Series 24: Communications Guidelines: Cooling-off Period

Communications Guidelines: Cooling-off Period

Prohibited communications:

• • Sales. No sales of the issue are allowed during the registration period. Underwriters can only collect “indications of interest.”
• • Written offers. Most written offers need to follow strict rules (see below).

Acceptable communications:

• • Oral offers. Underwriters, issuers, and registered reps are allowed to verbally discuss the offering with investors.
• • Preliminary prospectuses. This is the primary document to entice indications of interest.
• • FWPs. Free-writing prospectuses may be prepared by any type of eligible issuer.

The SEC has issued several rules that provide a safe harbor from the gun-jumping provisions for communications that include only general information about the offering. Rule 134 allows written communications and advertisements of this type. Solicitations to buy can be made only if accompanied by a preliminary prospectus and a disclaimer.

Often this information is presented in what is called a Tombstone Ad. This kind of ad is placed in a newspaper or financial magazine and contains a black border that resembles a tombstone. To ensure that tombstone ads will not be construed as an o