Permissible Communications: Waiting Period

The waiting period is when the deal team takes its show on the road. Filing has happened, but the registration statement is not effective yet. Sales remain prohibited, but oral and certain written marketing is open.

What Can a Tombstone Announcement Say?

The tombstone announcement is a narrow factual notice that does not trigger the prospectus-content restrictions.

Permitted content of a tombstone:

• Issuer's name and a brief description of the business
• Title and amount of securities being offered
• Brief description of the securities (common stock, senior notes, preferred)
• Underwriter names
• Price range or expected price (factual, not promotional)
• Anticipated timing of the offering
• Where the prospectus is available

NOT permitted in a tombstone:

• Price language that reads as an offer or a recommendation to buy
• Selling commentary about why the securities are attractive
• Photographs of investment properties (REIT abuse, historically)
• Tax-benefit descriptions
• Solicitations for seminars where the deal will be discussed

The tombstone is the announcement, not selling literature. Anything beyond the categorical list of facts puts the communication outside the tombstone safe harbor and into the prospectus-content restrictions.

Exam Tip: Gotchas

• The tombstone lets you say a deal is happening; it does NOT let you solicit indications of interest. Soliciting indications of interest requires a preliminary prospectus or a permitted FWP.
• A tombstone with selling commentary is no longer a tombstone. Adding language like "an attractive opportunity for growth investors" pushes the communication outside the safe harbor and triggers the written-offer restriction.

What Role Does the Preliminary (Red Herring) Prospectus Play in the Waiting Period?

The preliminary prospectus is the workhorse of the waiting period. The detailed content rules sit in the forms-of-prospectus section; the key role in the waiting period is to take indications of interest from institutional accounts.

• Permitted form of written offer during the waiting period
• Used in the road show as the formal disclosure document
• Indications of interest gathered from accounts are non-binding because no sale can be made until the registration statement is effective

How Do Live and Electronic Road Shows Differ?

The road show is the in-person and electronic marketing campaign run by the issuer's management and the underwriting syndicate.

• Live road show: management meets with institutional accounts in person or by video conference; the syndicate desk fields one-on-one and group sessions
• Electronic road show: the same management presentation recorded for distribution to accounts that cannot attend live
• Pre-recorded electronic IPO road show: the recorded version of an IPO road show does not need to be filed with the SEC if at least one version is made publicly available without restriction

Road shows must remain consistent with the red herring. Management cannot make material statements at the road show that go beyond the registration-statement disclosure; doing so risks exposure under the anti-fraud provisions, since going beyond the prospectus at an otherwise-permitted oral offer does not itself convert the road show into a written offer.

Alongside the offering documents and road show presentations, the deal team also drafts internal commitment memos and internal sales memos. These internal-use documents record the firm's own basis for committing capital and underwriting terms, and brief the sales force on the deal before marketing begins.

They are part of the same offering-documentation workflow the exam expects a banker to recognize, even though they never reach a customer.

Exam Tip: Gotchas

• The recorded IPO road show is exempt from filing if at least one version is publicly available. The exemption applies to the recorded version, not to the live road show, and it requires that an open-access version exist.
• Road shows are oral offers, not sales. The accounts at the road show are providing indications of interest, not contracts of sale. The order book becomes binding only after pricing and effectiveness.

What Are the Rules for a Free-Writing Prospectus (FWP)?

The free-writing prospectus (FWP) is the catch-all category for written waiting-period marketing material that is not the red herring and not a tombstone.

Gating condition: The FWP framework is available only if the issuer is not an ineligible issuer. Ineligible issuers (timely-filing failures, shell companies, recent-bankruptcy issuers, certain disqualified issuers) cannot use FWPs.

Substantive conditions:

• For non-reporting and unseasoned issuers: a preliminary prospectus that includes a price range must have been filed before any FWP is used, and the most recent statutory prospectus must accompany or precede the FWP
• Legend: the FWP must carry a prescribed legend pointing investors to the statutory prospectus on EDGAR. A safe-harbor cure is available for immaterial and unintentional legend omissions if certain corrective steps are taken
• Filing: an issuer FWP must generally be filed with the SEC. An offering participant's FWP (an underwriter's, for example) must be filed if it is distributed in a manner reasonably designed to lead to broad unrestricted dissemination
• Record retention: FWPs that are not filed must be retained for 3 years following the initial bona fide offering
• Media FWP: an issuer-unaffiliated media FWP must be filed within 4 business days of becoming aware of the publication

Examples of common FWPs: term sheets distributed to road-show attendees, marketing decks used at one-on-one investor meetings, written summaries of management presentations, marketing emails sent to institutional accounts after the road show.

Exam Tip: Gotchas

• The issuer's FWP is generally filed; the underwriter's FWP is filed only when distributed broadly. A bilateral FWP sent to one institutional investor is not "broadly disseminated" and need not be filed.
• The FWP framework is not available to ineligible issuers. Shell companies, timely-filing failures, and recent-bankruptcy issuers cannot use FWPs, but they can still use oral offers, road shows, the red herring, tombstones, and any research safe harbor for which they otherwise qualify.
• The recorded IPO road show is a kind of FWP that is exempt from filing if a publicly available version exists. Other recorded road shows (non-IPO) follow the standard FWP rules.

Think of it this way: the waiting-period marketing toolkit is three lanes wide. Lane 1 is the tombstone (a public-facing notice that the deal exists). Lane 2 is the red herring (the formal prospectus the syndicate uses to take indications of interest). Lane 3 is everything else in writing (the FWP), governed by legending and filing rules. Oral offers, including the live road show, sit outside all three lanes because they do not need a written-offer permission slip.

When Is a Research Report Not Considered an Offer?

The third major category of waiting-period communication is research reports by broker-dealers about the issuer or its industry. Three separate safe harbors decide when a research report is not an "offer" and therefore can be published during a registered distribution. Those safe harbors get their own section.

Exam Tip: Gotchas

• Whether a research report is an "offer" depends on whether the broker-dealer is participating in the distribution. Non-participating broker-dealers and participating broker-dealers operate under different safe harbors with different conditions.

What Should You Check on Exam Day?

• Sort the fact pattern into one of the three written lanes (tombstone, red herring, FWP) or confirm it is oral, since oral offers sit outside all three lanes.
• Watch for a tombstone that adds selling commentary; that pushes the communication into the prospectus-content restrictions.
• Check whether the FWP is the issuer's (generally filed) or an offering participant's (filed only if broadly disseminated).
• Confirm the issuer is not an ineligible issuer before assuming the FWP framework is available.