Marketing and Sales Presentations - Issuing and Underwriting

It is crucial to understand that the issuer and the underwriting syndicate cannot sell securities, solicit requests for orders or send out any research report or any report that discusses the company's future sales and earnings during the period between the filing date and the effective date.

They can publish a tombstone advertisement, which contains a standardized clause that merely announces the new issue but disclaims the tombstone as an offer to sell or solicit orders. In addition, unsolicited requests for information may be met by sending out a preliminary prospectus.

No subscription payments may be requested, even if they are held in escrow until the effective date. Although a red herring can be sent to prospective purchasers without them requesting it, direct solicitations may be made only by means of a final prospectus.

Prospectus Delivery
The managing underwriter provides both preliminary and final prospectuses to the broker-dealers participating in the distribution. These dealers, in turn, provide prospectuses to clients over the 25-day period following the effective date if the securities are listed on a national exchange or on the Nasdaq.

There is no aftermarket prospectus requirement if the security is already listed on these markets. The prospectus delivery requirement for non-Nasdaq OTC securities is 90 days if the company has never before issued an IPO, or 40 days if the security has been previously listed.

Exempt Securities
Securities exempt from registration under the Securities Act of 1933 include the following:

  • US government and Federal agency issues
  • Municipal and state issues
  • Intrastate offerings
  • Small public offerings
  • Private placements
  • Insurance policies, including fixed annuity contracts
  • Commercial paper and banker acceptances with maturities of 9 months or less


Exam Tips and Tricks
The term exempt securities refers to those securities that are not required to follow the procedures of registration and prospectus requirements set forth by the Securities Act of 1933. You should know which securities are exempt from registration under \'33 and why. Again, the \'33 Act was passed to ensure full disclosure to the investing public.

Regulation A, D and Rule 147


Related Articles
  1. Investing

    An Insight on the Prospectus of Corporate Bonds

    Making a well-informed decision with respect to buying a corporate bond involves reading the significant facts and details of the prospectus document.
  2. Retirement

    IPO Basics: Getting In On An IPO

    The Underwriting Process Getting a piece of a hot IPO is very difficult, if not impossible. To understand why, we need to know how an IPO is done, a process known as underwriting. When a company ...
  3. Bonds & Fixed Income

    The Issuance Procedure of Corporate High-yield Bonds

    Issuing debt over equity can have several advantages for companies. Here we have a detailed look on the issuance procedure of corporate high-yield bonds.
  4. Mutual Funds & ETFs

    Digging Deeper: The Mutual Fund Prospectus

    The legal jargon of this document can be daunting. Find out how to get to the important stuff.
  5. Investing Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  6. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  7. Economics

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  8. Bonds & Fixed Income

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  9. Investing Basics

    5 Tips For Investing In IPOs

    It’s not easy to profit from IPO​s, but the money is there.
  10. Personal Finance

    What Do Investment Bankers Really Do?

    Investment bankers are essentially corporate financial advisors and can help companies manage the process of raising financing for their activities.
RELATED TERMS
  1. Final Prospectus

    1. The final version of a prospectus for a public offering of ...
  2. Prospectus

    A formal legal document, which is required by and filed with ...
  3. Tombstone

    A written advertisement placed by investment bankers in a public ...
  4. SEC Form S-20

    A filing with the Securities and Exchange Commission (SEC), more ...
  5. Offering Price

    The price at which publicly issued securities are made available ...
  6. Placement

    The sale of securities to a small number of private investors ...
RELATED FAQS
  1. What is the difference between a prospectus and summary prospectus?

    Learn about the differences between the summary prospectus and statutory, or full, prospectus, and discover what mutual fund ... Read Answer >>
  2. How can I get a mutual fund prospectus?

    Read and understand the prospectus before investing in a mutual fund. You can obtain a copy from the fund company, your financial ... Read Answer >>
  3. What is the difference between a summary prospectus and an offering memorandum?

    Understand what investments require a summary prospectus or a offering memorandum, and learn the differences between the ... Read Answer >>
  4. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  5. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Answer >>
  6. What is the most important section in an investment company's prospectus?

    Learn about the various elements included in an investment company's prospectus and which ones are most important for investors ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center