The same 20-slide deck can be routine in March and an illegal offer in May. Three things decide which it is: who sends the deck, who receives it and where the deal sits on the registration calendar. The principal who approves distribution is the last checkpoint.
The Securities Act of 1933 (Securities Act) requires a company selling new securities to tell its story through a filed disclosure document rather than sales talk. The Securities and Exchange Commission (SEC) enforces that requirement through Section 5, which restricts offers and sales made through interstate commerce or the mails. Nearly every call, email and web post uses interstate commerce or the mails, so Section 5 reaches almost everything your bankers and salespeople say about a deal.
Section 5 divides a registered offering into three periods, and each one changes what your firm may say:
- Pre-filing period: Section 5(c) bars every offer to sell or offer to buy, oral or written, until a registration statement is filed. Offering early is called gun-jumping.
- Waiting period: After filing, oral offers are legal. Section 5(a) still bars sales, and Section 5(b)(1) requires any written offer that counts as a prospectus to satisfy Section 10.
Common mistakes
- Letting bankers borrow issuer safe harbors. See the TRAP on issuer-only safe harbors.
- Naming underwriters under Rule 135. Only a post-filing Rule 134 notice may list the syndicate.
- Using the wrong aftermarket clock. A listed IPO gets 25 days, not 90, and a previously reporting issuer gets none.
Bottom line
- Section 5(c) bars offers before filing, Section 5(a) bars sales before effectiveness, and Section 5(b) requires Section 10 prospectuses for written offers and for delivery.
- Issuer-only safe harbors: Rule 163A (more than 30 days out, no offering reference), Rule 163 (WKSIs, $700 million non-affiliate float), Rule 168 (reporting issuers, guidance allowed), Rule 169 (any issuer, facts only).
- Rule 135 announces a deal without naming underwriters; Rule 134 notices follow filing, may name underwriters and need the not-yet-effective legend; Rule 135a ads name no fund and show the sponsor.
- Rule 137 shields research by non-participating firms, Rule 142 excludes qualifying standby purchasers from underwriter status, and Rule 153a requires delivery before a merger vote.
Exam shortcut
Run every communication stem through the same order: period, speaker, written or oral, then the shelter's conditions. The speaker check eliminates the most answers. If a banker, syndicate desk or dealer sent the piece, cross off Rules 163, 163A, 168 and 169 immediately. On notice questions, look for the single fatal detail: an underwriter's name in a Rule 135 notice, or a projection or adjective in a Rule 134 notice.
The full lesson (about 5,228 words, 35 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- E17
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