Free Writing Prospectus
Quick Answer
A free writing prospectus (FWP) is a written offer made after the registration statement is filed that is not a statutory prospectus and not a tombstone. Typical examples are term sheets, electronic road-show recordings, and sales memos. The free-writing prospectus rule authorizes the use of FWPs in connection with registered offerings and cures immaterial filing or legend failures made in good faith. The FWP conditions set the mechanics: each FWP must contain a prescribed legend pointing to EDGAR; an FWP prepared by the issuer or used by an offering participant must be filed with the SEC by the date of first use; the issuer / participant must retain the FWP for 3 years after the offering. Eligibility is tiered: WKSIs and seasoned issuers may use FWPs at any time post-filing; unseasoned and non-reporting issuers may use FWPs only after filing a preliminary prospectus with pricing information, and the FWP must be accompanied or preceded by the most recent statutory prospectus. Ineligible issuers may not use FWPs at all.
The FWP framework is the modern way to do free-form marketing in a registered deal. The principal must know who is eligible, what the filing and legend mechanics are, and the trap that an FWP cannot replace a preliminary prospectus.
What Is an FWP?
| Element | Definition |
|---|---|
| Format | A written offer that is not a statutory prospectus and not a tombstone |
| Common examples | Term sheets (deal economics, structure summary), electronic road-show recordings (recorded webcast or video pitch), sales memos (analyst-style write-ups by the underwriter), investor presentations distributed in writing |
| What it is NOT | A preliminary prospectus, a final prospectus, or a tombstone |
The term "free writing" reflects what the rule does: it lets the issuer and underwriters communicate "freely" in writing post-filing without forcing every written communication into the statutory prospectus form. The price for that freedom is the FWP mechanics.
Exam Tip: Gotchas
- An FWP is post-filing only. A pre-filing communication that resembles an FWP is governed by the pre-filing safe harbors (WKSI pre-filing-offer / 30-day shield / regularly-released information / proposed-offering notice), not by the FWP framework.
- A live, in-person roadshow is NOT an FWP. It is not a "written communication." A recorded electronic roadshow IS a graphic communication and is treated as an FWP unless made freely available without restriction. (More on this in the forward-looking topic.)
- An FWP is a "prospectus" for civil-liability purposes. A misstatement in an FWP creates the same civil liability as a misstatement in the final prospectus.
Authorization and the Cure for Mechanical Failures
The free-writing prospectus rule does two things:
| Function | What the Rule Provides |
|---|---|
| Authorizes use of post-filing FWPs | Establishes the FWP as a permitted form of written offer in connection with a registered offering |
| Cures immaterial mechanical failures | If the filer acted in good faith and made reasonable efforts to comply, an immaterial or unintentional failure to file or include the legend can be cured |
The cure provision is narrow. It is for the inadvertent skip of a legend or a missed filing that is corrected promptly when discovered. A deliberate or reckless failure (or a failure that is not corrected) is not within the cure.
Exam Tip: Gotchas
- The cure is for IMMATERIAL, UNINTENTIONAL failures. It does not bless an FWP that was deliberately not filed. The cure is reserved for technical lapses corrected in good faith.
- The cure preserves the FWP, not civil liability for misstatements. Even when the cure works, a misstatement in the FWP is still a civil-liability question. The cure fixes the framework status of the communication, not its substantive accuracy.
The Operating Conditions for FWPs
The FWP framework is the operating manual for free-writing prospectuses. Three categories of conditions apply: filing, legend, and recordkeeping, with eligibility tiered by issuer status.
Filing
| Who Prepares / Uses the FWP | Filing Obligation |
|---|---|
| Issuer | Must file the FWP with the SEC by the date of first use, with limited exceptions |
| Offering participant (underwriter, dealer, selling security holder) | Must file the FWP with the SEC by the date of first use if the FWP is "broadly disseminated" or otherwise required to be filed |
| Roadshow recording | An issuer-prepared roadshow recording is a "written communication" and is filed unless the issuer makes the recording available without restriction to all interested investors (typically by posting it publicly on the issuer's website with a statutory-prospectus-compliant final prospectus available) |
Legend
Each FWP must contain a prescribed legend that:
- Identifies the issuer by name
- Points the recipient to the registration statement on EDGAR (URL or instruction to obtain free of charge from the SEC's EDGAR system)
- Identifies a contact (typically the underwriter) for additional copies of the prospectus
Recordkeeping
- The issuer / offering participant must retain the FWP for 3 years after the offering is completed
- Records must be made available to the SEC and FINRA on examination
Treatment for Civil Liability
- An FWP is a prospectus for civil-liability purposes
- Misstatements in the FWP create the same civil liability as misstatements in the final prospectus
Exam Tip: Gotchas
- The FWP filing trigger is FIRST USE, not first publication. An FWP shown in a one-on-one investor meeting "first uses" the FWP at that meeting; the filing has to follow within the rule's window from first use.
- The legend is mandatory. A "good" FWP without the prescribed legend is a defective FWP and (absent the cure for immaterial failures) an illegal prospectus.
- A roadshow recording that is "private" (sent to selected institutions through a private link) is a filed-or-fail FWP. Missing the filing creates a gun-jumping-style violation. Making the recording publicly available to all interested investors (with the prospectus available) takes the recording out of the FWP filing requirement.
- The 3-year recordkeeping clock runs from completion of the offering, not from first use of the FWP. A firm that destroys FWP files after the deal closes will fail an SEC or FINRA exam.
Eligibility Tiered by Issuer Status
| Issuer Type | When FWPs May Be Used | Conditions |
|---|---|---|
| Well-known seasoned issuer (WKSI) | At any time post-filing | Standard FWP conditions (filing, legend, recordkeeping) |
| Seasoned issuer (Form S-3 / F-3 eligible by reason of timely reporting and public float) | At any time post-filing | Standard FWP conditions |
| Unseasoned reporting issuer (reporting but not S-3 / F-3 eligible) | Only after the preliminary prospectus containing pricing information has been filed | FWP must be accompanied or preceded by the most recent statutory prospectus when delivered |
| Non-reporting issuer (typically the company's first registered deal) | Only after the preliminary prospectus containing pricing information has been filed | FWP must be accompanied or preceded by the most recent statutory prospectus |
| Ineligible issuer | NOT permitted to use FWPs (with a narrow descriptions-of-securities exception only) | n/a |
An ineligible issuer is broadly an issuer that has failed to file required periodic reports, is in or recently emerged from bankruptcy, has been the subject of certain SEC orders, has been convicted of certain felonies, or is a shell company. Ineligible issuers are denied most of the post-2005 communications reforms.
Think of it this way: The FWP eligibility tiers map onto how much disclosure the market already has on the issuer. WKSIs and seasoned issuers have substantial public-market disclosure (10-Ks, 10-Qs, audited financials, market float), so the SEC trusts them with broad post-filing free writing. Unseasoned and non-reporting issuers have less disclosure, so they have to file a prelim with pricing first and deliver the prelim alongside any FWP. Ineligible issuers have failed disclosure obligations, so they are denied the framework entirely.
Exam Tip: Gotchas
- An FWP is NOT a substitute for a preliminary prospectus. A non-WKSI, non-seasoned issuer cannot use an FWP until a prelim with pricing has been filed. The FWP supplements the prelim; it does not replace it. The "FWP without a prelim" trap is heavily tested.
- The "accompanied or preceded by" requirement applies to NON-WKSI / non-seasoned issuers. WKSIs and seasoned issuers do not have to deliver the prospectus alongside every FWP. Unseasoned and non-reporting issuers do.
- Ineligible issuers cannot use FWPs. The descriptions-of-securities carve-out is narrow (basic factual descriptions of the security being offered, no marketing). The principal supervising an ineligible-issuer deal has to manage all post-filing written communications through tombstones and the prospectus itself.
The Practical FWP Workflow
| Step | What Happens |
|---|---|
| 1. Registration filed | Pre-filing window closes; FWP framework opens (subject to eligibility) |
| 2. Determine eligibility | WKSI / seasoned / unseasoned / non-reporting / ineligible |
| 3. If non-WKSI / non-seasoned, file prelim with pricing | Required precondition before using FWP |
| 4. Prepare FWP | Embed prescribed FWP legend |
| 5. File FWP at first use | Filed via EDGAR, typically same day |
| 6. Deliver alongside prospectus if non-WKSI / non-seasoned | "Accompanied or preceded by" delivery requirement |
| 7. Retain FWP for 3 years post-offering | FWP recordkeeping |
The principal does not personally execute every step but signs off on the supervisory framework that ensures each step happens. The cure handles the inadvertent miss; the supervisory framework prevents the deliberate one.
Exam Tip: Gotchas
- The principal's supervisory failure on FWPs typically shows up as "no legend, no filing, no records." All three FWP conditions are mechanical. A failure to embed any of them is detectable on examination.
- Civil liability runs through the FWP. A misstatement in the term sheet is as much a basis for civil liability as a misstatement in the prospectus. The principal who reviews FWPs is reviewing prospectus-equivalent material.