4.1.10. 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 (discussed later in the chapter).
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 a tombstone ad. Tombstone ads are covered in detail in Chapter 3’s discussion of investment company advertising, but they are used by other issuers as well.
Rule 135 states that an issuer that publishes a notice of proposed offering to be registered will not be deemed to offer its securities for sale if the notice includes a statement to that effect and it includes no more than the following information:
• The name of the issuer
• The title, amount, and basic terms of the securities offered
• The amount of the offering to be made by selling groups
• The anticipated timing of the offering
• A statement of the type and purpose of the offering, without naming the underwriters
A person may also issue a notice that contains no more information than is necessary to correct published inaccuracies about the proposed offering.
Rules 168 and 169 create a safe harbor for the communication of cer