Permissible Communications: Pre-Filing Period

Without safe harbors, almost any communication by an issuer in the months before an offering would be a gun-jumping violation. Six categories of safe harbor carve specific activities out of the prohibition.

WKSI Free-Writing Exemption

The well-known seasoned issuer (WKSI) exemption is the broadest pre-filing safe harbor.

• Exempts a WKSI from the pre-filing offer prohibition entirely
• Permits both oral and written offers before filing, with no audience restrictions
• Written offers must contain a prescribed legend and must be filed with the SEC promptly upon filing the registration statement (treated as a free-writing prospectus (FWP))
• Available only to issuers that meet the WKSI definition (covered in detail in the shelf-registration section)

The combination of this exemption plus automatic shelf registration is what lets large mature issuers price a follow-on deal essentially overnight. The marketing happens before filing; the filing is automatic; the deal goes effective on filing.

Exam Tip: Gotchas

• The WKSI free-writing exemption permits ORAL offers too, not just written. A WKSI can road-show institutional accounts in the pre-filing period and structure the deal before the registration statement is on file.
• The exemption is available only to WKSIs. Non-WKSIs must rely on the 30-day safe harbor or the regularly-released-information safe harbors during the pre-filing period.

30-Day Pre-Filing Safe Harbor

The 30-day pre-filing safe harbor is a non-exclusive safe harbor available to any issuer.

• Protects communications made more than 30 days before the public filing of the registration statement
• The communication must not reference the upcoming registered offering
• The issuer must take reasonable steps to prevent further distribution during the 30-day pre-filing window
• Not available to underwriters; not available for business-combination transactions, business development companies (BDCs), blank-check companies, or penny-stock issuers

The 30-day buffer protects against gun-jumping liability for routine corporate communications. The issuer can run its ordinary investor-relations and customer communications more than 30 days out, then go silent on the offering once the 30-day window closes.

Exam Tip: Gotchas

• The 30-day safe harbor measures from the FILING date, not the effectiveness date. A communication made 35 days before filing is safe; a communication made 25 days before filing is not.
• The safe harbor is for the issuer, not the underwriter. Underwriter communications in the pre-filing period must fit a different safe harbor (or wait until filing).

Regularly Released Information (Reporting Issuers)

A safe harbor for the ordinary-course release of factual and forward-looking information by reporting issuers (companies already subject to Exchange Act reporting).

• Protects continued ordinary-course release of factual business information and forward-looking information
• The issuer must have a prior history of similar disclosures
• The timing, manner, and form must be materially consistent with past practice

This safe harbor solves a problem facing companies that file periodic reports. A company about to do a follow-on offering must continue filing 10-Qs, issuing earnings releases, and holding earnings calls; without a safe harbor, every one of those would be a pre-filing offer.

Exam Tip: Gotchas

• "Materially consistent with past practice" is the test. Suddenly upgrading guidance, changing the cadence of earnings calls, or adding forward-looking detail that does not match prior practice can take the issuer outside the safe harbor.
• The safe harbor covers FORWARD-LOOKING information for reporting issuers but not for non-reporting issuers. The non-reporting safe harbor is narrower.

Regularly Released Information (Non-Reporting Issuers)

A parallel safe harbor for non-reporting issuers that have not yet completed an IPO.

• Available only to non-reporting issuers
• Protects factual business information only; does not cover forward-looking information
• The communication must be intended for customers, suppliers, and other non-investors

The non-reporting safe harbor lets a pre-IPO company keep talking to its customers, suppliers, and recruits during the months before filing. It does not let the company give the same content to investors.

Exam Tip: Gotchas

• Non-reporting issuers cannot release FORWARD-LOOKING information under this safe harbor. That is the single biggest difference from the reporting-issuer safe harbor.
• The audience is customers, suppliers, and other NON-INVESTORS. Posting the same factual release to an investor distribution list takes the issuer outside the safe harbor.

Generic and Investment-Company-Generic Announcements

Two narrow announcement safe harbors carve specific categorical announcements out of the prospectus definition.

• Generic securities-offering announcements: brief notices that name no specific issuer and contain no information that would identify the upcoming offering
• Generic investment-company advertising: generic communications about investment-company products that may not refer to a particular fund or security and must include the name and address of the registered broker-dealer or other sponsor

These are categorical safe harbors used for institutional advertising more than for deal marketing. They cannot be used to identify the issuer, the timing, the price, or the terms of an upcoming offering.

Exam Tip: Gotchas

• The generic announcement safe harbors do not identify the issuer. If the announcement names the company, the categorical safe harbor is unavailable; the issuer needs a different safe harbor (or has to wait until filing).
• The investment-company-generic safe harbor requires the sponsor's name and address in the communication. Failing to include them takes the communication outside the safe harbor.

Test-the-Waters for Emerging Growth Companies

The JOBS Act test-the-waters carve-out is a special pre-filing safe harbor for emerging growth companies (EGCs) covered in detail in the JOBS Act section. The key feature: an EGC may communicate with qualified institutional buyers (QIBs) and institutional accredited investors (IAIs) to gauge interest in an upcoming offering, before or after filing.

Exam Tip: Gotchas

• EGC test-the-waters is broader than the WKSI exemption in eligibility (an EGC does not need WKSI status) but narrower in audience (QIBs and IAIs only). A WKSI can talk to anyone pre-filing; an EGC can only talk to qualified institutional buyers and institutional accredited investors.