Capital Markets

Quiet Period May Get Noisier

Proposals scheduled to be considered next week by the Securities and Exchange Commission would grant companies more latitude in what they can say p...
Stephen TaubOctober 21, 2004

The “quiet period” that precedes public offerings — which became an issue recently when Google Inc.’s IPO was threatened — may get a lot noisier following a meeting of the Securities and Exchange Commission scheduled for next Tuesday.

At present, the Securities Act of 1933 restricts companies from issuing certain types of communication from the time they file a registration statement with the SEC until the date of the offering. Many critics say this rule is outdated and that it can hurt investors by giving them too little information.

In the case of Google, the cause for concern was an interview with co-founders Sergey Brin and Larry Page published in Playboy magazine. The SEC admonished Google (on the theory, perhaps, that some investors had actually bought the magazine for the articles) but allowed the IPO to proceed.

The proposals scheduled to be considered next week would grant companies more latitude in what they can say prior to a public offering. They would address communications related to registered securities offerings, delivery of information to investors, and procedural restrictions in the offering and capital-formation process, according to a brief announcement on the SEC website.

“This is different than almost all the regulation we’ve done in the last two years, where we’ve been imposing more requirements,” SEC commissioner Roel Campos told The Wall Street Journal. “This is giving relief and taking away certain requirements in a way that’s thoughtful.”

Currently, once a company has filed the registration for an offering, its only allowable written communication during the quiet period is the offering’s prospectus; all other communication must be oral and must toe the line drawn by the prospectus. The SEC will consider allowing written communication including letters, emails, and published interviews, reported the Journal, provided that it is publicly filed with the commission, to provide investors with more-timely information.

The commission also plans to consider allowing companies that are established in the marketplace to bring offerings to the public without initially filing a registration statement, Campos told the paper.

Another possible proposal would permit pre-IPO companies to reveal basic information about their management philosophy and their business — perhaps including projected stock prices, revenue predictions, and order backlogs — during the quiet period, according to, citing people familiar with the matter. The website noted that such companies would be required to take responsibility for those statements, subjecting themselves to possible lawsuits if they provided inaccurate historical data or made projections in bad faith. also reported that the SEC is considering whether to shorten the pre-IPO 45-day quiet period to 30 days.