Investment Companies - Registration

When registering the new issue, the issuer submits a registration statement that must be signed by the issuer's executive officers, financial and accounting officers and a majority of its board of directors. It is submitted in triplicate to the SEC along with the required filing fee.The information and documentation that must be included in the registration statement is listed under Schedule A of the Securities Act and includes some of the following items:

  • Statement of purpose of the issuer's business
  • Public offering price (POP)
  • Biographical descriptions of the officers and directors
  • Specific amount of shares held by the senior officers, directors and underwriters
  • Identification of individuals holding at least 10% of the company's securities
  • Use of the proceeds of the issue sale
  • Underwriters' commissions and discounts
  • Copy of underwriting agreement
  • Financial statements, including earning statements from the past three years and a balance sheet
  • Copies of the articles of incorporation

The Registration Process The official filing date is the date on which the SEC actually receives the registration statement. Once the statement is received, a 20-day cooling-off period commences, during which the SEC reviews the registration statement.During the cooling-off period, the issuer may give potential purchasers a preliminary prospectus, known informally as a red herring, which is also submitted to the SEC with the registration statement. The red herring acquaints investors with the essential facts of the new issue, and it is prepared primarily to get indications of interest from potential investors. It does not contain the final offering price of the issue, but it may list an expected range of prices per share, such as $10 to $12 per share.

Look Out!The preliminary prospectus will NOT have a public offering price, nor will it list the effective date. Neither of these items will be known for certain at this time!

During the cooling-off period, the issuer will register, or "blue sky", the new issue with the states in which the underwriter plans to sell shares. The underwriters and the officers of the issuers, along with the accountants, attorneys and syndicate members, will hold a due diligence meeting prior to issuing the final prospectus to discuss the issuer's and underwriter's exercise of due diligence towards federal and state securities law.

Look Out!The period between the filing date and the effective date is known as the cooling-off period. Make sure you understand that the issue is "in registration" during this period. During the cooling-off period, the SEC reviews the registration statement to determine whether full disclosure has been made. Only indications of interest are accepted during this time: no sales may be made until the effective date, and only a preliminary prospectus may be issued to prospective purchasers.

Underwriter Requirements and Procedures


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