NEW OLD GUIDANCE

SECTION 2
Forms
Title 2
Title 3
Title 4

SECTION 3
Securities Act
Exchange Act
Sarbanes-Oxley Act
SOX TABLE
Title 5

SECTION 4
33 ACT Reg
'34 ACT Reg
Reg. S-K
Reg. S-X
 

Title 5
Title 6

Interpretative Release III and Release 5180

Interpretative Release III prefaces the new old guidance with the following statement: “An issuer that is in registration should maintain communications with the public as long as the subject matter of the communications is limited to ordinary-course business and financial information, which may include the following.” What follows is a bulleted rephrase of the Release 5180 guidelines as to what is permitted while in registration:[1]

·         Advertisements concerning the issuer’s products and services;

·         Exchange Act reports required to be filed with the Commission;

·         Proxy statements, annual reports to security holders and dividend notices;

·         Press announcements concerning business and financial developments;

·         Answers to unsolicited telephone inquiries concerning business matters from securities analysts, financial analysts, security holders and participants in the communications field who have a legitimate interest in the issuer’s affairs; and

·         Security holders’ meetings and responses to security holder inquiries relating to these matters.

The Interpretative Release III guidance references Release 5180 and the earlier releases in a supporting footnote; hence, there may be a presumption that there was no intention to change the guidance. There are some subtle differences, however, and it is not clear whether it is intended to provide more latitude or is an effort to restate prior guidance in “plain English.” The introductory sentence in Release 5180 references “the flow of factual information to shareholders and the investing public.” Emphasis added. Interpretative Release III refers to communications “limited to ordinary-course business and financial information.” Emphasis added. Interpretative Release III refers to “press announcements concerning business and financial developments.” Release 5180 referred to “[c]ontinue to make announcements to the press with respect to factual business and financial development.” Emphasis added. Interpretative Release III permits “answers to unsolicited telephone inquiries concerning business matters from securities analysts, financial analysts, security holders and participants in the communications field who have a legitimate interest in the issuer’s affairs.” Emphasis added. Release 5180 allows issuers to “[a]nswer unsolicited telephone inquiries from stockholders, financial analysts, the press and others concerning factual information.” Emphasis added.

Release 5180 immediately following the approved list of what can be communicated while in registration cautioned issuers as follows: “[I]ssuers . . . should avoid: 1. Issuance of forecasts, projections, or predictions relating but not limited to revenues, income or earnings per share. 2. Publishing opinions concerning values.”[2] The Release 5180 restrictions on forward-looking statements are conspicuous by their absence from Interpretative Release III. The studied avoidance in the Interpretative Release of any reference to “factual” information and absence of caution relating to forecasts, projections, and value may suggest that the new old guidance may allow at least some issuers to continue to issue forecasts as “ordinary-course business” financial information while in registration. This is an area that the Aircraft Carrier Release made some concessions even for issuers that could not meet the standards to register securities on the proposed Form B. If securities were registered on the catch-all Form A by a reporting company, the issuer, underwriter or participating dealers would have been allowed to disseminate regularly released forward-looking information. To constitute “regularly released” forward-looking information, the proposed Rule would have required that the issuer “customarily releases information of this type in the ordinary course of business on a regular basis,” and “has done so in the two fiscal years (and any portion of a fiscal year) immediately prior to the communication” and the release “is consistent with past practice.”[3] Emphasis added.

The above suggests that “ordinary-course business,” the operative words of the Interpretative Release III guidance, could include forward-looking information. On the other hand, there is the purported reliance on Release 5180 as the basis for communications that are allowed without constituting free writing, and Release 5180 specifically precludes forward-looking statements. It is unfortunate that an Interpretative Release intended to clarify what can be included on a web site leaves the issue of forward-looking statements ambiguous without once referencing forward-looking, forecast, or projection. That ambiguity aside, communications within the foregoing guidance “may be posted on an issuer’s web site when in registration, either directly or indirectly through a hyperlink to a third-party web site, including the web site of a broker-dealer that is participating in the registered offering.”[4]