The Notice of a Proposed Registered Offering

The tombstone communication rule needs a registration statement on file first. The proposed-offering notice rule covers the stage before that: an issuer wants to signal a deal is coming without triggering the registration requirement.

When Can an Issuer Rely on the Proposed-Offering Notice Rule?

An issuer, a selling security holder, or someone acting on either one's behalf can publish a notice of an offering it plans to register. The notice is not treated as an offer requiring registration as long as it meets the rule's content and legend conditions. The rule turns on what the notice says, not on when it goes out.

What Must a Notice of a Proposed Offering Say and Not Say?

Every notice of a proposed offering must include a legend stating that it does not constitute an offer of any securities for sale. Beyond that legend, content is limited to:

• The issuer's name
• The title, amount, and basic terms of the securities
• The amount to be offered by any selling security holder
• The anticipated timing of the offering
• A brief statement of the manner and purpose of the offering
• Whether the offering targets a particular class of purchasers
• Any statements or legends required by state or foreign law, or by an administrative authority

Exam Tip: Gotchas

• A notice of a proposed offering may not name the underwriters. Naming underwriters is a tombstone communication feature. The exam can flip this detail between the two safe harbors, so check which stage a fact pattern describes before picking an answer.

What Extra Content Is Allowed for Specific Transaction Types?

A small set of added items is permitted only in specific transaction types:

• Rights offering: the eligible class of security holders, the subscription ratio and price, the record date, the anticipated issuance date of the rights, and the subscription period
• Employee offering: the employer's name, the eligible class of employees, the offering price, and the offering period
• Exchange offer: the basic terms of the exchange, the subject company's name, and the class of securities sought
• Merger-type transaction requiring a security-holder vote: the name of the person whose assets are to be sold in exchange for the securities offered, the names of any other parties to the transaction, a brief description of their businesses, a brief description of the transaction and its basic terms, and the date, time, and place of the vote

Think of it this way: The core seven items answer "what is happening." These added items exist because a rights offering, an employee offering, an exchange offer, or a vote-requiring merger each needs one or two extra facts (a subscription ratio, a vote date) before the notice is actually useful to the people who receive it.

Can a Notice of a Proposed Offering Be Corrected Later?

A person relying on the proposed-offering notice rule may publish a follow-up notice, but that follow-up is limited to correcting inaccuracies previously published about the proposed offering. It may carry no more information than correcting the inaccuracy requires, so it cannot add new content of any kind.

Exam Tip: Gotchas

• A correction notice under the proposed-offering notice rule only fixes inaccuracies; it does not add new information. A firm that wants to announce changed terms cannot piggyback that announcement on a correction notice.

Does the Notice Ever Have to Be Filed?

Yes, in one case. A notice under this rule that relates to a business combination transaction must also be filed with the SEC. The permitted content list and the filing duty are separate requirements, so a merger-related notice that stays inside the content list still has to be filed.

What Should You Check on Exam Day?

• Check whether the underwriters are named. A named underwriter points to the tombstone communication rule, not the proposed-offering notice rule.
• Confirm a proposed-offering-notice fact pattern happens before, or independent of, a filed registration statement.
• Match added content (subscription ratio, vote date, exchange terms) to the specific transaction type that permits it.
• Remember that a correction notice under the proposed-offering notice rule can only fix prior inaccuracies, not add new information.
• Check for a business combination in the facts; that notice must also be filed with the SEC.