Quick Answer
A free writing prospectus (FWP) is an offering-related written communication outside the statutory prospectus form. Post-filing use depends on issuer eligibility, the prescribed legend, applicable filing rules, and retention. Unseasoned and non-reporting issuers face additional prospectus-content and delivery conditions. Written road shows have filing exceptions. Unfiled FWPs generally require retention for three years after the initial bona fide offering.
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
- This framework governs post-filing use. A qualifying WKSI's pre-filing written offer is also an FWP, but relies on the separate pre-filing exemption and its conditions.
- Written status and filing status differ. A recorded road show is a written FWP even when exempt from filing. A live in-person presentation without a separate distributed writing is oral.
- 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 or unintentional failures | If a good-faith, reasonable effort to comply was made, an immaterial or unintentional failure to file, to include the legend, or to retain the FWP does not cause a violation or the loss of the rule's protection |
The cure provision is narrow. The failure must be immaterial or unintentional, and a good-faith, reasonable compliance effort must have been made. A missed filing or a missing legend must also be corrected as soon as practicable after discovery. A failure that is both material and intentional, or a filing or legend failure that is never corrected, is not within the cure.
Exam Tip: Gotchas
- The failure must be immaterial OR unintentional, with a good-faith reasonable compliance effort. Filing and legend failures require prompt correction. The legend cure also requires retransmission to substantially the same recipients by substantially the same means when necessary.
- 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 |
| Written road show | Generally exempt from filing. A non-reporting issuer's common-equity or convertible-equity offering instead requires filing unless at least one bona fide electronic version is available without restriction, no later than any other written versions |
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 unfiled FWPs used for 3 years following the initial bona fide offering; separate broker-dealer retention requirements still apply
- 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
- An issuer FWP's first use can occur in a one-on-one meeting. Apply the actual filing category and exceptions; not every offering-participant FWP must be filed merely because it was used privately.
- The legend is mandatory. A "good" FWP without the prescribed legend is a defective FWP and (absent the cure for an immaterial or unintentional failure despite a good-faith, reasonable effort) an illegal prospectus.
- Private access alone does not determine road-show filing. Check the offering category and whether a qualifying unrestricted bona fide version exists. The filing exception does not remove other applicable FWP conditions.
- The 3-year recordkeeping clock runs from the initial bona fide offering of the securities, not from the deal's completion. A firm that destroys FWP files right after the deal closes can still fail an SEC or FINRA exam.
Eligibility Tiered by Issuer Status
| Issuer Type | When FWPs May Be Used | Conditions |
|---|---|---|
| Well-known seasoned issuer (WKSI) | After registration-statement filing under this framework; separate pre-filing relief may apply | Required prospectus in the registration statement and applicable FWP conditions |
| Seasoned issuer | After a registration statement containing the required prospectus is filed | Applicable FWP conditions; no unseasoned-issuer delivery condition |
| Unseasoned reporting issuer | After filing the required prospectus, including a price range where required | Required prospectus must precede or accompany the FWP, subject to the specified delivery provisions |
| Non-reporting issuer | After filing the required prospectus, including a price range where required | Same additional prospectus delivery conditions |
| Ineligible issuer | Limited relief for descriptions of securities or offering terms, if eligible for that exception | Recent blank-check, shell, and penny-stock exclusions can prevent even this limited route |
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, or within three years it or a predecessor was, a blank check, shell (other than a business-combination shell) or penny-stock issuer.
Ineligible issuers are denied most of the modern communications reforms.
The tiers reflect the issuer's disclosure record and the offering's conditions. Broader post-filing use does not mean a seasoned issuer can skip filing a registration statement containing the required prospectus. The unseasoned and non-reporting tiers impose additional prospectus conditions.
Exam Tip: Gotchas
- An FWP does not replace the required statutory prospectus. For unseasoned and non-reporting issuers, the filed prospectus must include a price range where required; a final offering price is not universally required before FWP use.
- Earlier delivery can satisfy the prospectus condition. For unseasoned and non-reporting issuers, the statutory prospectus must precede or accompany the FWP. A new copy need not accompany every FWP if a prior prospectus was provided and there is no material change. An electronic FWP can satisfy the condition with an active hyperlink to the required prospectus.
- The final prospectus changes which document satisfies delivery. Once the offering is effective and the final prospectus is available, that final prospectus must precede or accompany subsequent FWPs, even if investors previously received the prelim.
- The limited ineligible-issuer route has its own exclusions. It concerns securities or offering terms, not unrestricted issuer promotion. Registered open-end funds and specified excluded offerings cannot use this post-filing framework; registered closed-end funds are not categorically excluded.
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. Confirm the required filed prospectus | Includes a price range where required for the unseasoned or non-reporting tier |
| 4. Prepare FWP | Embed prescribed FWP legend |
| 5. Apply the filing category | First-use filing where required, with specific exceptions and alternative deadlines |
| 6. Confirm prospectus delivery if non-WKSI / non-seasoned | Required prospectus precedes or accompanies the FWP; qualifying earlier delivery counts |
| 7. Retain unfiled FWPs | Three years after the initial bona fide offering; other recordkeeping duties remain |
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.
What Should You Check on Exam Day?
- Can you distinguish issuer first-use filing from participant and road-show filing exceptions?
- Do you know the three required legend elements: issuer identification, an EDGAR pointer to the registration statement, and a contact for the prospectus?
- Can you state that the 3-year FWP recordkeeping clock runs from the initial bona fide offering, not from the deal's closing date?
- Can you distinguish a required preliminary price range from a final offering price, and identify the issuer tiers with added prospectus-delivery conditions?