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The Waiting Period — Impact of SORThe big impact of SOR during the waiting period is the Rule 433 free writing prospectus. Subject to the anti-fraud and civil liability provisions, once a registration statement was filed any information could be communicated to prospective investors provided it was oral--i.e. over the telephone or in person. Rule 433 subject to a number of conditions permits similar information to be communicated in written form after the registration statement is filed. Understanding the use of a free writing prospectus requires, among other things, integrating the Rule 405 definitions of a free-writing prospectus, of written communications, and of graphic communications with Rule 433, which sets forth the conditions to the use of a free writing prospectus, and Rule 164, which precludes ineligible issuers from relying on Rule 433 with a limited exception for some of them. For certain Rule 433 purposes, we have to classify issuers as non-reporting companies, unseasoned reporting companies, seasoned reporting companies, and well-known seasoned companies. We commence with the definition of free-writing prospectus. Rule 405 defines a free writing prospectus, except as otherwise provided, as any written communication used after a registration statement is filed (or in the case of a well-known seasoned issuer whether or not a registration statement is filed). Since, as we discuss below (§ 1:11), a free writing prospectus generally has to be filed with the Commission, the Rule 405 definition also excludes from the definition some writings that do not have to be filed or are otherwise filed; to wit: a writing that does not constitutes an offer to sell or solicitation of an offer to buy; section 10(a), Rule 430, Rule 430A, Rule 430B, Rule 430C, or Rule 431 prospectus, and a writing that is excluded from the Section 2(a)(10)(a) definition of prospectus (e.g. a Rule 134 communication). See § 1:15 Also excluded are communications within Rule 167 pertaining to asset-backed securities that are filed pursuant to Rule 426 A written communication is defined by Rule 405 as “any communication that is written, printed, a radio or television broadcast, or a graphic communication.” The definition of a graphic communication in Rule 405 in turn is expanded to include “all forms of electronic media, including, but not limited to, audiotapes, videotapes, facsimiles, CD-ROM, electronic mail, Internet Web sites, substantially similar messages widely distributed (rather than individually distributed) on telephone answering or voice mail systems, computers, computer networks and other forms of computer data compilation.” Rule 433(a) conceptually provides that a written communication used in accordance with the provisions of the Rule is prospectus permitted under section 10(b) of the Act for purposes of sections 2(a)(10), 5(b)(1), and 5(b)(2) of the Act. Of particular significance in the context of using a free writing prospectus it is a Section 10 prospectus for the purpose of Section 5(b)(1), which aaprohibits the use of a prospectus other than a Section 10 prospectus after the filing of a registration statement. An ineligible issuer with some limited exceptions cannot use a free-writing prospectus or take advantage of Rule 433. For determining ineligible issuers you are referred to and should and are expected to read § 1:4 Classification of issuers—Ineligible issuers of Part 16. Rule 433 provides indirectly rather than directly that ineligible issuers generally are precluded from using a free writing prospectus. Rule 433 provides the provisions of Rule 433 permitting the use of free writing communications are applicable to “any issuer (except as set forth in Rule 164).” Rule 164(e)(1) provides that Rule 433 is available only if “the issuer is not an ineligible issuer as defined in Rule 405 (or in the case of any offering participant, other than the issuer, the participant has a reasonable belief that the issuer is not an ineligible issuer).” Rule 164(e)(2), however, provides that Rule 164(e)(1) is not applicable to an issuer, other than an issuer that during the last three years was a blank check or shell company or the issuer of penny stock (See Part III for definition of penny stock), with respect to a limited free-writing prospectus described as follows: “A free writing prospectus that contains only descriptions of the terms of the securities in the offering or the offering.” The description of what may be included by such otherwise ineligible issuers in parenthesis also includes certain very specific information pertaining to asset-backed securities that we do not pursue. We are not certain how this limited type of free-writing prospectus permits ineligible issuers other than those excluded to include information that could not be included in a Rule 134 communication. We will revisit that issue when we consider Rule 134 in more detail. Rule 164(f) also excludes from the availability of Rule 433 securities offered by a registered investment company or business development company; Rule 164(g) excludes securities registered in connection with a business combination and securities registered on Form S-8 other than by a well-known seasoned issuer, and Rule 164(h) provides for the date at which it is to be determined whether the issuer is “an ineligible in respect of an offering.” Before we consider the classification as seasoned and unseasoned reporting companies, we must get into the '34 Act. We have noted previously that any listed company must have the listed security registered under the Exchange Act because Section 12(b) so provides and that in order to be listed on Nasdaq as a smallcap or Nasdaq National Market security, the security must be registered under the Securities Act. Section 13(a) imposes on all companies with a security registered under the Exchange Act to file the '34 Act reports mandated by rule (Annual Report on Form 10-K, Quarterly report on Form 10-Q and current reports on Form 8-K for U.S. issuers). This accounts for the vast majority of reporting companies. A company may, however, have to register a class of securities under the Exchange Act and become subject to the reporting requirements even though not listed on a stock exchange or Nasdaq because it has 500 shareholders of record in a class of equity securities and total assets of $10 million or more. Finally, companies without a class of securities registered under the Exchange Act must file the same '34 Act reports pursuant to Section 15(d) of the Exchange Act if they previously registered an offering of securities under the Securities Act. You now know how to distinguish between a reporting company and a non-reporting company that is making a registered offering of securities, the latter generally involving an IPO. The notion of seasoned and unseasoned reporting companies is introduced by the SOR in connection with the conditions to the use of a free writing prospectus. To make this distinction, we have to get even further ahead of ourselves. Form S-1 is the principal Securities Act form to be used when no other form is prescribed and is typically is the form to be used in connection with an IPO. A company that has been a reporting company for may in connection with certain offerings may use a Form S-3. Form S-3 allows a good deal of the information included in a registration statement/prospectus to be incorporated by reference from '34 Act reports filed with the Commission. Form S-1 heretofore did not, although SOR provides for a more limited form of incorporation by reference by a reporting company that we will get into in due course. What we need to know for the purpose of distinguishing between seasoned and unseasoned reporting companies is that a reporting company that has met all the reporting requirements for one year and some other requirements set forth in General Instruction I.A. can use Form S-3 for a primary offering of its securities (i.e. of its own securities for cash), but only if it meets the requirements of General Instruction I.B.1 to the Form S-3, which requires it have a public float of $75 million (i.e. the market value of its common equity held by non-affiliates). See Form S-3 Go to Hypotheticals 5A and be prepared to answer the questions 1 through 9. With that
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