Now that you understand the documents involved in bringing a new issue to market, the next step is understanding the three registration periods and what activities are permitted (or prohibited) during each one.
What Are the Three Registration Periods at a Glance?
| Period | Offers | Sales | Key Documents |
|---|---|---|---|
| Pre-filing | Prohibited, except a WKSI | Prohibited | None |
| Cooling-off (waiting) | Oral offers + red herring | Prohibited | Preliminary prospectus, tombstone ad |
| Post-effective | Permitted | Permitted | Final prospectus required |
What Happens During the Pre-Filing Period?
The pre-filing period covers everything before the registration statement is filed with the SEC.
- No offers or sales of the security are permitted, whether written or oral
- A pre-filing communications safe harbor permits certain communications that are NOT deemed an "offer" (e.g., factual business communications by the issuer that are not related to the offering)
- Well-known seasoned issuers (WKSIs) are a real exception: a WKSI is exempt from the pre-filing offer prohibition and may make oral and written offers before the registration statement is filed
- A WKSI's written pre-filing offer is a free writing prospectus. It must carry the prescribed legend and be filed with the SEC when the registration statement is filed
Exam Tip: Gotchas
"No offers before filing" is the rule for everyone except a WKSI. If a question names a well-known seasoned issuer, the blanket prohibition does not apply; the WKSI may make pre-filing offers. Do not read the general rule as absolute when the issuer is a WKSI.
What Happens During the Cooling-Off Period (Waiting Period)?
The cooling-off period begins when the registration statement is filed with the SEC and lasts a minimum of 20 days. The SEC may extend it by issuing a deficiency letter.
What IS permitted:
- Oral offers to sell
- Distributing the preliminary prospectus (red herring), the primary selling document during this period
- Tombstone ads: bare-bones announcements identifying the issuer, security type, underwriter, and where to get a prospectus. These are NOT considered a prospectus
- Gathering indications of interest (non-binding expressions of potential interest from investors)
- Free writing prospectus: permitted for seasoned issuers and WKSIs after filing. For non-reporting or unseasoned issuers (every IPO issuer qualifies, but so can other issuers), must be accompanied or preceded by the preliminary prospectus
What is NOT permitted:
- No sales may occur
- No money may be collected
- No binding commitments from investors
Exam Tip: Gotchas
During the cooling-off period, a firm may distribute the preliminary prospectus and accept indications of interest, but may NOT accept orders or collect money. An indication of interest is NOT binding on either party. Know the distinction between an indication of interest (permitted) and an order (prohibited).
What Happens During the Post-Effective Period?
The post-effective period begins when the SEC declares the registration effective. This is when the actual selling begins.
- Sales may now occur
- The final prospectus must be delivered to all purchasers
- All forms of offers are permitted
What Is the 48-Hour Preliminary-Prospectus Rule?
- When the issuer has not previously been a reporting company, which is the usual IPO case, each broker-dealer participating in the distribution must deliver the preliminary prospectus to anyone expected to receive a confirmation, at least 48 hours before that confirmation is sent
- "Participating in the distribution" means any underwriter and any selling-group member, not only the managing underwriter
- This gives buyers time to review the offering before they are committed
What Are the Prospectus Delivery Obligations?
This table covers the ongoing (aftermarket) dealer prospectus-delivery requirement: how long a dealer must keep delivering the prospectus with confirmations for trades after the offering, not the delivery of the final prospectus at the original sale itself.
| Offering Type | Delivery Requirement |
|---|---|
| IPO, listed on an exchange or Nasdaq, issuer NOT already an SEC reporting company | Prospectus must accompany or precede any confirmation for 25 days after the effective date |
| IPO, NOT exchange/Nasdaq-listed, issuer NOT already an SEC reporting company | Prospectus delivery required for 90 days after the effective date |
| Follow-on (additional) issue of an already-public, non-listed company that is NOT already an SEC reporting company | Prospectus delivery required for 40 days |
| Already exchange/Nasdaq-listed (secondary) | 0 days (no aftermarket prospectus delivery) |
| Any offering by an issuer already subject to ongoing SEC reporting requirements before it filed | 0 days, regardless of listing status: the reporting company is exempt from this table entirely |
Exam Tip: Gotchas
The 48-hour preliminary-prospectus rule applies specifically to IPOs: the preliminary prospectus must reach expected purchasers at least 48 hours before the confirmation. A common mix-up is the 48-hour delivery requirement versus the 25-day prospectus delivery obligation.
Don't confuse the reporting-company exemption above with the access-equals-delivery rule. They solve two different problems. The reporting-company exemption (this table's last row) removes the aftermarket dealer delivery requirement entirely, because the issuer's ongoing SEC reports already give the market the information a prospectus would. Access-equals-delivery is a separate rule that lets any registered offering (IPO or follow-on, reporting company or not) satisfy the duty to deliver the final prospectus at the original sale by having it filed and accessible on EDGAR, instead of by physical delivery. A reporting company's follow-on offering can qualify for both rules at once, but naming one does not explain the other.