Gun-Jumping Rules

1
Gun-Jumping Rules

• Waiting period
• Meaning of prospectus

(last updated 07 Feb 13)
2
Gun-Jumping(controlled disclosure during
registration)
Filing date
Effective date
3
Gun-Jumping(controlled disclosure during
registration)
Filing date
Effective date
No sales 5(a)(1)
No deliveries 5(a)(2)
No prospectus, unless comply 10 5(b)(1)
No delivery w/o 10 prospectus 5(b)(2)
No offers 5(c)
No offers - 8 proceeding / stop order 5(c)
Pre-filing period
Waiting period
Post-effective period
4
Gun-Jumping(controlled disclosure during
registration)
Filing date
Effective date

• Permitted
• Rule 135 - issuer notice of public offering
• Rule 163 WKSIs can use FWP (legended, filed w/
  SEC)
• Rule 163A issuers can communicate 30 days
  before RS filed
• Rule 168 reporting issues can give factual info
  and SEC-filed FLI (not reference offering)
• Rule 169 non-reporting issuers can release
  regular factual info (no FLI, cant target
  investors)

No sales 5(a)(1)
No deliveries 5(a)(2)
No prospectus, unless comply 10 5(b)(1)
No delivery w/o 10 prospectus 5(b)(2)
No offers 5(c)
No offers - 8 proceeding / stop order 5(c)
Pre-filing period
Waiting period
Post-effective period
5
Gun-Jumping(controlled disclosure during
registration)
Filing date
Effective date

• Permitted
• Rule 134 identifying statement (a) issuer and
  offering info, (b) legended where get PP )C)
  unless tombstone or accompany with PP
• Rule 164 allows FWP (conditions in Rule 433)
• Not conflict w/ filings
• Legended
• unseasoned and non-reporting Issuers must
  accompany PP
• File with SEC

No sales 5(a)(1)
No deliveries 5(a)(2)
No prospectus, unless comply 10 5(b)(1)
No delivery w/o 10 prospectus 5(b)(2)
No offers 5(c)
No offers - 8 proceeding / stop order 5(c)
Pre-filing period
Waiting period
Post-effective period
6

• Securities Act 5 
• (b) Necessity of prospectus meeting requirements
  of section 10 of this Act. It shall be unlawful
  for any person, directly or indirectly--    
• (1) to make use of any means or instruments of
  transportation or communication in interstate
  commerce or of the mails to carry or transmit any
  prospectus relating to any security with respect
  to which a registration statement has been filed
  under this title, unless such prospectus meets
  the requirements of section 10 or

7

• Securities Act 2(a)(10) 
• The term "prospectus" means any prospectus,
  notice, circular, advertisement, letter, or
  communication, written or by radio or television,
  which offers any security for sale or confirms
  the sale of any security except that (b) a
  notice, circular, advertisement, letter, or
  communication in respect of a security shall not
  be deemed to be a  prospectus if it states from
  whom a written prospectus meeting the
  requirements of section 10 may be obtained and,
  in addition, does no more than identify the
  security, state the price thereof, state by whom
  orders will  be executed, and contain such other
  information as the Commission, by rules or 
  regulations deem necessary or appropriate in the
  public interest and for the  protection of
  investors, and subject to such terms and
  conditions as may be  prescribed therein, may
  permit.

8

• Securities Act 2(a)(3)
• The term "sale" or "sell" shall include every
  contract of sale or disposition of a security or
  interest in a security, for value. The term
  "offer to sell", "offer for sale", or "offer"
  shall include every attempt or offer to dispose
  of, or solicitation of an offer to buy, a
  security or interest in a security, for value.

9
Hypothetical 1

• Larissa, a Sparrow broker, learns of the upcoming
  Smartway IPO in an inter-office memo.
• She cold calls recent grads from her alma mater.
  For the few who take her call, she intones for 5
  minutes about Smartways great growth prospects,
  its great management team, the usual IPO spike.
• Any gun-jumping?

10

• Securities Act 5(c)It shall be unlawful for
  any person, directly or indirectly, to make use
  of any means or instruments of transportation or
  communication in interstate commerce or of the
  mails to offer to sell or offer to buy through
  the use or medium of any prospectus or otherwise
  any security, unless a registration statement has
  been filed as to such security,

11
Hypothetical 2
For investors looking for a high return,
Smartway intends to sell 200 million in common
stock within the next year. Smartways return
on equity, which has run at 28, is projected to
increase to 35 after the offering. If
interested, contact Sparrow Securities, the
offerings lead underwriter.

• CEO Sherry tells Smartways investment relations
  staff to put an ad in the Wall Street Journal.
• Any gun-jumping?

12

• Securities Act 2(a)(10) 
• The term "prospectus" means any prospectus,
  notice, circular, advertisement, letter, or
  communication, written or by radio or television,
  which offers any security for sale or confirms
  the sale of any security except that (b) a
  notice, circular, advertisement, letter, or
  communication in respect of a security shall not
  be deemed to be a  prospectus if it states from
  whom a written prospectus meeting the
  requirements of section 10 may be obtained and,
  in addition, does no more than identify the
  security, state the price thereof, state by whom
  orders will  be executed, and contain such other
  information as the Commission, by rules or 
  regulations deem necessary or appropriate in the
  public interest and for the  protection of
  investors, and subject to such terms and
  conditions as may be  prescribed therein, may
  permit.

13

• Rule 135
• Announce offering (only issuer and only basic
  information)
• Rule 134
• Identifying statement (issuer or UW, and more
  information, but some conditions)
• Rule 169
• Factual information (non-reporting issuer can
  continue to describe business, no FLI or offering
  info)
• Rule 164 / Rule 433
• Permits free writing prospectus
• Specifies conditions

14
Rule 134 (synopsis)

• If your communication complies with Rule 134 it
  is not a "prospectus" for purposes of 5(b)(1).
• You can do (a) if you do (b).  You need not do
  (b) if you do either (c)(1) or (c)(2).  Or you
  can do (d) as specified.

(a)  you can give specified written information
about the issuer and the offering (more detailed
than a tombstone ad), IF (b)  you include a
legend that no sales until RS effective and name
the underwriters and where to obtain a
preliminary prospectus, BUT (c)  you need not
include this legend if (1) you include only the
information of a tombstone ad (with URL for UW),
or (2) you send (or link to) an accompanying
preliminary prospectus,
 (d)  you can ask investors to indicate their
interest in the offering by return card, if you
also send (or link to) a preliminary prospectus
and explain there is no commitment.
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Hypothetical 3
A registration statement relating to these
securities has been filed with the SEC but has
not yet become effective. These securities may
not be sold nor may offers to buy be accepted
prior to the time the registration statement
becomes effective. New issue March 13,
2006 Smartway, Inc. (online marketer of
last-minute airline tickets) 20,000,000 common
shares Price 10 per share Copies of the
Prospectus may be obtained from the
undersigned. Sparrow Securities (100 Broadway,
NYC, NY) Alexa Café, Inc Fish Brothers
Co. First Lynch GermanBank
MetroGroup Inc Morton Standard, Inc.
Silverman, Sachs Co. Townsend
Securities Ltd

• CEO Sherry tells Smartways investment relations
  staff to put the following tombstone ad in the
  Wall Street Journal.
• Any gun-jumping?

16

• Securities Act 2(a)(10) 
• The term "prospectus" means any prospectus,
  notice, circular, advertisement, letter, or
  communication, written or by radio or television,
  which offers any security for sale or confirms
  the sale of any security except that (b) a
  notice, circular, advertisement, letter, or
  communication in respect of a security shall not
  be deemed to be a  prospectus if it states from
  whom a written prospectus meeting the
  requirements of section 10 may be obtained and,
  in addition, does no more than identify the
  security, state the price thereof, state by whom
  orders will  be executed, and contain such other
  information as the Commission, by rules or 
  regulations deem necessary or appropriate in the
  public interest and for the  protection of
  investors, and subject to such terms and
  conditions as may be  prescribed therein, may
  permit.

17
Rule 134 (synopsis)

• If your communication complies with Rule 134 it
  is not a "prospectus" for purposes of 5(b)(1).
• You can do (a) if you do (b).  You need not do
  (b) if you do either (c)(1) or (c)(2).  Or you
  can do (d) as specified.

(a)  you can give specified written information
about the issuer and the offering (more detailed
than a tombstone ad), IF (b)  you include a
legend that no sales until RS effective and name
the underwriters and where to obtain a
preliminary prospectus, BUT (c)  you need not
include this legend if (1) you include only the
information of a tombstone ad (with URL for UW),
or (2) you send (or link to) an accompanying
preliminary prospectus,
 (d)  you can ask investors to indicate their
interest in the offering by return card, if you
also send (or link to) a preliminary prospectus
and explain there is no commitment.
18
Hypothetical 4
What if Larissa then sends an email to those who
show interest in Smartway. The email includes a
note, I think this is a good investment. Call
me or email if you want to talk further. Go
Muskrats! What if she also asks them to return
a card indicating their interest? Any
gun-jumping?
19

• Rule 135
• Announce offering (only issuer and only basic
  information)
• Rule 134
• Identifying statement (issuer or UW, and more
  information, but some conditions)
• Rule 169
• Factual information (non-reporting issuer can
  continue to describe business, no FLI or offering
  info)
• Rule 164 / Rule 433
• Permits free writing prospectus
• Specifies conditions

20
Rule 164/433 (Free writing prospectus)

• Free writing prospectus (Rule 164 )
• allows free writing prospectus (FWP), deemed to
  satisfy 10(b) if Rule 433 conditions satisfied
• available to issuer, UW or participant
• Conditions (Rule 433)
• info may not conflict with RS or SEC filings,
• FWP must be legended (tell investor to read
  prospectus, how obtain)
• must be accompanied by (or linked to)
  preliminary/final prospectus (only applies to
  non-reporting and unseasoned issuers)
• must file with SEC (on date of first use)
• issuers must file FWP and issuer info (press
  interview)
• participants must file FWP that has broad
  unrestricted dissemination

21
Rule 134 (synopsis)

• If your communication complies with Rule 134 it
  is not a "prospectus" for purposes of 5(b)(1).
• You can do (a) if you do (b).  You need not do
  (b) if you do either (c)(1) or (c)(2).  Or you
  can do (d) as specified.

(a)  you can give specified written information
about the issuer and the offering (more detailed
than a tombstone ad), IF (b)  you include a
legend that no sales until RS effective and name
the underwriters and where to obtain a
preliminary prospectus, BUT (c)  you need not
give this explanation if (1) you include only the
information of a tombstone ad (with URL for UW),
or (2) you send (or link to) an accompanying
preliminary prospectus,
 (d)  you can ask investors to indicate their
interest in the offering by return card, if you
also send (or link to) a preliminary prospectus
and explain there is no commitment.
22
Hypothetical 5

• Smartway mails a glossy brochure with a
  photograph of Sherry and detailed information on
  the IPO and how it will be rocket fuel
  propelling Smartways growth.
• The pamphlets are mailed to all doctors and
  lawyers in California and New York.
• Any gun-jumping? Is it exempt free writing?

23
Free-writing (Rule 164)

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

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Free-writing (Rule 164)
Free writing prospectus (Rule 405) any written
communication that offers to sell or solicits an
offer to buy a security subject to registration
that does not meet requirements of 10 statutory
prospectus

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

25
Free-writing (Rule 164)
Free writing prospectus (Rule 405) any written
communication that offers to sell or solicits an
offer to buy a security subject to registration
that does not meet requirements of 10 statutory
prospectus

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

Written communication (Rule 405) any
communication that is written, printed, a radio
or television broadcast, or a graphic
communication
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Free-writing (Rule 164)
Free writing prospectus (Rule 405) any written
communication that offers to sell or solicits an
offer to buy a security subject to registration
that does not meet requirements of 10 statutory
prospectus

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

Written communication (Rule 405) any
communication that is written, printed, a radio
or television broadcast, or a graphic
communication
Graphic communications (Rule 405) includes
all forms of electronic media, including
audiotapes, videotapes, facsimiles, CD-ROM,
email, Internet web sites does not include
communication that originates live, in real-time
to a live audience and does not originate in
recorded form.
27
Free-writing (Rule 164)

• Rule 433(b)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by preliminary
  prospectus (or final prospectus once RS effective)

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

28
Free-writing (Rule 164)

• Rule 433(b)(1)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by preliminary
  prospectus (or final prospectus once RS effective)

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

• Rule 433(c)
• Information in FWP
• Not conflict with RS / SEC filings
• Legend Read prospectus from EDGAR, UW,
  website, email

29
Free-writing (Rule 164)

• Rule 433(b)(1)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by preliminary
  prospectus (or final prospectus once RS effective)

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

• Rule 433(c)
• Information in FWP
• Not conflict with RS / SEC filings
• Legend Read prospectus from EDGAR, UW,
  website, email

• Rule 433(d)
• Filing of FWP w/ SEC
• By issuer (on date of use)
• By participant, if broadly disseminate

30
Hypothetical 6

• CEO Sherry of Smartway Inc (the online
  last-minute ticket marketer) works with Harold
  and Sparrow Securities to file a RS.
• Sherry and Harold meet with large institutional
  shareholders in various road shows around the
  country. They make PPT presentations and answer
  questions.
• Any gun-jumping?

Check out RetailRoadShow.com
31

• Rule 405
• Defines graphic communication
• Does not include PPTs (unless transmitted or
  simulcast)
• Rule 164 / Rule 433
• Permits free writing prospectus / subject to
  conditions
• Thus PPT handed out at bona fide roadshow could
  be FWP (and no filing if put on company website)

32
Hypothetical 7

• CEO Sherry gives an interview to SmallBiz
  magazine. In the interview, Sherry discusses the
  offering and her hope that Smartways business
  will rapidly expand due to the capital provided
  by the offering.
• The SmallBiz article quotes the entire interview.
  
• Any gun-jumping?

Smartway goes public
33
Rule 164/433 (Free writing prospectus)

• exception for media communications Rule 433(f)
• Not subject to delivery of statutory prospectus,
  legending and filing with SEC
• Still must be consistent with RS and SEC filings
  433(c)(1)
• two conditions
• media source not compensated by issuer
• Issuer files the written communication with the
  Commission with the legend within four business
  days after the issuer becomes aware of
  publication
• Filing of 1st story enough
• Filing can correct information
• Filing requirement satisfied with materials
  (including transcript) provided by issuer to
  media

34
Hypothetical 8

• Harold of Sparrow Securities emails a packet on
  the Smartway IPO to potential dealers and select
  institutional investors.
• Sparrow includes a valuation analysis, based on
  the financials in the preliminary prospectus.
  Sparrow anticipates that information in the
  packet will be sent to prospective individual
  investors.
• Sparrow forgets to legend the emails or to file
  the info packet with the SEC.
• Any gun-jumping?

35
Rule 164/433 (Free writing prospectus)

• Free writing prospectus (Rule 164 )
• allows free writing prospectus (FWP), deemed to
  satisfy 10(b) if Rule 433 conditions satisfied
• available to issuer, UW or participant
• Conditions (Rule 433)
• info may not conflict with RS or SEC filings,
• FWP must be legended (read prospectus, how
  obtain)
• must be accompanied by (or linked to)
  preliminary/final prospectus (only applies to
  non-reporting and unseasoned issuers)
• must file with SEC (on date of first use)
• issuers must file FWP and issuer info (press
  interview)
• participants must file FWP that is broad
  unrestricted dissemination

Immaterial or unintentional failures Rule
164(c)
36
Hypothetical 9

• Recall that CEO Sherry and underwriter Harold
  have embarked on a road show across the country
  to pitch the offering to institutional investors.
  
• Sherry has one of the shows recorded and posted
  as a media file on Smartways website. Might as
  well let everyone know what were doing.
• Any gun-jumping?

37
Rule 164/433 (Free writing prospectus)

• Conditions (Rule 433(d)(8), (h)(5)
• road show is FWP but need not be filed and
• road show for equity offering by non-reporting
  issuer must be filed,
• unless issuer makes at least one version of a
  bona fide electronic road show available by means
  of graphic communication to any person
• A bona fide electronic road show means a road
  show that is a written communication transmitted
  by graphic means that contains a presentation by
  one or more officers of an issuer

38
Hypothetical 10

• Sparrow Securities sends an email to its investor
  clients
• Were pleased that you are interested in the
  upcoming Smartway IPO. Please find PDF version
  of the preliminary prospectus click here.
• You might also be interested in recent stories
  about Smartway in the Wall Street Journal click
  here and Fortune click here . They give a
  quite favorable report on the company and its
  prospects.
• Any gun-jumping?

39
Free-writing (Rule 164)

• Rule 433(b)(1)
• Seasoned issuers / WKSIs
• Non-reporting / unseasoned issuers
• FWP accompanied/preceded by preliminary
  prospectus (or final prospectus once RS effective)

• In connection with a registered offering of an
  issuer meeting the requirements of this section,
  a free writing prospectus, as defined in Rule
  405, of the issuer or any other offering
  participant, including any underwriter or dealer,
  after the filing of the registration statement
  will be a section 10(b) prospectus for purposes
  of section 5(b)(1) of the Act provided that the
  conditions set forth in Rule 433 are satisfied.

• Rule 433(c)
• Information in FWP
• Not conflict with RS / SEC filings
• Legend Read prospectus from EDGAR, UW,
  website, email

• Rule 433(d)
• Filing of FWP w/ SEC
• By issuer (on date of use)
• By participant, if broadly disseminated

40
A thought question

• Consider the marketing of a securities offering.
  
• In quiet pre-filing period we prohibit all
  sales efforts, whether oral or written. Then in
  test the markets waiting period, we prohibit
  written sales efforts, but accept oral and PPT
  communications.
• Why do we allow investors in their pajamas to get
  road shows online, but they cant handle (1) oral
  communications before the RS filing or (2)
  written communications in the test the markets
  period.

41
A summary
42
Waiting period - whats permitted?

• Oral offers 5(c) no longer applies
• Preliminary prospectus that complies 10(b)
• Tombstone ad under 2(a)(10)(b) minimal info
  that ID issuer, securities, price, where get
  prelim prospectus
• Rule 135 announcement of offering (issuer,
  security, amount offered, timing, manner and
  purpose)
• Rule 134 identifying information
• (a) broader info
• (b) include legend, where get prelim prospectus
  unless (c) accompanied with prelim prospectus or
  only tombstone ad
• (d) can get investor interest, accompany prelim
  prospectus and statement that not binding, fully
  revocable
• Rule 168 safe harbor for reporting company
  (factual information, SEC-filed FLI, not
  reference offering)
• Rule 169 safe harbor for non-reporting company
  (factual info, not reference offering)
• Rule 164 / 433 free writing prospectus

43
Waiting period - whats permitted?

• Oral offers 5(c) no longer applies
• Preliminary prospectus that complies 10(b)
• Tombstone ad under 2(a)(10)(b) minimal info
  that ID issuer, securities, price, where get
  prelim prospectus
• Rule 135 announcement of offering (issuer,
  security, amount offered, timing, manner and
  purpose)
• Rule 134 identifying information
• (a) broader info
• (b) include legend, where get prelim prospectus
  unless (c) accompanied with prelim prospectus or
  only tombstone ad
• (d) can get investor interest, accompany prelim
  prospectus and statement that not binding, fully
  revocable
• Rule 168 safe harbor for reporting company
  (factual information, SEC-filed FLI, not
  reference offering)
• Rule 169 safe harbor for non-reporting company
  (factual info, not reference offering)
• Rule 164 / 433 free writing prospectus

44
Waiting period - whats permitted?

• Free writing prospectus (Rule 164)
• allows free writing prospectus (FWP), deemed to
  satisfy 10(b) if Rule 433 conditions satisfied
• available to issuer, UW or participant
• Conditions (Rule 433)
• info may not conflict with RS or SEC filings,
• FWP must be legended (read prospectus, how
  obtain)
• must be accompanied by (or linked to)
  preliminary/final prospectus (only applies to
  non-reporting and unseasoned issuers)
• must file with SEC (on date of first use)
• issuers must file FWP and issuer info (press
  interview)
• participants must file FWP that is broad
  unrestricted dissemination

45
The end