The Quiet Period Pending Securities Registration Statement Effectiveness

There is a “quiet period” between the time that a company files a registration statement with the Securities and Exchange Commission for a new public securities offering and the time that the Commission declares the registration statement effective. During the quiet period, referred to as the “waiting period” also, the company and related parties are prohibited by federal securities laws from releasing information to the public that could be construed as promoting sale of the securities covered by the as yet unapproved registration statement.

There also are restrictions imposed pursuant to the Securities Act of 1933 and corresponding Commission rules on information issued publicly by a company prior to the company’s filing of a registration statement. Such restrictions go into effect at the point the company and an underwriter agree to conduct a public offering and remain in effect until 90 days after the prospectus in the registration statement becomes effective. During that time period, no offers regarding the proposed stock issue may be made by persons connected with the company, including directors, officers, employees, and company underwriters. The purpose of the restrictions is to avoid promotion of the proposed stock issue outside a registration statement and its prospectus. If there is publicity issued that arouses public interest in the company during this quiet period, the Commission may impose a “cooling off” period that holds off the proposed securities offering for an additional 30 days.

During the quiet period between a company’s filing of a registration statement and declaration by the Commission of the statement’s effectiveness, Commission regulations bar circulation of any information relating to the securities offering other than a preliminary prospectus. All other information issued by the company must be in the ordinary course of its business. As a result of the limitation regarding information on the proposed offering, it is anticipated that no written documents will be distributed even at so-called “road shows” describing the offering other than the preliminary prospectus. The Commission otherwise permits only the release of information regarding the size of the offering and the identity of underwriters of the offering.

Regarding the release of information in the ordinary course of business for a company that has filed a registration statement, the Commission has stated that the company should not initiate publicity pending Commission declaration of the effectiveness of the registration statement. It is expected that the company will continue to respond to normal inquiries concerning the company’s financial condition and business operations. However, companies with pending registration statements are expected to avoid forecasts, predictions, or opinions concerning sales, earnings, and the value of securities. Release of information directly or indirectly related to information provided in the pending registration statement could result in imposition of an additional 30-day cooling off period prior to effectiveness of the registration statement.