|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Rules Of The Road Show
Staff Writer – Deal.com
Securities Mosaic. December 1, 2005
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EXCERPT: The fundamental regulatory framework for securities distribution has been little altered since the adoption of the Securities Act of 1933, despite the tremendous evolution of communication technology and securities markets. However, today new SEC rules are slated to go into effect that will allow a range of new marketing tools and that are intended to accommodate not only existing technologies but those yet to be developed. Their impact on the offering process is likely to be profound. The result: Securities may soon be marketed in new and different ways, perhaps even including televised commercials and Web site pop-ups. Under the old rules, the mandated statutory prospectus, generally a rather daunting document that has to include or reference all material information about the securities and the issuer, was almost sacrosanct because it was the only tangible communication that could be used in marketing the securities. While "oral" offers and discussions were permissible, any other "written" communication was an illegal prospectus and subjected the offering participants to liability, including possible rescission. As communications technology evolved, the definition of "written" also expanded. Securities Act amendments in the 1950s said that TV and radio communications were "written," and the SEC has said Web sites and e-mail are as well. This historical situation has made the offering of securities a labor-intensive process, involving face-to-face or telephone communications. For IPOs and other offerings requiring a significant sales effort, this generally meant the need for a large sales force and the infamous road show. The new rules introduce a much more flexible concept — "free-writing prospectuses." These generally include any nonoral communications related to the offering, and their use is now allowed so long as minimal conditions are met: generally filing with the SEC and including a short, innocuous legend. These communications still cannot, of course, contain material misstatements or omissions, but their use is no longer forbidden. |
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