Afraid of revolution

Author: | Published: 1 Oct 2007

Nehru jackets, plans for universal health care in the US and the New Orleans levees. All illustrate that innovative ideas are most valuable if accompanied by good and thoughtful execution. Such is the case with the free-writing prospectus.

But we get ahead of ourselves. We should begin by pointing out that securities offering reform changed the registration, communication and offering rules under the Securities Act of 1933. The new rules, which have been effective since December 2005, introduced a new form of permitted communication, the free-writing prospectus.

Prior to securities offering reform, the only written material that could be distributed in connection with a registered securities offering was a prospectus that conformed to statutory requirements, or limited communications that were expressly excluded from being construed as a statutory prospectus. Although offering participants can now choose to use free-writing prospectuses, they have not been using them much. And when they do,...