Testing the Waters – Section 105(c) of the JOBS Act - YouTube

I am attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate,

securities, and business transactions law firm.

Today is the continuation in a LawCast series detailing testing the waters when conducting

an offering using form S-1.

The waiting or pre-effective period is that timeframe between the filing of a registration

statement and the effective date of that registration statement.

As with all periods in the offering process, communications with potential investors are

strictly limited and regulated during this period.

Also, as with other offering periods, many exemptions and safe harbors exist to allow

for communications during the pre-effective waiting period.

The pre-effective period is the period during which, among other things, the company begins

marketing the offering, through real-time oral offers, including calls to potential

investors.

The oral offers need not be accompanied by any documentation, or a copy of the filed

S-1 but are subject to the anti-fraud provisions under the securities laws.

Section 5(b)(1) of the Securities Act prohibits written offers other than by means of a prospectus

that meets the requirements of Section 10 of the Securities Act.

An S-1 meets such requirements and so any written offers would need to be accompanied

by the filed preliminary S-1.

Such bans on communications are designed to prohibit inappropriate marketing, conditioning

or hyping of the security before all investors have access to publicly available information

about the company so that they can make informed investment decisions.

Other than a free writing prospectus for qualified companies and test-the-waters communications

by an emerging growth company satisfying the requirements of Section 5(d) of the Securities

Act, which is the implementation to Rule 105(c) of the JOBS Act, the only written offer materials

that may be distributed by the company during this period is the preliminary prospectus,

which must satisfy specified SEC requirements.

Rule 105 is the same during the pre-effective period as it is for the pre-filing period.

I will give a reminder on those provisions as well as details on free writing prospectus

and communications that are not deemed an offer in future LawCasts in this series.

While binding commitments cannot be made during this period, the underwriters will receive

indications of interest from potential purchasers, including as to the price they would be willing

to pay and the number of shares they would be willing to purchase.

Also during this period, key management personnel generally will make a series of presentations

covering the company’s business and industry, market opportunities and financial matters

to the investment community.

The underwriters will use these presentations as an opportunity to ask questions and establish

their due diligence.

This presentation period is commonly referred to as the road show and, generally, is conducted

in the two-to-three-week period immediately prior to the effectiveness of the registration

statement and ability to complete actual sales of the securities.

I am securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer

of LawCast.

Should you have any questions about today’s topic, please visit SecuritiesLawBlog.com

and LawCast.com, or contact me directly.

Inquiries of a technical nature are always encouraged.