Risk & Compliance

SEC Enlivens ‘Quiet Periods’

The commission's proposed rules would reportedly allow some executives to be interviewed and perhaps enable companies to boost offerings via televi...
Stephen TaubOctober 28, 2004

The Securities and Exchange Commission has proposed rules that would allow the largest companies to do a lot more talking before they issue shares of stock. The new regulations would permit some executives to take part in interviews and possibly allow companies to advertise offerings on television, according to Reuters.

The most significant revisions would apply to “well-known seasoned issuers”—companies with either $700 million worth of public common-equity float or have issued $1 billion of registered debt in the preceding three years, according to the SEC.

Under the proposal, such issuers would be allowed 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”—which the commission doesn’t define— subject to certain conditions.

The so-called quiet period begins when a company files a statement with the SEC to register new stock and ends when the agency approves the registration statement, according to The AP. Dating back more than 70 years, the laws governing the periods limit the information that company executives and investment bankers underwriting the stock offering can release publicly other than through the prospectus.

The SEC stressed that the bulk of its new proposal “would not apply to blank check companies, penny stock issuers, or shell companies.”

Further, company executives would be held liable for any misstatements, according to the Associated Press.

SEC Commissioner Roel Campos said a number of the current rules are “almost silly,” according to Reuters. He cited, for example, one rule that bars brokers from faxing an offering prospectus to a potential investor, but permits them to read it aloud over the phone. “These changes to the offering process should significantly lower the cost of raising capital,” Campos added.

SEC Commissioner Harvey Goldschmid estimates that corporations would save almost $200 million annually from the new rules, according to the wire services.