuer, as defined in Rule 405, at registration statement and prospectus, registrant elects to rely on Rule 456(b) and
the most recent eligibility determination date identifying the selling security holders and Rule 457(r), but the Fee Table does not need
specified in paragraph (2) of that definition the amount of securities to be sold by each to specify any other information. When the
may use this Form for registration under the of them, and if included in a report under the registrant amends the Fee Table in
Securities Act of securities offerings, other Exchange Act that is incorporated by accordance with Rule 456(b)(1)(ii), the
than pursuant to Rule 415(a)(1)(vii) or reference, a prospectus or prospectus amended Fee Table must include either the
(viii)(§ 230.415(a)(1)(vii) or (viii) of this supplement is filed, as required by Rule dollar amount of securities being registered if
chapter), as follows: 430B, pursuant to Rule paid in advance of or in connection with an
1. The securities to be offered are: 424(b)(7)(§ 230.424(b)(7) of this chapter). offering or offerings or the aggregate offering
(a) Any securities to be offered pursuant to 2. The registrant pays the registration fee price for all classes of securities referenced
Rule 415, Rule 430A, or Rule 430B pursuant to Rules 456(b) and 457(r) or in in the offerings and the applicable
(§ 230.415, § 230.430A, or § 230.430B of this accordance with Rule 456(a). registration fee.
chapter) by: 3. If the registrant is a majority-owned
G. Information in Automatic and Non-
(i) A registrant that is a well-known subsidiary, it is required to file and has filed
Automatic Shelf Registration Statements
seasoned issuer by reason of paragraph reports pursuant to Section 13 or Section
(1)(i)(A) of the definition in Rule 405; or 15(d) of the Exchange Act and satisfies the Where securities are being registered on
(ii) A registrant that is a well-known requirements of the Form with regard to this Form pursuant to General Instruction
seasoned issuer only by reason of paragraph incorporation by reference or information I.A.5, I.B.1, I.B.2, or I.C., information is only
(1)(i)(B) of the definition in Rule 405 if the about the majority-owned subsidiary is required to be furnished as of the date of
registrant also is eligible to register a primary included in the registration statement (or a initial effectiveness of the registration
offering of its securities pursuant to post-effective amendment to the registration statement to the extent required by Rule
Transaction Requirement I.B.1 of this Form; statement). 430A or Rule 430B. Required information
(b) Non-convertible securities, other than 4. The registrant may register additional about a specific transaction must be included
common equity, to be offered pursuant to securities or classes of its or its majority- in the prospectus in the registration
Rule 415, Rule 430A, or Rule 430B by a owned subsidiaries’ securities on a post- statement by means of a prospectus that is
registrant that is a well-known seasoned effective amendment pursuant to Rule deemed to be part of and included in the
issuer only by reason of paragraph (1)(i)(B) of 413(b)(§ 203.413(b) of this chapter). registration statement pursuant to Rule 430A
or Rule 430B, a post-effective amendment to registration statement. The well-known ■ h. Revise the heading and introductory
the registration statement, or an Exchange seasoned issuer may add majority-owned text of Item 14 in Part I;
Act report incorporated by reference into the subsidiaries as additional registrants whose ■ i. Revise the heading and text of Item
registration statement and the prospectus and securities are eligible to be sold as part of the 16 in Part I;
identified in a prospectus filed, as required automatic shelf registration statement by
■ j. Revise the heading and introductory
by Rule 430B, pursuant to Rule 424(b) filing a post-effective amendment identifying
(§ 230.424(b) of this chapter). the additional registrants, and the registrant text of Item 17 in Part I;
and the additional registrants and other ■ k. Revise paragraph (b) of Item 18 in
H. Selling Security Holder Offerings persons required to sign the registration Part I; and
Where a registrant eligible to register statement must sign the post-effective ■ l. Revise the heading and paragraph (c)
primary offerings on this Form pursuant to amendment. The post-effective amendment of Item 19 in Part I.
General Instruction I.B.1 registers securities must consist of the facing page; any The revisions read as follows:
offerings on this Form pursuant to General disclosure required by this Form that is
Instruction I.B.1 or I.B.3 for the account of necessary to update the registration statement Note: The text of Form F–4 does not and
persons other than the registrant, if the to reflect the additional securities, additional this amendment will not appear in the Code
offering of the securities, or securities classes of securities, or additional registrants; of Federal Regulations.
convertible into such securities, that are any required opinions and consents; and the UNITED STATES SECURITIES AND
being registered on behalf of the selling signature page. Required information, EXCHANGE COMMISSION
security holders was completed and the consents or opinions may be included in the Washington, DC 20549
securities, or securities convertible into such prospectus and the registration statement
securities, were issued and outstanding prior through a post-effective amendment or may FORM F–4—REGISTRATION STATEMENT
to the original date of filing the registration be provided through a document UNDER THE SECURITIES ACT OF 1933
statement covering the resale of the incorporated or deemed incorporated by * * * * *
securities, the registrant may, as permitted by reference into the registration statement and
General Instructions
Rule 430B(b), in lieu of identifying selling the prospectus that is part of the registration
security holders prior to effectiveness of the statement, or, as to the required information * * * * *
resale registration statement, refer to only, contained in a prospectus filed B. Information With Respect to the
unnamed selling security holders in a generic pursuant to Rule 424(b) that is deemed part Registrant
manner by identifying the initial transaction of and included in the registration statement
in which the securities were sold. Following and prospectus that is part of the registration * * * * *
effectiveness, the registrant must include in statement. 1. * * *
a prospectus filed pursuant to Rule 424(b)(7), (b) Items 12 and 13 of this Form, if the
* * * * * registrant meets the requirements for use of
a post-effective amendment to the
registration statement, or an Exchange Act PART I—INFORMATION REQUIRED IN Form F–3 and elects this alternative; or
report incorporated by reference into the PROSPECTUS (c) Item 14 of this Form, if the registrant
prospectus that is part of the registration * * * * * does not meet the requirements for use of
statement (which Exchange Act report is Form F–3, or if it otherwise elects this
identified in a prospectus filed, as required Item 6. Incorporation of Certain Information alternative.
by Rule 430B, pursuant to Rule 424(b)(7)), by Reference * * * * *
the names of previously unidentified selling * * * * *
security holders and amounts of securities (f) Any information required in the C. Information With Respect to the Company
that they intend to sell. If this Form is being prospectus in response to Item 3 through Being Acquired
filed pursuant to General Instruction I.C. by Item 5 of this Form may be included in the 1. * * *
a well-known seasoned insurer to register prospectus through documents filed pursuant (b) Item 16 of this Form, if the company
securities being offered for the account of to Sections 13(a), 14, or 15(d) of the Exchange being acquired meets the requirements for
persons other than the issuer, the registration Act that are incorporated or deemed use of Form F–3 and this alternative is
statement and the prospectus included in the incorporated by reference into the prospectus elected; or
registration statement do not need to that is part of the registration. (c) Item 17 of this Form, if the company
designate the securities that will be offered * * * * * being acquired does not meet the
for the account of such persons, identify ■ 57. Amend Form F–4 (reference in requirements for use of Form F–3, or if this
them, or identify the initial transaction in alternative is otherwise elected.
which the securities, or securities convertible
§ 239.34) as follows:
■ a. Revise paragraph B.1.(b), B.1.(c), * * * * *
into such securities, were sold until the
registrant files a post-effective amendment to C.1.(b), and C.1.(c) to the General PART I—INFORMATION REQUIRED IN
the registration statement, a prospectus Instructions; THE PROSPECTUS
pursuant to Rule 424(b), or an Exchange Act ■ b. Revise, in paragraph D.4. to the
* * * * *
report (and prospectus filed, as required by General Instructions the phrase ‘‘(202)
Rule 430B, pursuant to Rule 424(b)(7)) 942–8900.’’ to read ‘‘(202) 551–8900.’’ B. INFORMATION ABOUT THE
containing information for the offering on and the phrase ‘‘(202) 942–2940.’’ to read REGISTRANT
behalf of such persons. ‘‘(202) 551–3610.’’; * * * * *
* * * * * ■ c. Redesignate the second paragraph
Item 12. Information With Respect to F–3
IV. Registration of Additional Securities and (b) of Item 11 in Part I as paragraph (c); Registrants
Additional Classes of Securities ■ d. Revise in newly redesignated
paragraph (c)(2) of Item 11 in Part I the If the registrant meets the requirements for
A. Registration of Additional Securities use of Form F–3 or Form S–3 and elects to
phrase ‘‘450 Fifth Street, N.W.,’’ to read
Pursuant to Rule 462(b) comply with this Item, furnish the
‘‘100 F Street, N.E.,’’; information required by either paragraph (a)
* * * * * ■ e. In Item 12 to Part I, revise the or (b) of this Item. However, the registrant
B. Registration of Additional Securities or heading and introductory text, the shall not provide prospectus information in
Classes of Securities or Additional introductory text of paragraph (b)(2), and the manner allowed by paragraph (a) of this
Registrants After Effectiveness paragraph (b)(3)(vii); Item if the financial statements incorporated
■ f. Revise Instructions 1. and 3. of by reference pursuant to Item 13 reflect:
A well-known seasoned issuer relying on
General Instruction I.C. or this Form may paragraph (c) of Item 13 in Part I; * * * * *
register additional securities or classes of ■ g. Revise in Item 13(c)(2) in Part I., the (b) * * *
securities, pursuant to Rule 413(b) by filing phrase ‘‘450 Fifth Street, N.W.,’’ to read (2) Include financial statements and
a post-effective amendment to the effective ‘‘100 F Street, N.E.,’’ information as required by Item 18 of Form
20–F, except that financial statements of the Item 17. Information With Respect to PART 243—REGULATION FD
registrant may comply with Item 17 of Form Foreign Companies Other Than F–3
20–F if the only securities being registered Companies ■ 60. The authority citation for part 243
are investment grade securities as defined in If the company being acquired does not continues to read as follows:
the General Instructions to Form F–3. In meet the requirements for use of Form F–3,
addition, provide: Authority: 15 U.S.C. 78c, 78i, 78j, 78m,
or compliance with this Item is otherwise 78o, 78w, 78mm, and 80a–29, unless
* * * * * elected in lieu of Item 15 or 16, furnish the otherwise noted.
(3) * * * information required by paragraph (a) or (b)
(vii) Financial statements required by Item of this Item, whichever is applicable. ■ 61. Amend § 243.100 by revising
18 of Form 20–F, except that financial * * * * * paragraph (b)(2)(iv) to read as follows:
statements of the registrant may comply with
Item 17 of Form 20–F if the only securities D. VOTING AND MANAGEMENT § 243.100 General rule regarding selective
being registered are investment grade INFORMATION disclosure.
securities as defined in the General * * * * *
Item 18. Information if Proxies, Consents or
Instructions to Form F–3, and financial (b) * * *
Authorizations Are To Be Solicited
information required by Rule 3–05 and
Article 11 of Regulation S–X with respect to * * * * * (2) * * *
transactions other than that pursuant to (b) If the registrant or the company being (iv) In connection with a securities
which the securities being registered are to be acquired meets the requirements for use of offering registered under the Securities
issued (Schedules required under Regulation Form F–3, any information required by Act, other than an offering of the type
S–X shall be filed as ‘‘Financial Statement paragraphs (a)(5)(ii) and (7) of this Item with described in any of Rule 415(a)(1)(i)
Schedules’’ pursuant to Item 21 of this Form, respect to such company may be through (vi) under the Securities Act
but need not be provided with respect to the incorporated by reference from its latest
(§ 230.415(a)(1)(i) through (vi) of this
company being acquired if information is annual report on Form 20–f.
chapter) (except an offering of the type
being furnished pursuant to Item 17(a) of this Item 19. Information if Proxies, Consents or described in Rule 415(a)(1)(i) under the
Form); and Authorizations Are Not To Be Solicited or in Securities Act (§ 230.415(a)(1)(i) of this
* * * * * an Exchange Offer chapter) also involving a registered
Item 13. Incorporation of Certain * * * * * offering, whether or not underwritten,
Information by Reference (c) If the registrant or the company being for capital formation purposes for the
acquired meets the requirements for use of account of the issuer (unless the issuer’s
* * * * * Form F–3, any information required by offering is being registered for the
Instructions. paragraphs (a)(5)(ii) and (7) of this Item with
purpose of evading the requirements of
1. All annual reports incorporated by respect to such company may be
incorporated by reference from its latest this section)), if the disclosure is by any
reference pursuant to Item 13 of this Form of the following means:
shall contain financial statements that annual report on Form 20–F.
comply with Item 18 of Form 20–F, except * * * * * (A) A registration statement filed
that financial statements of the registrants under the Securities Act, including a
may comply with Item 17 of Form 20–F if the PART 240—GENERAL RULES AND prospectus contained therein;
only securities being registered are REGULATIONS, SECURITIES (B) A free writing prospectus used
investment grade securities as defined in EXCHANGE ACT OF 1934 after filing of the registration statement
General Instructions to Form F–3. * * * for the offering or a communication
* * * * * ■ 58. The authority citation for part 240 falling within the exception to the
3. The registrant may incorporate by continues to read inpart as follows: definition of prospectus contained in
reference and deliver with the prospectus clause (a) of section 2(a)(10) of the
Authority: 15 U.S.C. 77c, 77d, 77g, 77j,
any Form 6–K, Form 10–Q or Form 8–K Securities Act;
77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn,
containing information eligible to be
incorporated by reference into Form F–1. See 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, (C) Any other Section 10(b)
Rules 4–01(a)(2) and 10–01 of Regulation S– 78j–1, 78k, 78k–1, 781, 78m, 78n, 78o, 78p, prospectus;
X and Item 18 of Form 20–F. 78q, 78s, 78u–5, 78w, 78x, 7811, 78mm, 79q, (D) A notice permitted by Rule 135
79t, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, under the Securities Act (§ 230.135 of
* * * * * 80b–4, 80b–11, and 7201 et seq.; and 18
this chapter);
Item 14. Information With Respect to U.S.C. 1350, unless otherwise noted.
(E) A communication permitted by
Registrants Other Than F–3 Registrants * * * * * Rule 134 under the Securities Act
If the foreign registrant does not meet the ■ 59. Amend § 240.14a–2 as follows: (§ 230.134 of this chapter); or
requirements for use of Form F–3, or
otherwise elects to comply with this Item in ■ a. Remove the authority citation (F) An oral communication made in
lieu of Items 10 and 11 or Items 12 and 13, following the section; and connection with the registered securities
furnish the following information: ■ b. Add paragraph (b)(5).
offering after filing of the registration
* * * * * statement for the offering under the
The addition reads as follows: Securities Act.
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED § 240.14a–2 Solicitations to which
PART 249—FORMS, SECURITIES
§ 240.14a–3 to § 240.14a–15 apply.
* * * * * EXCHANGE ACT OF 1934
* * * * *
Item 16. Information With Respect to F–3 ■ 62. The authority citation for part 249
Companies
(b) * * *
continues to read in part as follows:
If the company being acquired meets the (5) Publication or distribution by a
broker or a dealer of a research report Authority: 15 U.S.C. 78a et seq. and 7201
requirements for use of Form F–3 and
et seq.; and 18 U.S.C. 1350, unless otherwise
compliance with this Item is elected, furnish in accordance with Rule 138 (§ 230.138
noted.
the information that would be required by of this chapter) or Rule 139 (§ 230.139
Items 12 and 13 of this Form if securities of of this chapter) during a transaction in ■ 63. Amend Form 10 (referenced in
such company were being registered. which the broker or dealer or its affiliate § 249.210) by adding Item 1A. to read as
* * * * * participates or acts in a an advisory role. follows:
Note: The text of Form 10 does not, and E. Which Items To Respond to in Item 1. * * *
this amendment will not, appear in the Code Registration Statements and Annual Reports
of Federal Regulations. Item 1A. Risk Factors
* * * * *
Set forth any material changes from risk
UNITED STATES SECURITIES AND (c) Financial Statement. An Exchange Act
factors as previously disclosed in the
EXCHANGE COMMISSION registration statement or annual report filed
registrant’s Form 10–K ( 249.310) in response
Washington, DC 20549 on this Form must contain the financial
to Item 1A. to Part I of Form 10–K.
statements and related information specified
FORM 10 * * * * *
in Item 17 of this Form. We encourage you
* * * * * to provide the financial statements and ■ 66. Amend Form 10–K (referenced in
Item 1A. Risk Factors related information specified in Item 18 of § 249.310) as follows:
this Form in lieu of Item 17, but the Item 18
Set forth, under the caption, ‘‘Risk ■ a. In General Instruction J., redesignate
statements and information are not required.
Factors,’’ where appropriate, the risk factors In certain circumstances, Form F–1, F–3, or paragraphs (1)(b) through (1)(m) as
described in Item 503(c) of Regulation S–K F–4 for the registration of securities under paragraph (1)(c) through (1)(n), and add
(§ 229.503(c) of this chapter) applicable to the the Securities Act require that you provide new paragraph (b);
registrant. Provide any discussion of risk the financial statements and related ■ b. Add two check boxes to the cover
factors in plain English in accordance with information specified in Item 18 in your
Rule 421(d) of the Securities Act of 1933 page before the paragraph that starts
annual report on Form 20–F. Consult those ‘‘Indicate by check mark whether the
(§ 230.421(d) of this chapter). Securities Act forms for the specified
registrant (1) has filed all reports
* * * * * requirements and consider the potential
■ 64. Amend Form 20–F (referenced in advantages of complying with Item 18 required to be filed by Section 13 or 15(d)
§ 249.220f) as follows: instead of Item 17 of this form. Note that of the Securities Exchange Act of 1934
■ a. Add two check boxes to the cover Items 17 and 18 may require you to file during the preceding 12 months * * *’’;
page before the paragraph that starts financial statements of other entities in and
‘‘Indicate by check mark whether the certain circumstances. These circumstances ■ c. Add Items 1A. and 1.B. to Part I.
registrant (1) has filed all reports are described in Regulations S–X.
The additions read as follows:
required to be filed by Section 13 or 15(d) The financial statements must be audited
in accordance with U.S. generally accepted Note: The text of Form 10–K does not, and
of the Securities Exchange Act of 1934 auditing standards, and the auditor must this amendment will not, appear in the Code
during the preceding 12 months * * *’’; comply with the U.S. standards for auditor of Federal Regulations.
■ b. Revise in paragraph (a) of General independence. If you have any questions
Instruction D the phrase ‘‘(202) 942– about these requirements, contact the Office UNITED STATES SECURITIES AND
8900.’’ to read ‘‘(202) 551–8900.’’ and the of Chief Accountant in the Division of EXCHANGE COMMISSION
Washington, DC 20549
phrase ‘‘(202) 942–2940.’’ to read ‘‘(202) Corporation Finance at (202) 551–3400.
551–3610.’’; * * * * * FORM 10–K
■ c. Revise in paragraph (c) to General * * * * *
Part I
Instruction D the phrase ‘‘450 Fifth
* * * * * GENERAL INSTRUCTIONS
Street, NW.,’’ to read ‘‘100 F Street,
NE.,’’; Item 4. * * * * * * * *
■ d. Revise paragraph (c) to General J. Use of this Form by Asset-Backed Issuers.
Item 4A. Unresolved Staff Comments
Instruction E; and (1) Items that May be Omitted. * * *
■ e. Add Item 4A. to Part I. If the registrant is an accelerated filer as
defined in Rule 12b–2 of the Exchange Act (a) * * *
The revision and additions read as (b) Item 1A. Risk Factors;
follows: (§ 240.12b–2 of this chapter) or is a well-
known seasoned issuer as defined in rule 405 * * * * *
Note: The text of Form 20–F does not, and of the Securities Act (§ 230.405 of this Indicate by check mark if the registrant is
this amendment will not, appear in the Code chapter) and has received written comments a well-known seasoned issuer, as defined in
of Federal Regulations. from the Commission staff regarding its Rule 405 of the Securities Act.
periodic reports under the Exchange Act not Yes llll No llll.
UNITED STATES SECURITIES AND less than 180 days before the end of its fiscal
EXCHANGE COMMISSION Indicate by check mark if the registrant is
year to which the annual report relates, and not required to file reports pursuant to
Washington, DC 20549 such comments remain unresolved, disclose Section 13 or Section 15(d) of the Act.
FORM 20–F the substance of any such unresolved
comments that the registrant believes are Yes llll No llll.
* * * * * material. Such disclosure may provide other Note: Checking the box above will not
Indicate by check mark if the registrant is information including the position of the relieve any registrant required to file reports
a well-known seasoned issuer, as defined in registrant with respect to any such comment. pursuant to Section 13 or 15(d) of the
Rule 405 of the Securities Act. Exchange Act from their obligations under
Yesllll Nollll
* * * * * those Sections.
If this report is an annual or transition ■ 65. Amend Form 10–Q (reference in
* * * * *
report, indicate by check mark if the § 249.308a) by adding Item 1A to Part II
registrant is not required to file reports to read as follows: PART I
pursuant to Section 13 or 15(d) of the Note: The text of Form 10–Q does not, and * * * * *
Securities Exchange Act of 1934. this amendment will not, appear in the code
Yesllll Nollll Item 1. * * *
of Federal Regulations.
Note —Checking the box above will not Item 1A. Risk Factors
UNITED STATES SECURITIES AND
relieve any registrant required to file reports EXCHANGE COMMISSION Set forth, under the caption ‘‘Risk Factors,’’
pursuant to Section 13 or 15(d) of the Washington, DC 20549 where appropriate, the risk factors described
Securities Exchange Act of 1934 from their in Item 503(c) of Regulation S–K
obligations under those Sections. FORM 10–Q (§ 229.503(c) of this chapter) applicable to the
* * * * * * * * * * registrant. Provide any discussion of risk
factors in plain English in accordance with
GENERAL INSTRUCTIONS PART II. OTHER INFORMATION Rule 421(d) of the Securities Act of 1933
* * * * * * * * * * (§ 230.421(d) of this chapter).
Item 1B. Unresolved Staff Comments Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, reference into the registration statement or
If the registrant is an accelerated filer as 78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24, prospectus that is part of the registration
defined in Rule 12b–2 of the Exchange Act 80a–26, and 80a–29, unless otherwise noted. statement will, as to a purchaser with a time
(§ 240.12b–2 of this chapter) or is a well- 69. Amend Form N–2 (referenced in
■ of contract of sale prior to such first use,
known seasoned issuer as defined in Rule § 239.14 and § 274.11a–1) as follows: supersede or modify any statement that was
405 of the Securities Act ( 230.405 of this ■ a. Revise in the third paragraph of the made in the registration statement or
chapter) and has received written comments Instructions after the Calculation of prospectus that was part of the registration
from the Commission staff regarding its Registration Fee table the phrase ‘‘450 statement or made in any such document
periodic or current reports under the Act not
5th Street, NW.,’’ to read ‘‘100 F Street,
less than 180 days before the end of its fiscal immediately prior to such date of first use.
year to which the annual report relates, and
NE.,’’; e. That for the purpose of determining
■ b. Revise in Item 18.15, the phrase ‘‘1– liability of the Registrant under the 1933 Act
such comments remain unresolved, disclose
the substance of any such unresolved 202–942–8090,’’ to read ‘‘1–202–551– to any purchaser in the initial distribution of
comments that the registrant believes are 8090,’’; securities:
material. Such disclosure may provide other ■ c. Remove the period at the end of The undersigned Registrant undertakes
information including the position of the paragraph 4.a(3) to Item 34 and in its that in a primary offering of securities of the
registrant with respect to any such comment.place add a semi-colon; undersigned Registrant pursuant to this
* * * * * ■ d. Remove the word ‘‘and’’ at the end registration statement, regardless of the
■ 67. Amend Form 10–KSB (referenced of paragraph 4.b to Item 34; underwriting method used to sell the
in § 249.310b) by adding a check box to ■ e. Remove the period at the end of the securities to the purchaser, if the securities
the cover page before the paragraph that paragraph 4.c to Item 34 and in its place are offered or sold to such purchaser by
starts ‘‘Check whether the issuer (1) filed add a semi-colon; and means of any of the following
all reports required to be filed by Section ■ f. Add paragraphs 4.d and 4.e to Item communications, the undersigned Registrant
13 or 15(d) of the Exchange Act during 34. will be a seller to the purchaser and will be
the past 12 month * * *’’ to read as The additions read as follows: considered to offer or sell such securities to
follows: Note: The text of Form N–2 does not, and the purchaser:
Note: The text of Form 10–KSB does not, this amendment will not, appear in the Code (1) Any preliminary prospectus or
and this amendment will not, appear in the of Federal Regulations. prospectus of the undersigned Registrant
Code of Federal Regulations. relating to the offering required to be filed
UNITED STATES SECURITIES AND FORM N–2 pursuant to Rule 497 under the 1933 Act [17
EXCHANGE COMMISSION * * * * * CFR 230.497];
Washington, DC 20549 (2) The portion of any advertisement
Item 34. Undertakings pursuant to Rule 482 under the 1933 Act [17
FORM 10–KSB * * * * * CFR 230.482] relating to the offering
* * * * * 4. * * * containing material information about the
Check whether the issuer is not required to d. That, for the purpose of determining undersigned Registrant or its securities
file reports pursuant to Section 13 or 15(d) liability under the 1933 Act to any purchaser, provided by or on behalf of the undersigned
of the Exchange Act.[ ] if the Registrant is subject to Rule 430C [17
Registrant; and
Note— Checking the box above will not CFR 230.430C]: Each prospectus filed
pursuant to Rule 497(b), (c), (d) or (e) under (3) Any other communication that is an
relieve any registrant required to file reports offer in the offering made by the undersigned
pursuant to Section 13 or 15(d) of the the 1933 Act [17 CFR 230.497(b), (c), (d), or
(e)] as part of a registration statement relating Registrant to the purchaser.
Exchange Act from their obligations under
those Sections. to an offering, other than prospectuses filed * * * * *
in reliance on Rule 430A under the 1933 Act
* * * * * [17 CFR 230.430A], shall be deemed to be Dated: July 19, 2005.
part of and included in the registration By the Commission.
PART 274—FORMS PRESCRIBED statement as of the date it is first used after Jill M. Peterson,
UNDER THE INVESTMENT COMPANY effectiveness. Provided however, that no
statement made in a registration statement or Assistant Secretary.
ACT OF 1940
prospectus that is part of the registration [FR Doc. 05–14560 Filed 8–2–05; 8:45 am]
■ 68. The authority citation for Part 274 statement or made in a document BILLING CODE 8010–01–P
continues to read in part as follows: incorporated or deemed incorporated by

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Wednesday,

1. Increased Information Flow magnitude that the proposals Commission.24 It recommended a

B. Background A public issuer’s Exchange Act record • Providing further interpretive

and Jeffrey V. Bailey, Fundamentals of Investments

(2001 ed.) at 530. Institute for Certified Public Accountants

Is it a prohibited pre-filing Is it a prohibited

99 See, e.g., letters from Citigroup; Merrill Lynch

Is it a prohibited pre-filing Is it a prohibited

131 We are using a similar definition as contained

III.D.3 below under ‘‘Electronic Road Shows.’’ 266 The

in connection with business Corporation Finance provided guidance as to how

the consent of an expert). 2003). provide that it covers communications by the

satisfied through incorporation by reference, or prospectus supplements may be filed in connection

securities. and NYSBA. Disclosure Release, note 23, at Section IV.B.2.d.

prospectuses generally do not contain certain

As we discuss above, we have statement, a written communication that

$948,900. 635 17 U.S.C. 77z–2. million confirmations) = $11,622,500.

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