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Gun-Jumping Rules

Gun-Jumping Rules. Gun Jumping Rules. Sale – Section 2(a)(3).

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Gun-Jumping Rules

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  1. Gun-JumpingRules

  2. Gun Jumping Rules • Sale – Section 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. …

  3. Gun Jumping Rules • Issuer Categories • – Non-Reporting Issuer • –No periodic reports • – Unseasoned Issuer • – Reporting, but not eligible for S-3 • – Seasoned Issuer • – S-3 eligible for primary offerings • – Well-Known Seasoned Issuers (WKSI) • – S-3 eligible for primary offerings, and • – $700 million in equity or $1 billion in debt • offerings over last three years

  4. Gun-Jumping Rules POST-EFFECTIVEPERIOD WAITINGPERIOD PRE-FILINGPERIOD final prospectus §5(b)(1)-(2)§5(b)(2)§10(a) no sales §5(a) preliminary prospectus §5(b)(1)§10(b) no offersto sell orto buy§5(c) • Stages of the Registration Process FILED START FINISH EFFECTIVE “in registration”

  5. Gun-Jumping Rules • Section 5(a) of the 1933 Act • Unless aregistration statementisin effectas to a security, it shall beunlawful for any person, directly or indirectly • (1) to ...sell [a] securitythrough the use or medium of any prospectus or otherwise; or • (2) to carry ... in interstate commerce ... any ... security for the purpose of sale or for delivery after sale.

  6. Gun-Jumping Rules • Section 5(b) of the 1933 Act • (b) It shall be unlawful for any person • to ... transmit anyprospectusrelating 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 • to carry ... any such security for the purpose ofsaleor for delivery after sale, unlessaccompanied or preceded by a prospectusthat meets the requirements of subsection(a) of section 10.

  7. Gun-Jumping Rules • Section 5(c) of the 1933 Act (c) It shall beunlawfulfor any person ...to offer to sell or offer to buy... any security, unless aregistration statementhas beenfiledas to such security ...

  8. Pre-Filing Period • In re Carl M. Loeb, Rhoades & Co. PRESS RELEASE offering expected proceeds expected asset size nationwide investment banking group description ofland holdings ARVIDA

  9. Pre-Filing Period • In re Carl M. Loeb, Rhoades & Co. • What counts as an offer? • 2. If investors eventually will receive (or have access to) a final statutory prospectus, why does it matter that they earlier obtain information that “conditions” the market?

  10. Pre-Filing Period • SEC Release No. 3844 • Does the issuer’s communication condition the market? • motivation of the communicationarranged after a financing decision is more likely an offer • type of informationsoft, forward-looking information is more likely an offer • breadth of the distributionbroader means more likely an offer • form of the communicationwritten, easily reproduced and distributed communications are more likely an offer • mentioning facts about the offeringnaming the underwriter is more likely an offer

  11. Pre-Filing Period • SEC Release No. 5180 • Did the issuer intend to condition the market? • purposeinitiating publicity when in registration • soft informationsoft, forward-looking information

  12. Pre-Filing Period • Graphic Communications & Hyperlinks • Rule 405 • – Includes all electronic communications as written communications • – Excludes “real time” communications • - Emails, CD-roms, recorded road show • Rule 433(e)(1) p. 158 • – Hyperlinks can be an offer • - Links from your company site to another site can result in incorporating that second site into your offer document

  13. Pre-Filing Period • New Safe Harbors Rule 163A – prior to 30 days before the filing of the registration statement (may not reference the offering) Rule 163 – communications prior to the filing of the registration statement by well-known seasoned issuers Rule 168 – regularly released factual and forward-looking information by reporting issuers (may not reference the offering) Rule 169 – regularly released factual information by non-reporting issuers given only to persons other than in their capacities as investors or potential investors (may not reference the offering)

  14. New Prefiling Period Safe Harbors

  15. New Prefiling Period Safe Harbors

  16. Pre-Filing Period • Rule 135 • For purposes of section 5 . . ., anotice of a proposed offeringto be registered under the Act willnot be deemed to offerits securities for sale through that notice if: • Legend. The noticeincludesa statement . . . that it doesnotconstitutean offerof any securities for sale; and • Limited notice content. The notice otherwise includesno morethan the following information: Thenameof the issuer; Thetitle, amount and basic termsof thesecurities offered; . . . Theanticipated timingof the offering; A brief statement of themanner and the purposeof the offering,without naming the underwriters

  17. Gun-Jumping Rules • 1. Pre-Filing Period POST-EFFECTIVEPERIOD WAITINGPERIOD PRE-FILINGPERIOD FILED START FINISH EFFECTIVE Rule 135 Rule 163 Rule 163A 30 days Rule 168 Rule 169

  18. Pre-Filing Period law schoolfriend • Smartway (Hypothetical 1) “I can get you in on the ground floor at $20 per share.” Sherry CEO PRE-FILINGPERIOD

  19. Pre-Filing Period • SEC Release No. 5180 Footnote 1 [Deleted from Casebook] “In registration” is used herein to refer to the entire process of registration, at least from the time an issuer reaches an understanding with the broker-dealer which is to act as managing underwriter prior to the filing of a registration statement….”

  20. Pre-Filing Period • Section 5(c) of the 1933 Act It shall be unlawful for any person ... 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 ... any security, unless a registration statement has been filed as to such security . . .

  21. Pre-Filing Period law schoolfriend • Smartway (Hypothetical 1, Scenario 1) “The Boston Red Sox will win the World Series.” “I can get you in on the ground floor at $20 per share.” Sherry CEO PRE-FILINGPERIOD

  22. Pre-Filing Period • Smartway (Hypothetical 1; Scenario 1) Grey Area Boston Red Sox will win in 2006 I “offer” you securities

  23. Pre-Filing Period ad incollegenewspapers • Smartway (Hypothetical 1, Scenario 2) “optimistic” “50% increase in business” does not mention IPO does not say “offer” “IN REGISTRATION”

  24. Pre-Filing Period ad incollegenewspapers • Smartway (Hypothetical 1, Scenario 3) “Smartway’s strong financial future ensures thatwe’ll be arounda long time tohelp customerslike you!” “IN REGISTRATION”

  25. Pre-Filing Period • Safe Harbors Rule 168 – regularly released factual and forward-looking information by reporting issuers (may not reference the offering) Rule 169 – regularly released factual information by non-reporting issuers given only to persons other than in their capacities as investors or potential investors (may not reference the offering)

  26. Pre-Filing Period remove “soft” informationfrom website • Smartway (Hypothetical 1, Scenario 4) investment information on www.fool.com “IN REGISTRATION”

  27. Pre-Filing Period sparrow securities • Smartway (Hypothetical 2) Harold investmentbanker Sherry CEO letter of intent managingunderwriter

  28. Pre-Filing Period • Section 5(c) of the 1933 Act It shall beunlawfulfor any person ...to offer to sell or offer to buy... any security, unless aregistration statementhas beenfiled as to such security ...

  29. Pre-Filing Period • Sale – Section 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. The terms defined in this paragraph and the term "offer to buy" as used in subsection (c) of section 5 shall not includepreliminary negotiationsor agreements between anissuer... and anyunderwriteror among underwriters who are or are to be in privity of contractwith an issuer ...

  30. Pre-Filing Period • Smartway (Hypothetical 2) underwriting syndicate (15 banks)

  31. Pre-Filing Period • Sale – Section 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. The terms defined in this paragraph and the term "offer to buy" as used in subsection (c) of section 5 shall not includepreliminary negotiations or agreements between an issuer . . . and any underwriteror among underwriters who are or are to be in privity of contractwith an issuer . . .

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