The federal securities laws do not define the term "quiet period," which is also referred to as the "waiting period." However, a quiet period extends from the time a company files a registration statement with the SEC until SEC staff declare the registration statement "effective." During that period, the federal securities laws limit what information a company and related parties can release to the public. The failure to comply with these restrictions generally is referred to as "gun-jumping."
On June 29, 2005, the Commission voted to adopt modifications to the registration, communications, and offering processes under the Securities Act of 1933. Among many other provisions, the rules update and liberalize permitted offering activity and communications to allow more information to reach investors by revising the "gun-jumping" provisions under the Securities Act. The cumulative effects of these rules are as follows:
- Well-known seasoned issuers are permitted to engage at any time in oral and written communications, including use at any time of a new type of written communication called a "free writing prospectus," subject to enumerated conditions (including, in some cases, filing with the Commission).
- All reporting issuers are, at any time, permitted to continue to publish regularly released factual business information and forward-looking information.
- Non-reporting issuers are, at any time, permitted to continue to publish factual business information that is regularly released and intended for use by persons other than in their capacity as investors or potential investors.
- Communications by issuers more than 30 days before filing a registration statement will be permitted so long as they do not reference a securities offering that is the subject of a registration statement.
- All issuers and other offering participants will be permitted to use a free writing prospectus after the filing of the registration statement, subject to enumerated conditions (including, in some cases, filing with the Commission). Offering participants, other than the issuer, will be liable for a free writing prospectus only if they use, refer to, or participate in the planning and use of the free writing prospectus by another offering participant who uses it. Issuers will have liability for any issuer information contained in any other offering participant's free writing prospectus as well as any free writing prospectus they prepare, use, or refer to.
- The exclusions from the definition of prospectus are expanded to allow a broader category of routine communications regarding issuers, offerings, and procedural matters, such as communications about the schedule for an offering or about account-opening procedures.
- The exemptions for research reports are expanded.
A number of these rules include conditions of eligibility. Most of the rules, for example, are not available to blank check companies, penny stock issuers, or shell companies.
The rules address the treatment under the Securities Act of electronic communications, including electronic road shows and information located on or hyperlinked to an issuer's website. The rules define written communication as any communication that is written, printed, a radio or television broadcast, or a graphic communication. The definition of graphic communication and, thus, electronic road show excludes communications that are carried live and in real-time to a live audience, regardless of the means of transmission. Electronic road shows for initial public offerings of common equity or convertible equity securities will have to make a bona fide electronic road show readily available to an unrestricted audience to avoid filing the electronic road show with the Commission. No other road shows will be subject to filing.
The effective date of the rules was December 1, 2005. For more information, please see Release No. 33-8591 — Securities Offering Reform.
In addition, Title I of the Jumpstart our Business Startups (JOBS) Act further liberalized permitted offering activity and communications for emerging growth companies. An emerging growth company in a registered offering is permitted to "test the waters" through oral or written communications with qualified institutional buyers (QIBs) or institutions that are accredited investors either prior to or following the filing of a registration statement, provided that no security may be sold unless accompanied or preceded by a Section 10(a) prospectus. The JOBS Act also liberalized the use of research reports on emerging growth companies.