Release No. 33-8591

Release No. 34-52056

Release No. IC-26993

Financial Reporting Rel. No. 75

International Series Rel. No. 1294

70 Fed. Reg. _____ - ____

Table of Contents

Securities Offering Reform

D. Communications Rules (continued)

3. Relaxation of Restrictions on Written Offering-Related Communications

The rules we are adopting today will expand the amount and types of permitted written offering-related communications that may be made by offering participants under the gun-jumping provisions after a registration statement is filed.¹⁸³ The two main elements of these rules are expansion of information that Securities Act Rule 134 permits to be communicated and the permitted use of free writing prospectuses in connection with a registered offering.

a. Rule 134

Rule 134 provides a safe harbor from the gun-jumping provisions for limited public notices about an offering made after an issuer files its registration statement.¹⁸⁴The Rule was intended originally to provide an “identifying statement” that could be used to locate persons that might be interested in receiving a prospectus. All issuers, including well-known seasoned issuers, are precluded from relying on Rule 134 until the issuer files a registration statement that includes a statutory prospectus.¹⁸⁵

i. Expansion of Permitted Information

We are modifying and expanding the information permitted under Rule 134 to include information that issuers, underwriters, and investors will find helpful and to permit the types of written communications during an offering that we do not consider raise the risk of offering abuses. We are adopting a limited expansion of the information permitted in the notice about the issuer and the registered offering. The amendments to Rule 134 will:

• permit increased information about an issuer and its business, including where to contact the issuer;

• permit more information about the terms of the securities being offered;¹⁸⁶

• expand the scope of permissible factual information about the offering itself, including underwriter information, more details about the mechanics of and procedures for transactions in connection with the offering process, the anticipated schedule of the offering, and a description of marketing events;¹⁸⁷

• allow more factual information about procedures for account opening and submitting indications of interest and conditional offers to buy the offered securities;¹⁸⁸

• allow more factual information regarding procedures for directed share plans and other participation in offerings by officers, directors, and employees;

• permit the correction of inaccuracies in permissible information previously disclosed pursuant to the Rule; and

• expand the disclosure permitted regarding credit ratings to include the security rating that is reasonably expected to be assigned.

While we have expanded the amount of information regarding the terms of an offering that may be included in a Rule 134 notice, the expansion does not permit use of a Rule 134 notice to provide a detailed description of securities being offered. There is increased ability under our rules to provide such a detailed description, such as a term sheet, as a free writing prospectus, as discussed below. Commenters suggested a number of additional items of information that they believed should be included in the Rule 134 safe harbor.¹⁸⁹ This additional information generally focused on more extensive information about the terms of the securities being offered. As we have noted, Rule 134 is not intended as a substitute for a detailed description of the securities, such as a term sheet, or information included in a prospectus. We have expanded the information categories from those in the proposal to include items that provide more procedural information about the offering or the securities.¹⁹⁰

ii. Section 10 Prospectus Requirement

We have modified the changes to Rule 134 from the proposals in one significant regard. We had proposed that Rule 134 explicitly condition the availability of the Rule on the issuer filing a statutory prospectus meeting the requirements of Securities Act Section 10 which, in the case of an initial public offering, would include a bona fide estimate of the initial offering price range and the maximum amount of securities to be offered. While commenters recognized that the registration statement had to be filed, a number of commenters were concerned that including an explicit requirement of a bona fide price range and maximum amount of securities to be offered would change current practice and would not permit a number of communications, including press releases announcing the filing of the registration statement and naming underwriters, or even lead managers, and other notices that would be appropriate before the commencement of marketing efforts.¹⁹¹ These commenters noted that, in many cases, the bona fide price range is not included in registration statements for initial public offerings until a later point in time that is closer to the commencement of marketing activities for the offering.¹⁹²

We are modifying the Rule to provide that much of the information permitted under the Rule may be disclosed under the Rule before the inclusion of a bona fide price range in the registration statement. This modification does not mean, however, that the prospectus in an initial public offering satisfies Section 10 without the bona fide price range. Rather, the purpose of the modification is to permit notices to contain information that is not dependent on the price range or amount of securities being offered prior to inclusion of that information. In addition, information related to the pricing and rating of the security can be provided only if a price range is included where required.

The amended Rule also provides that the Rule is available for certain other information only if it also is disclosed at that time in the filed registration statement. For example, notices including information about the use of proceeds of the offering can be provided only after information about the use of proceeds is included in the filed registration statement.¹⁹³ Rule 134(d) continues to require that a price range be included where required. We are not modifying the provisions of Rule 134(d). The procedures that market participants have developed with the staff of the Division of Corporation Finance to facilitate offerings of securities using Internet facilities are not affected by the amendments to Rule 134 that we are adopting today.

iii. Changes to Required Information

We are modifying the information that must be included in a Rule 134 notice, as proposed. First, we are eliminating the reference in the legend to state securities laws, as we believe that other provisions of the Rule already address any state securities law requirements, as applicable.¹⁹⁴ Second, we are eliminating the requirement to specify whether the financing is a new financing or refunding, as we believe that such information is no longer necessary because it will be provided where appropriate by the issuer’s disclosure of the use of the proceeds of the offering.

One commenter suggested that the Rule 134 requirement that issuers alert investors where they can obtain a copy of the statutory prospectus should include a means for receipt of a prospectus by electronic delivery.¹⁹⁵ Several commenters also suggested that we allow issuers to satisfy the requirement that certain Rule 134 notices be accompanied or preceded by a statutory prospectus through the inclusion of a hyperlink in the Rule 134 notice to the statutory prospectus.¹⁹⁶ While we are not expanding “access equals delivery” to Rule 134, we are amending Rule 134(c)(1) to allow persons providing notices relying on Rule 134 to include a uniform resource locator (“URL”) address to the statutory prospectus that alerts investors where they can obtain a statutory prospectus.¹⁹⁷For purposes of Rule 134, including a URL address to the statutory prospectus that is not an active hyperlink in an electronic communication does not mean that the prospectus has been delivered. However, an active hyperlink to a statutory prospectus in an electronic Rule 134 notice will satisfy the requirement that the prospectus accompany or precede that notice.¹⁹⁸

b. Permissible Use of Free Writing Prospectuses

i. Overview

After the filing of a registration statement, the gun-jumping provisions permit issuers and other offering participants to make written offers only in the form of a statutory prospectus. After effectiveness of a registration statement, written offers other than a statutory prospectus may be made only if a final prospectus meeting the requirements of Securities Act Section 10(a) is sent or given prior to or at the same time as the written offer.¹⁹⁹ We believe that written communications during the offering process are unnecessarily restricted, even with the substantial relaxations in restrictions on communications resulting from the rules we discuss above. The rules we are adopting permit written offers, including electronic communications, outside the statutory prospectus beyond those currently permitted by the Securities Act, if certain conditions are met. We are defining such a written offer outside of the statutory prospectus as a “free writing prospectus.”²⁰⁰

Under the rules we are adopting today, a free writing prospectus that satisfies specified conditions can be used by a well-known seasoned issuer at any time.²⁰¹ Further, a free writing prospectus that satisfies the specified conditions can be used by any other eligible issuer or offering participant after a registration statement has been filed.²⁰² In general, the rules we are adopting will allow offering participants to use free writing prospectuses in conjunction with most registered primary and secondary offerings, although we do not treat all issuers and offerings the same.²⁰³

The issuer and any other offering participant in an eligible issuer’s registered securities offering satisfying the conditions of our rules can use a free writing prospectus after a registration statement is filed to communicate information about a registered offering of securities.²⁰⁴ This will permit affiliates, underwriters, dealers, and others acting on behalf of the parties to the transaction to use a free writing prospectus without violating the gun-jumping provisions. The conditions to the use of a free writing prospectus will depend on the nature of the issuer and the offering. A free writing prospectus can take any form and is not required to meet the informational requirements otherwise applicable to prospectuses.

ii. Definition of Free Writing Prospectus

(A) Scope of Definition

We are adopting the proposed definition of “free writing prospectus.” A free writing prospectus is, except as otherwise provided specifically or otherwise required by the context, a written communication that constitutes an offer to sell or a solicitation of an offer to buy securities that are or will be the subject of a registration statement and is not:

• a prospectus satisfying the requirements of Securities Act Section 10(a);

• a prospectus satisfying our rules permitting the use of preliminary or summary prospectuses or prospectuses subject to completion;

• a communication made in reliance on the special rules for asset-backed issuers permitting the use of ABS informational and computational materials;²⁰⁵ or

• a prospectus because a final prospectus meeting the requirements of Section 10(a) was sent or given with or prior to the written communication.²⁰⁶

Further, the definition makes clear that, although a free writing prospectus will not be filed as part of a registration statement, it will still be considered to relate to a registered public offering of securities that is or will be the subject of a registration statement, regardless of the method of its use or distribution.

A written communication will be a free writing prospectus only where it constitutes an offer by an offering participant of a security under the Securities Act. Whether a particular communication constitutes such an offer will continue to be determined based on the particular facts and circumstances.²⁰⁷ While the definition of “offer” is broad, not all communications relating to an offering are offers or offers by an offering participant. As a non-exclusive illustration, the gun-jumping provisions have been administered in a manner that excludes from categorization as an offer a media publication or television or radio broadcast that is based solely on information that is filed with us or available on an unrestricted basis or on other information the dissemination of which did not represent an offer by an issuer or other offering participant, where there is no other involvement or participation by an offering participant. On that basis, for example, a newspaper article about an initial public offering that is based on the filed registration statement, on a press release that is filed with or furnished to us, on a filed free writing prospectus, or on filed issuer information where the issuer and other offering participants have refused to comment and not otherwise been involved, would not be categorized as an offer under the gun-jumping provisions.

(B) Comments on Definition

Commenters supported the concept of free writing prospectuses.²⁰⁸ Commenters suggested that we exclude offshore communications and rating agency reports from the scope of the definition.²⁰⁹ We are not including any specific provision in the rules regarding offshore communications and, as such, the treatment of offshore communications under the free writing prospectus rules will be no different than the treatment of any offshore communication prior to the Rules we adopt today.²¹⁰ We also have not revised the Rule in response to commenters’ request for clarification of the treatment of rating agency reports. Our treatment of NRSROs is currently the subject of rulemaking and other consideration.²¹¹

iii. Permitted Use of a Free Writing Prospectus After the Filing of a Registration Statement Under Rule 433

(A) Overview

We are adopting Rule 164 and Rule 433 substantially as proposed. Rule 164 will permit the use of a free writing prospectus where an eligible issuer has filed a registration statement, the other requirements of Rule 164 are met, and the conditions of Rule 433 are satisfied.²¹² The Rules permitting the use of free writing prospectuses are not available for any communication that, while in technical compliance with the Rule, is part of a plan or scheme to evade the requirements of Securities Act Section 5.²¹³

(B) Issuer Eligibility

For any offering participant to use free writing prospectuses, other than free writing prospectuses that consist only of descriptions of the securities in the offering or of the offering, the issuer may not be an ineligible issuer.²¹⁴ We have modified the consequences of ineligibility in the context of use of free writing prospectuses to permit ineligible issuers, other than blank check companies, shell companies, and penny stock issuers, to use free writing prospectuses that are limited to descriptions of the terms of the securities being offered and the offering because we believe that the permitted use of such free writing prospectuses can provide advantages to investors that justify the risks of use of such materials by some classes of ineligible issuers. Such use would be subject to all of the other requirements of the new rules.

We have revised the definition of ineligible issuer from the proposals in response to comments. As adopted, ineligible issuers are, as of the relevant date of determination:²¹⁵

• reporting issuers who are not current in their Exchange Act reports and other materials required to be filed during the prior 12 months (or such shorter period that the issuer was required to file such reports and materials), other than reports on Form 8-K required solely pursuant to an item specified in General Instruction I.A.3(b) of Form S-3;²¹⁶

• in the case of asset-backed issuers, the depositor, or any issuing entities previously established, directly or indirectly by the depositor who are not current in their Exchange Act reports and other materials required to be filed during the prior 12 months (or such shorter period that the issuer was required to file such reports and materials), other than reports on Form 8-K required solely pursuant to an item specified in General Instruction I.A.4 of Form S-3;²¹⁷

• issuers who are or during the prior three years were or any of their predecessors were:

  • blank check companies;

  • shell companies (other than business combination related shell companies);

  • issuers for an offering of penny stock;

• issuers who are limited partnerships offering and selling their securities other than through a firm commitment underwriting;²¹⁸

• issuers who have filed for bankruptcy or insolvency during the past three years;²¹⁹

• issuers who have been or are the subject of refusal or stop orders under the Securities Act during the past three years, or are the subject of a pending proceeding under Securities Act Section 8²²⁰ or Section 8A;²²¹ or
  

• issuers who, or whose subsidiaries at the time they were subsidiaries of the issuer, have been convicted of any felony or misdemeanor described in certain provisions of the Exchange Act, have been found to have violated the anti-fraud provisions of the federal securities laws, or have been made the subject of a judicial or administrative decree or order (including a settled claim or order) prohibiting certain conduct or activities regarding the anti-fraud provisions of the federal securities laws²²² during the past three years. The definition as adopted provides that ineligibility of an issuer based on a settlement will be prospective only and thus arise only for settlements entered into after the effective date of the new rules.²²³

The categories of ineligible issuers include issuers that at the time of the eligibility determination are not current (with specified Form 8-K exceptions) for 12 months in their Exchange Act reporting obligations, issuers that may raise greater potential for abuse, and issuers that have violated the anti-fraud provisions of the federal securities laws. Certain of these issuers have been viewed historically as unsuited for short-form registration or ineligible for disclosure-related relief. For instance, we have repeatedly stated our belief that blank check companies, shell companies, and penny stock issuers may give rise to disclosure abuses.²²⁴ In addition, Congress determined not to extend the safe harbors for forward-looking statements to issuers of blank check and penny stock securities, as well as issuers previously convicted of certain felonies and misdemeanors and issuers subject to a decree or order involving a violation of the antifraud provisions of the federal securities laws.²²⁵

We are adopting as proposed the exclusion of registered investment companies and business development companies from eligibility for use of Rules 164 and 433 because they are already subject to separate rules permitting use of a Section 10(b) prospectus.²²⁶ Securities Act Rule 482 permits investment companies to advertise investment performance data and other information, and Securities Act Rule 498 permits open-end management investment companies to use a profile. We also are adopting as proposed the exclusion of offerings that are business combination transactions subject to Regulation M-A. We also are excluding all offerings registered on Form S-8, except for those by well-known seasoned issuers.

We have revised the Rules from the proposal to change the time of determination of status as an ineligible issuer. We have concluded that eligibility, in most cases, should not be determined at the time of reliance on our new Rules for each free writing prospectus. We have adopted an approach to eligibility determination that generally looks to the commencement of an offering and will not result in a change of status during an offering. As adopted, eligibility determinations will be made:

• if the offering is registered pursuant to Rule 415, our shelf registration rule, the earliest time after the filing of the registration statement covering the offering at which the issuer, or in the case of an underwritten offering the issuer or another offering participant, makes a bona fide offer, including without limitation through the use of a free writing prospectus, in the offering; or

• otherwise at the time of filing of a registration statement covering the offering.

This timing of determination as to eligibility to use a free writing prospectus (with the enumerated exceptions from the prohibition) applies to all issuers, including well-known seasoned issuers. The timing of determination of whether an issuer is a well known seasoned issuer, described above, is different and is made on an approximately annual basis.

(1) Comments on Ineligible Issuer Definition

Commenters expressed a number of concerns about the ineligibility conditions, including those relating to prior securities law violations and settlements,²²⁷ going concern opinions in audit reports covering financial statements,²²⁸ and certain involuntary bankruptcy petitions.²²⁹ Commenters also requested clarification of the time frame for which the issuer must be current in its reports for purposes of the definition.²³⁰Commenters did not believe that issuers should be ineligible based on disclosure of material weaknesses in internal controls over financial reporting.²³¹ Commenters also stated that offering participants should be able to rely on the various exemptions based on a reasonable belief that the issuer was not an ineligible issuer.²³²

With regard to the ineligibility based on securities law violations or settlements of alleged violations, commenters believed that the disqualifying violations were too broad and should be limited to violations of the anti-fraud provisions, not any provision of the federal securities laws.²³³ Moreover, commenters stated that the disqualification based on settled allegations of violations of the securities laws should be prospective only, because the settling parties would not have known, at the time of the negotiated settlement, also to negotiate a waiver of the ineligible issuer disqualifications.²³⁴Commenters did not believe that the settlement of an alleged violation should be a disqualification.²³⁵ Other commenters did not believe that a securities law violation or settlement by a subsidiary should affect the eligibility of an issuer to use the various exemptions and safe harbors that we proposed.²³⁶

Commenters addressing ineligibility based on bankruptcy were concerned that an involuntary bankruptcy disqualification could disadvantage issuers in their relationships with their creditors.²³⁷ They were concerned that a creditor could cause an issuer to be an ineligible issuer by filing an involuntary bankruptcy petition against the issuer. These commenters suggested that the involuntary bankruptcy petition be a disqualification only after the lapse of a period of time or conversion of the petition to a voluntary petition, enabling issuers to attempt to resolve the issues with their creditors.

We have revised the definition of “ineligible issuer” to address many of commenters’ concerns. Under the definition we are adopting, an issuer must be current, but not necessarily timely, in its required filings under the Exchange Act for the past twelve months or such shorter period that the issuer is subject to the Exchange Act reporting requirements. We have limited the ineligibility condition for securities law violations to those involving the anti-fraud provisions and have eliminated the separate provision regarding settlements because they are subsumed within the ineligibility provision based on a settled judicial or administrative decree or order. In addition, we have provided that ineligibility based on actions of a subsidiary must have arisen at the time that the entity was a subsidiary of the issuer. We also have eliminated the ineligibility condition based on a going concern opinion covering the issuer’s most recent audited financial statements. In addition to the revisions to the specific ineligibility provisions, we also have revised Rule 164 and Rule 433 to provide that persons relying on those Rules, other than issuers, must have a reasonable belief that an issuer is not ineligible.²³⁸ We also have provided that ineligibility based on settlements will apply only to judicial or administrative decrees or orders entered into after the effective date of the new rules.

(C) Conditions to Permitted Use of a Free Writing Prospectus

Rule 164 as adopted provides that, after the filing of a registration statement, a free writing prospectus that meets the requirements of Rule 164 and satisfies the conditions of Rule 433 will be a permitted prospectus under Section 10(b) for purposes of Securities Act Section 5(b)(1). The Rule 433 conditions on the use of free writing prospectuses relate to:

• the delivery or availability of the statutory prospectus at the time the free writing prospectus is used;

• the information contained in the free writing prospectus;

• the legend that is to be included in the free writing prospectus;

• filing of the free writing prospectus; and

• record retention for the free writing prospectus.

(1) Prospectus Delivery or Availability

The ability of any person participating in the offer and sale of the securities to use free writing prospectuses under Rules 164 and 433 generally is conditioned on the filing of a registration statement that includes a prospectus satisfying the requirements of Securities Act Section 10.²³⁹ Further, in specified cases, Rule 433 conditions the use of a free writing prospectus on prior or concurrent delivery of the issuer’s most recently filed statutory prospectus.

(a) Prospectus Delivery Conditions for Non-Reporting Issuers and Unseasoned Issuers

In an offering of securities of an eligible non-reporting issuer, including an initial public offering, or securities of an eligible unseasoned issuer, the use by an offering participant of free writing prospectuses is conditioned on:

• filing of the registration statement for the offering; and

• the free writing prospectus being preceded or accompanied by the most recent statutory prospectus that satisfies the requirements of Section 10 if:²⁴⁰

  •  the free writing prospectus is prepared by or on behalf of or used or referred to by an issuer or prepared by or on behalf of or used or referred to by other offering participants;

  • consideration has been or will be given by the issuer or an offering participant for the dissemination (in any format)²⁴¹ of any free writing prospectus (including any published article, publication, or advertisement); or

  • Securities Act Section 17(b)²⁴² requires disclosure that consideration has been or will be given by the issuer or an offering participant for any activity described therein in connection with the free writing prospectus.

In these cases, issuers and offering participants must assure that the most recent statutory prospectus is actually provided to anyone who might receive a free writing prospectus. Accordingly, the use of broadly disseminated free writing prospectuses in registered offerings by these types of issuers and offering participants in these offerings may not be feasible unless they are in electronic form and contain a hyperlink to the statutory prospectus. We believe that this is an appropriate result, as conditioning the use of the free writing prospectus on its being preceded or accompanied by the statutory prospectus will assure that an investor has a balanced disclosure document of an issuer with no or limited reporting history against which to evaluate the free writing prospectus and to place the statements made in context. The condition that the statutory prospectus precede or accompany the free writing prospectus will not require that it be provided through the same means, so long as it is provided at the required time. Referring to its availability will not satisfy this condition.

In the following situations, for example, the most recent statutory prospectus must precede or accompany the free writing prospectus or the communication cannot be made in reliance on Rules 164 and 433:²⁴³

• a direct written communication by an issuer or offering participant;

• a written communication or a television or radio broadcast prepared by or on behalf of or used or referred to by an issuer or an offering participant;

• the dissemination, in any format including publication or broadcast, of any free writing prospectus (including any published article, publication, or advertisement) for which

  • consideration is or will be given by the issuer or an offering participant; or

  • Securities Act Section 17(b) requires disclosure of a payment made or consideration given by an issuer or other offering participant; or

• a paid published or broadcast advertisement by an issuer or offering participant.

Once the required statutory prospectus is provided to an investor, additional free writing prospectuses can be provided to that investor without having to provide an additional statutory prospectus, unless there is a material change in the most recent statutory prospectus from the provided prospectus.²⁴⁴ For example, once an investor has been sent a preliminary prospectus, absent a material change, the Rule permits subsequent e-mail communications to that investor by an offering participant that constitute free writing prospectuses without the user having to hyperlink to or otherwise redeliver a statutory prospectus with each communication. After effectiveness and availability of a final prospectus meeting the requirements of Securities Act Section 10(a), no earlier statutory prospectus may be provided, and such final prospectus, as revised or supplemented, must precede or accompany any free writing prospectus provided after such availability, whether or not an earlier statutory prospectus has been previously provided to the recipient.²⁴⁵

(b) Prospectus Availability Condition for Seasoned Issuers and Well-Known Seasoned Issuers

In offerings of securities of eligible seasoned issuers (including asset-backed issuers eligible to use Form S-3) and eligible well-known seasoned issuers, we are adopting as proposed the provision that these issuers and other offering participants in their offerings can use a free writing prospectus after the filing of a registration statement containing a statutory prospectus.²⁴⁶ For shelf offerings, this statutory prospectus can be a base prospectus.²⁴⁷ For offerings of securities of eligible seasoned issuers (including eligible well-known seasoned issuers), the Rule does not condition use of the free writing prospectus on actual delivery of the most recent statutory prospectus. Instead, the user of the free writing prospectus must notify the recipient, through a required legend, of the filing of the registration statement and the URL for our web site where the recipient can access or hyperlink to the preliminary or base prospectus. The Rule as adopted permits the use of a generic rather than an issuer-specific legend. The legend must contain a toll-free telephone number, and may contain an e-mail address, through which the statutory prospectus may be requested.²⁴⁸

(c) Comments on Prospectus Delivery or Availability Conditions

Some commenters believed that the requirement that a statutory prospectus precede or accompany a free writing prospectus in offerings of securities of non-reporting or unseasoned issuers should be able to be accomplished by the availability of the prospectus on our Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”),²⁴⁹ while others thought it should be limited only to non-reporting companies engaging in their initial public offerings²⁵⁰ or that there should be cure provisions for failure to provide timely a statutory prospectus.²⁵¹ We do not believe that it is appropriate at this time to have access or filing of a registration statement on EDGAR satisfy this delivery obligation for statutory prospectuses in all cases. In addition, as we note above, we believe that investors should have the statutory prospectus for unseasoned issuers when they evaluate free writing prospectuses involving offerings of securities of such issuers.

(2) Information in a Free Writing Prospectus

(a) Information Conditions

We are adopting substantially as proposed the provisions that will permit a free writing prospectus meeting the conditions of Rule 433 to be a Section 10(b) prospectus without having line-item disclosure requirements or otherwise requiring that the free writing prospectus contain any particular information, other than the legend. The Rule permits information in a free writing prospectus to go beyond information the substance of which is contained in the prospectus included in the registration statement. However, the information in the free writing prospectus must not conflict with the information in the registration statement, including Exchange Act reports incorporated by reference into the registration statement. We believe that exempting free writing prospectuses meeting the conditions of Rule 433 from limitations on any particular content should not diminish investor protection. In that regard, we believe that the liability provisions applicable to free writing prospectuses, particularly Securities Act Section 12(a)(2) and the anti-fraud provisions of the federal securities laws, provide protection against material misstatements in and material omissions from information contained in such free writing prospectus.

Although the proposal stated that the information in the free writing prospectus did not have to be in the registration statement, some commenters requested further clarification of the proposed condition that the free writing prospectus cannot contain information that is “inconsistent” with the information in the prospectus filed as part of the registration statement.²⁵² In revising the provision to preclude information that “conflicts” with that in the registration statement, we have clarified that information in the free writing prospectus may be different from or additional or supplemental to that in the registration statement, so long as it does not “conflict” with the latter.

Commenters requested clarification as to how information in the free writing prospectus would be treated in relation to other information that was filed with us or was otherwise publicly available.²⁵³ Commenters believed that liability for free writing prospectuses should not be considered in isolation but should take into account other information that is conveyed for purposes of the total mix of information available.²⁵⁴Free writing prospectuses may incorporate or refer investors to other information, so that investors will be advised to consider the information presented in the free writing prospectus in context. We note that the legend that must be included in a free writing prospectus will direct investors to the filed prospectus contained in the registration statement. As we discuss below, a free writing prospectus cannot include language that deems an investor to have read or have knowledge of or rely on the content of other documents incorporated in or referred to in the free writing prospectus. Whether such other information is conveyed to the investor will be determined based on the facts and circumstances.²⁵⁵

Treating a free writing prospectus satisfying the conditions of Rule 433 as a Section 10(b) prospectus provides for additional continuing Commission oversight and enforcement authority over the contents and use of the free writing prospectus. As we discussed in the Proposing Release, we will retain the ability to halt the use of any materially false or misleading free writing prospectus in accordance with Section 10(b). Under the amendments to Securities Act Rule 418 we are adopting today, our staff will be able to request any free writing prospectus that has been used in connection with a securities offering.

(b) Amendment to Rule 408

Finally, we are amending Securities Act Rule 408 as proposed to make clear that not including information that is included in a free writing prospectus in a prospectus filed as part of a registration statement will not, solely by virtue of inclusion of the information in a free writing prospectus, be considered an omission of material information required to be included in the registration statement.

(c) Legend Condition

(i) Discussion

We are not adopting any content requirement for free writing prospectuses other than to condition the use of a free writing prospectus on inclusion of a legend indicating where a prospectus is available for the offering to which the communication relates and recommending that potential investors read the prospectus (including Exchange Act documents incorporated by reference).²⁵⁶ In addition, the legend also advises investors that they can obtain the registration statement including the prospectus and any incorporated Exchange Act documents for free through the Commission’s web site at www.sec.gov, and that they may request the prospectus from the issuer, any underwriter or any dealer by calling a toll-free number.²⁵⁷ The legend also indicates that the free writing prospectus relates to a registered public offering. As suggested by commenters, we are adopting a generic, rather than issuer-specific legend condition.²⁵⁸ We believe this modification should assist issuers and offering participants in including a legend in a free writing prospectus without much added cost.²⁵⁹

(ii) Cure for Unintentional or Immaterial Failure to Include a Legend

Rule 164 permits a user to cure an unintentional or immaterial failure to include the specified legend in any free writing prospectus, as long as a good faith and reasonable effort is made to comply with the condition and the free writing prospectus is amended to include the specified legend as soon as practicable after discovery of the omitted or incorrect legend.²⁶⁰ In addition, if a free writing prospectus has been transmitted to potential investors without the specified legend, the free writing prospectus must be retransmitted, with the appropriate legend by substantially the same means as and directed to substantially the same investors to whom it was originally transmitted.²⁶¹

The legend condition is intended to identify more clearly materials as free writing prospectuses used in relation to a registered offering. We believe that this legend will put investors on notice and assist them in evaluating the content of the free writing prospectus.

(iii) Impermissible Legends or Disclaimers

As we discussed in the Proposing Release, we understand that issuers or other users of written communications may sometimes include legends or disclaimers in offering materials that may be inappropriate. In particular, disclaimers of responsibility or liability that are impermissible in a statutory prospectus or registration statement also are impermissible in free writing prospectuses. Examples of impermissible legends or disclaimers, which are not exclusive, that will cause the materials not to be permissible free writing prospectuses or not to be effective as to any purchaser for liability purposes include:

• disclaimers regarding accuracy or completeness or reliance by investors;

• statements requiring investors to read or acknowledge that they have read or understand the registration statement or any disclaimers or legends;

• language indicating that the communication is neither a prospectus nor an offer to sell or a solicitation or an offer to buy; and

  • for information that must be filed with us, statements that the information is confidential.²⁶²

    • Filing Conditions

    • General Conditions

    • Scope of General Conditions

We are adopting substantially as proposed the provisions conditioning use of a free writing prospectus on the filing of that prospectus or information contained in that prospectus,²⁶³ unless exempt from filing, in the following circumstances:²⁶⁴

• where a free writing prospectus is prepared by or on behalf of, or used or referred to by, the issuer, known as an “issuer free writing prospectus,” the issuer shall file that free-writing prospectus;

• where a free writing prospectus prepared by or on behalf of or used by an offering participant other than the issuer contains material information about the issuer or its securities that has been provided by or on behalf of an issuer, known as “issuer information,” that is not already included or incorporated in the prospectus or a filed free writing prospectus, the issuer shall file the issuer information;²⁶⁵

• where a free writing prospectus used or referred to by an offering participant other than the issuer is distributed by or on behalf of such offering participant in a manner reasonably designed to lead to its broad unrestricted dissemination, the offering participant shall file the free writing prospectus; and

• where a free writing prospectus or portion thereof prepared by or on behalf of the issuer or other offering participant comprises a description of the final terms of the issuer’s securities in the offering or of the offering, the issuer must file such free writing prospectus or portion thereof after such terms have been established for all classes of the offering.²⁶⁶

In most cases, there is no condition that underwriters and dealers file the free writing prospectuses that they prepare, use, or refer to. This includes information prepared by underwriters and others on the basis of or derived from, but not containing, issuer information. Such information can be, but is not limited to, information that is proprietary to the preparer.

We are adopting as proposed the exception to the general principle that underwriter free writing prospectuses do not need to be filed where a free writing prospectus is used or referred to by and distributed by or on behalf of an offering participant, other than the issuer, in a manner that is reasonably designed to lead to its broad unrestricted dissemination. Accordingly, such use of a free writing prospectus is conditioned on such person filing the free writing prospectus on or before the date of first use. For example, the filing condition applies where:

• an underwriter includes a free writing prospectus on an unrestricted web site or hyperlinks from an unrestricted web site to information that would be a free writing prospectus;²⁶⁷ or

• an underwriter sends out a press release regarding the issuer or the offering that is a free writing prospectus.

Offering participants include selling security holders. A selling security holder who is unaffiliated with the issuer and who uses a free writing prospectus is treated for purposes of Rule 164 and Rule 433 as any other offering participant who may be an underwriter of the issuer’s securities. If the selling security holder is an affiliate of the issuer and the selling security holder prepares, uses, or refers to a free writing prospectus, it should consider, in addition to underwriter status, whether it is acting by or on behalf of the issuer. Further, the issuer and such affiliated selling security holder should evaluate whether the selling security holder has access to material information about the issuer and whether it is including such material issuer information in that free writing prospectus.²⁶⁸

(ii) Conditions Specific to Final Terms of the Securities or Offering

We also have adopted with modifications the provision that a description of the final terms of the securities in the offering or of the offering contained in a free writing prospectus must be filed by the issuer, regardless of whether it was prepared by or on behalf of the issuer or other offering participant prepared or used it. As modified, the provision applies to final terms of the securities in the offering and of the offering, whether or not they are the only matters included in the free writing prospectus. Terms are required to be filed only if they reflect the final terms of the securities or of the offering. The issuer has to file the description of the terms contained in the free writing prospectus within two days after the later of the date such terms became final for all classes of the offering or the date of first use.²⁶⁹ We believe this filing condition is appropriate for the final terms of a security or offering contained in a free writing prospectus. Preliminary term sheets and other descriptive material containing only the terms of the securities or the offering that do not reflect final terms of securities or transactions are not subject to filing. All such written offering materials, whether or not filed, are, however, free writing prospectuses. As we note above, we have revised the Rule as adopted to permit most issuers, whether or not ineligible issuers, to use free writing prospectuses that consist only of descriptions of the terms of the issuer’s securities in the offering or of the offering.²⁷⁰

(iii) Asset-Backed Issuers

Asset-backed issuers and other parties to asset-backed transactions specified in Rule 167(c) potentially have two sets of rules on which they may rely in using written offering materials. Under the special rules for asset-backed securities we adopted in December 2004, if the offering is registered on Form S-3, these persons may use ABS informational and computation materials as defined in Item 1101 of Regulation AB as permitted by Rule 167 and Rule 426. Rule 426 in particular includes filing conditions for the use of such materials using a Form 8-K. The filed materials become part of the registration statement for the offering of asset-backed securities in question.

These persons may also use free writing prospectuses as permitted by Rules 164 and 433 that we are adopting today. Use of free writing prospectuses is not limited to offerings registered on Form S-3. Free writing prospectuses are prospectuses subject to the provisions of Section 12(a)(2) of the Securities Act but are not filed as part of or included in the registration statement. The contents of free writing prospectuses are not limited to ABS informational and computational materials. Rule 433 requires filing by issuers of free writing prospectuses prepared by or on behalf of or used or referred to by, issuers or, depositors, sponsors, servicers, or affiliated depositors, whether or not the issuer, but not by underwriters or dealers, unless they contain issuer information or are distributed in a manner reasonably designed to lead to its broad unrestricted dissemination. Issuers also must file issuer information contained in other free writing prospectuses.²⁷¹

Under Rule 426, filing is required for ABS informational and computational materials provided to prospective investors after final terms of all classes of securities in the offering have been established. Filing also is required of such materials relating to a class of securities, whether or not final terms of all classes had been established, as to which a prospective investor had indicated an interest. Filing is required by the later of the due date for filing the final prospectus with us under Rule 424(b) or two days after the date of first use.

Under Rule 433, the issuer must file a free writing prospectus or portion thereof comprising a description of final terms of securities in the offering or of the offering within two days after the later of the date final terms have been established for all classes of the offering or the date of first use. Filing is not required of descriptions of securities or of the offering that do not reflect final terms, even if a prospective investor had indicated an interest.

Under Rule 164, ineligible issuers may not use free writing prospectuses, except that most categories of ineligible issuers may use free writing prospectuses comprising only descriptions of terms of securities and offerings. Rule 164 provides that for offerings of asset-backed securities, ineligible issuers may use free writing prospectuses limited to certain categories of ABS informational and computational materials.²⁷² There is no such ineligible issuer restriction on the use of ABS informational and computational materials under Rules 167 and 426.

To coordinate the operation of the two available approaches to use of written offering communications, Rule 433 as adopted today provides that a free writing prospectus or portion thereof required to be filed under Rule 433 containing only ABS informational and computational materials, as defined in Item 1101(a) of Regulation AB, may be filed under Rule 433 but within the time frame required for satisfaction of the conditions of Rule 426, and that such filing will satisfy the conditions of Rule 433.

Rule 433 as adopted today also provides that where a free writing prospectus is used in reliance on Rules 164 and 433 and the conditions of those Rules (including the special filing election for free writing prospectuses or portions thereof comprising ABS informational and computational materials) are satisfied, the conditions of Rules 167 and 426 do not need to be satisfied. It similarly provides that where ABS informational and computational materials are used in reliance on Rules 167 and 426 and the conditions of those Rules are satisfied, the conditions of Rules 164 and 433 do not need to be satisfied.

Special considerations apply with respect to providing static pool information in offerings of asset-backed securities. Rule 312 of Regulation S-T²⁷³ provides that static pool information provided on an Internet web site can be included in the prospectus included in the registration statement if certain conditions are satisfied, including the inclusion of the specific web site address in the prospectus.

Static pool information also can be provided on an Internet web site as part of ABS informational and computational materials if certain conditions are satisfied, including provision of the specific web site address in the materials. Those materials are filed on Form 8-K and become part of the registration statement pursuant to Rule 167.

In addition, static pool information provided on an Internet web site can be included in a free writing prospectus. The web site address can be referred to in a written communication, and in the case of an electronic communication an active hyperlink can be provided. In either case the static pool information will be part of the free writing prospectus. Where filing is required under Rule 433, the Rule provides that filing of the free writing prospectus containing the address or hyperlink satisfies the filing requirement. Where static pool information provided in a free writing prospectus is separately included in the prospectus included in the registration statement, the filing in the prospectus included in the registration statement is accomplished pursuant to Rule 312 of Regulation S-T.

(iv) Comments on Filing Condition

Some commenters did not believe there should be any filing requirements for free writing prospectuses.²⁷⁴ Other commenters did not believe that filing should be a condition to the use of a free writing prospectus because the failure to comply with the filing requirements would give rise to a Section 5 violation with related rescission rights.²⁷⁵ Some commenters requested further clarification of the cure provisions, including what constitutes “unintentional,” a “good faith and reasonable effort” to comply with the filing conditions, and a “discovery” of a failure to file a free writing prospectus.²⁷⁶ We have retained the filing condition and cure provisions as noted. We have not provided further elaboration of the terms in the cure provisions which also are contained in the rules affecting business combination transactions and asset-backed securities offerings.²⁷⁷

With regard to filing descriptions of the final terms of the securities in the offering or of the offerings, some commenters expressed concern that issuers and offering participants would not know when the terms were final to be able to file the final term sheet in a timely manner.²⁷⁸ We believe that because a description of the final terms of the securities or the offering does not have to be filed until after the deal terms are final for all classes, there will not be a situation where there is uncertainty when a description of the final terms is a final term sheet. In addition, some commenters thought that only issuer prepared term sheets should have to be filed.²⁷⁹ Because the final terms represent the description of the issuer’s securities and of the offering, we have retained the condition that the issuer must file the final terms, regardless of who has prepared it.

Commenters also requested clarification of the interplay between new Rule 433 and the rules applicable in business combination transactions where there is a capital formation transaction occurring at the same time as a business combination transaction, whether or not related.²⁸⁰ Rule 165, which is applicable to communications in connection with business combination transactions, is not available for a communication whose primary purpose or effect relates to a capital formation transaction. The rules we are adopting today applicable to registered capital formation transactions generally will apply to registered capital formation transactions even if they have some connection to or are proximate in time to a business combination transaction. As a result, if an issuer undertakes a registered capital formation transaction that is related to, or takes place at around the same time as, a business combination transaction, then the issuer can, if the conditions to the applicable rules are satisfied, rely on the rules we adopt today that apply to the registered capital formation transaction and Rules 165 and 166 for the business combination transaction. This is true whether the two transactions are connected (for example, the purpose of the capital formation transaction is to finance a contemporaneous business combination transaction) or independent of each other. If a communication relates to both a capital formation and business combination transaction, then the communication may be subject to both Rules 425 and 433.²⁸¹ We have revised the filing condition of Rule 433 to provide that the filing condition of the Rule will be satisfied if a filing is made pursuant to Rule 425 and the Rule 425 filing includes the Rule 433 legend and indicates on the cover page the registration statement number for the capital formation transaction and that it also is being filed pursuant to Rule 433.

Some commenters addressed issues regarding asset-backed securities offerings. Some commenters questioned the interplay between the free writing prospectus rules and rules affecting communications in asset-backed offerings, particularly as it affected the use of informational and computational materials and final term sheets.²⁸² These commenters were concerned about filing deadlines and the treatment of certain disclosures, such as static pool data disclosed on a website, under the definition of free writing prospectus.²⁸³ As noted above, we are revising Rule 433 and have provided additional guidance as appropriate to address these issues.

(b) Immaterial or Unintentional Failures to File

(i) Scope of Cure Provision

We are adopting as proposed the ability to cure any unintentional or immaterial failure to file free writing materials.²⁸⁴ Rule 164 provides that the material must be filed as soon as practicable after discovery of the failure to file.

Rule 164 provides an issuer and any other person relying on the Rule the ability to cure any immaterial or unintentional failure to file or delay in filing the free writing prospectus, without losing the ability to rely on the Rule. This cure provision is available if a good faith and reasonable effort is made to comply with the filing condition and the free writing prospectus is filed as soon as practicable after the discovery of the failure to file. As in the business combination rules, we are including the cure provision to avoid potential chilling of communications due to uncertainty over filing status.

(ii) Comments on Cure Provision

Some commenters requested further clarification of the cure provisions, including what constitutes “unintentional,” a “good faith and reasonable effort” to comply with the filing conditions, and a “discovery” of a failure to file a free writing prospectus.²⁸⁵ The filing cure provisions are the same as those contained in the asset-backed rules we adopted in 2004 and in the business combination rules, which have operated without further elaboration on these issues since we adopted the rules in 1999.²⁸⁶ As we discuss above under Rule 163, we are not including any further clarification of what constitutes the elements of the cure provisions.²⁸⁷

(4) Record Retention Condition

(a) Discussion

We are adopting, with some modifications, the proposed record retention condition in Rule 433. As adopted, Rule 433 conditions the use of a free writing prospectus on issuers and offering participants retaining for three years any free writing prospectuses they have used from the date of the initial bona fide offering of the securities in question that have not been filed with us. This record retention condition applies to all offering participants.²⁸⁸ The three-year retention period is consistent with retention periods for brokers and dealers to retain securities sale confirmations.²⁸⁹

We believe this record retention condition is appropriate for several reasons. First, it will give us the ability to review free writing prospectuses used in reliance on Rules 164 and 433 under our authority in Securities Act Section 10(b) and the amendments to Rule 418, among other rules. Second, offering participants and purchasers will benefit from the availability of the free writing prospectuses.

(b) Immaterial or Unintentional Failure to Retain a Free Writing Prospectus

Some commenters were concerned that the lack of a cure provision for failure to retain free writing prospectuses could cause retroactive violations of Securities Act Section 5 for three years.²⁹⁰ In response to these concerns, we have included a provision in Rule 164 that provides that solely for purposes of that Rule, but not any other record retention obligation of any issuer or other offering participant, an immaterial or unintentional failure to retain a free writing prospectus will not result in a violation of Securities Act Section 5(b)(1) or the loss of the ability to rely on the exemption so long as a good faith and reasonable effort was made to comply with the record retention condition. Whether or not there has been a good faith and reasonable effort to comply with the record retention condition will be a facts and circumstances determination. We have included this provision because we believe that there can be circumstances in which a free writing prospectus is inadvertently not retained even after a good faith and reasonable effort. We also have modified the record retention condition so that it does not apply in cases where the free writing prospectus is filed with us.

¹⁸³ As noted previously, Securities Act Section 5(b)(1) limits the means by which written offers may be made following the filing of a registration statement. Section 5(b)(1) does not include a limitation on oral offers after the filing of a registration statement.

¹⁸⁴ The safe harbor operates by excluding such notices from the definition of prospectus under Securities Act Section 2(a)(10). See Rule 134 and Adoption of Rules 134 and 135, Release No. 33-3568 (Aug. 29, 1955) [20 FR 6523]. Rule 134 does not apply to communications relating to a registered investment company or a business development company. See Rule 134(e) [17 CFR 230.134(e)].

¹⁸⁵ Rule 134 is not available until a preliminary prospectus, or in the case of shelf registration, a base prospectus, has been filed. This does not mean, however, that a final prospectus meeting the requirements of Securities Act Section 10(a), including a price, is required as a condition to Rule 134. Further, the prospectus required for reliance on Rule 134(d) is a statutory prospectus that satisfies the requirements of Securities Act Section 10, including a price range where required (other than a free writing prospectus), and it need not be a prospectus that satisfies Section 10(a).

If a well-known seasoned issuer makes a written communication of information of the type covered by Rule 134 prior to filing its registration statement, and that communication constitutes an offer, the communication will be a free writing prospectus and the issuer will need to look to the Rule 163 exemption of pre-filing offers from the gun-jumping provisions.

¹⁸⁶ For example, for fixed income securities, the changes will allow greater information about final interest rates and yield information, including yield information on fixed income securities with comparable maturities and credit ratings. We believe that yield disclosure also covers disclosure of the anticipated spread over a benchmark. We also have revised the Rule to allow issuers to disclose whether securities are convertible, exercisable, or exchangeable, and the ranking of the securities. The revised Rule also allows disclosure of the permissibility or status of the investment under the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.] (“ERISA”).

¹⁸⁷ The information on marketing events, such as road shows, can include greater detail on the date, time, location, and procedures for attending or otherwise accessing the events.

¹⁸⁸ For example, a broker or dealer can inform investors of the procedural aspects of an auction or a directed share program. The changes will not include written notices of allocations of securities, including those delivered electronically. These notices will be a type of written confirmation of sale and, thus, prospectuses. The rules we are adopting regarding prospectus delivery reforms, as discussed later, will apply to these notices.

¹⁸⁹ See, e.g., letters from ABA; ABA-ABS; Alston; ASF; Citigroup; Cleary; CMSA; Fried Frank; Merrill Lynch; Morgan Stanley; NYCBA; S & C; SIA; and TBMA.

¹⁹⁰Rule 134 and the other communications safe harbors are non-exclusive; therefore, if a communication falls outside of the safe harbor it still may, depending on the facts and circumstances, not be deemed an "offer."

¹⁹¹ See, e.g., letters from ABA; Citigroup; Cleary; Davis Polk; Fried Frank; Merrill Lynch; Morgan Stanley; NYCBA; NYSBA; and SIA. 192

¹⁹² See, e.g., letters from ABA and SIA.

¹⁹³ The Rule also provides that identities of selling security holders and the type of underwriting can be provided if the information has been included in the registration statement.

¹⁹⁴ See paragraphs (a)(13) and (a)(16) of the amendments to Rule 134.

¹⁹⁵ See letter from NYCBA.

¹⁹⁶ See, e.g., letters from ABA; Alston; Cleary; and S & C.

¹⁹⁷ Rule 134 requires in some cases that the notice must be accompanied or preceded by a written prospectus meeting the requirements of Section 10 of the Securities Act, which may be satisfied in an electronic notice by including an active hyperlink to such a prospectus. The notice itself cannot, however, include information beyond that permitted by the Rule, and, as such, the notice cannot include a hyperlink or URL for an address containing information beyond that permitted by Rule 134. See the 2000 Electronics Release, note 96, at II.B.2.

¹⁹⁸ See example (19) under Section II.D. of Use of Electronic Media for Delivery Purposes, Release No. 33-7233 (Oct. 6, 1995)[60 FR 53458] (the “1995 Electronics Release”), which states that a URL address can be included in an electronic Rule 134 notice.

¹⁹⁹ See Securities Act Section 2(a)(10).

²⁰⁰ We are adding this definition to Securities Act Rule 405.

²⁰¹ As we discuss above, a free writing prospectus can be used by a well-known seasoned issuer prior to filing the registration statement pursuant to Rule 163.

²⁰² The rules provide that such a free writing prospectus is a permitted prospectus for purposes of Securities Act Section 10(b) [15 U.S.C.77j(b)] and, as such, can be used without violating Securities Act Section 5(b)(1). A free writing prospectus used other than in accordance with our new rules will continue to be a prospectus.

²⁰³The rules do not extend to business combination transactions, for which we have already adopted rules. See Securities Act Rule 162 [17 CFR 230.162], Rule 165, Rule 166, and Rule 425 [17 CFR 230.425]. Rule 162 relates to submission of tenders in registered exchange offers. Communications relating to business combinations are covered by Rule 165 and Rule 166. Rule 425 relates to the filing of certain prospectuses and communications in connection with business combination transactions. See also the Regulation M-A Release note 95; and Cross-Border Tender and Exchange Offers, Business Combinations and Rights Offerings, Release No. 33-7759 (Oct. 22, 1999) [64 FR 61382] (exemptive rules for cross-border tender and exchange offers, business combinations, and rights offerings relating to the securities of foreign issuers). Where appropriate, we have included provisions that are intended to ensure consistency among the rules and, with respect to filing conditions, permit a single filing to satisfy the conditions under both regulatory schemes. See Rule 425 and Rule 433.

²⁰⁴ Prior to filing a registration statement, only a well-known seasoned issuer will be able to use a free writing prospectus. This use of a free writing prospectus by a well-known seasoned issuer is permitted by Rule 163.

²⁰⁵ See Rules 167 and 426 [17 CFR 230.167 and 17 CFR 230.426]. Asset-backed issuers also may use free writing prospectuses as discussed below. We have excluded free writing prospectuses used in reliance on Rule 164 and Rule 433 (including the filing requirements) from the filing requirements for ABS informational and computational materials. See the amendments to Rule 426. The content of ABS free writing prospectuses may include, but is not limited to, the same information as material used pursuant to Rule 167 and Rule 426.

²⁰⁶ See clause (a) of Securities Act Section 2(a)(10). After effectiveness of a registration statement, any written offer that is accompanied or preceded by a final prospectus that meets the requirements of Securities Act Section 10(a) (such as sales literature used after effectiveness) will continue to be permitted without having to satisfy the requirements of any safe harbor or other rule permitting its use or Rule 433. Such a written offer is excluded from the definition of “prospectus” under the Securities Act by reason of clause (a) of Securities Act Section 2(a)(10) if a final prospectus meeting the Section 10(a) information requirements is sent or given before or at the same time as the written offer. A base prospectus included in a shelf registration statement that omits information is not a final prospectus meeting the requirements of Section 10(a).

²⁰⁷ In addition, communications that are not considered offers or prospectuses for purposes of the gun-jumping provisions, such as Rule 134 notices, Rule 135 communications, regularly released factual business information and forward-looking information falling within the new safe harbors, and research reports falling within the safe harbors provided by our rules, will not be free writing prospectuses.

²⁰⁸ See, e.g., letters from Cleary; NYSBA; and SIA.

²⁰⁹ See, e.g., letters from ABA; ABA-ABS; ASF; Fried Frank; NYSBA; S & C; SIA; and TBMA. But see letter from State Street Global Advisors (“SSGA”).

²¹⁰  Whether an offshore communication is considered an offer in the United States subject to the federal securities laws will depend on when and how the communication is made and the availability of other exemptions, such as those for offshore press conferences. See Rule 135e [17 CFR 230.135e] and note 140 above. See also Rule 902(c)(3)(vii) [17 CFR 230.902(c)(3)(vii)].

²¹¹ In addition, as we have said previously, whether information prepared and distributed by third parties that are not offering participants is attributable to an issuer or other offering participant depends upon whether the issuer or other offering participant has involved itself in the preparation of the information or explicitly or implicitly endorsed or approved the information. The courts and we have referred to the first line of inquiry as the entanglement theory and the second as the adoption theory. See the 2000 Electronics Release, note 96, at fn. 48 and accompanying text. We think these theories are equally applicable with respect to issuer or offering participant involvement regarding rating agency reports. For example, if an issuer or underwriter distributes the rating agency report in connection with an offering of the securities, it is appropriate to conclude that such party has adopted that report and should be liable for its contents. Liability under the entanglement theory depends upon the level of pre-publication involvement in the preparation of the information. See the Asset-Backed Securities Adopting Release, note 82, at part III.C.3.

²¹² The discussion in this section relates to the use of free writing prospectuses after the filing of a registration statement. For a discussion of the use of free writing prospectuses by well-known seasoned issuers prior to filing a registration statement, see the discussion in Section III.D.2 above under “Permitted Pre-Filing Offers for Well-Known Seasoned Issuers.”

²¹³ As with certain of the safe harbors and other exemptions we are adopting today, we have included language in the Preliminary Note to Rule 164 making clear that the exemption in that Rule is non-exclusive.

²¹⁴ These descriptions cannot be used in any case if the issuer is or it or any of its predecessors in the last three years was a blank check company, a shell company (other than a business combination related shell company), or a penny stock issuer.

²¹⁵ We have adopted as proposed a waiver provision that will allow us to grant or deny a request to waive an issuer’s ineligibility if we find good cause to provide the waiver. We are adopting rules today delegating authority to the Division of Corporation Finance to grant or deny waivers from any of the ineligibility provisions. See revisions to Rule 30-1 of the Rules of Organization and Program Management Governing Delegations of Authority to the Director of the Division of Corporation Finance [17 CFR 200.30-1].

²¹⁶ The exception for reports solely for specified items of Form 8-K from the requirement that issuers be current effectively applies only for purposes of the ineligible issuer definition in the context of the use of free writing prospectuses. In the context of the determination of status as a well-known seasoned issuer, the requirement that the issuer be current at the determination date applies separately (without the Form 8-K exceptions) by virtue of the requirement that the issuer be eligible for Form S-3. (The Form 8-K exceptions in the Form S-3 requirements apply in determining whether an issuer is timely for purposes of Form S-3 eligibility, but not in determining whether it is current.)

²¹⁷ The requirements for Form S-3 eligibility for asset-backed issuers include not only this condition, but also the condition that filings be timely, and extend the requirements to reports of affiliated depositors regarding the same asset class. The timeliness condition and extension to affiliated depositors do not apply here.

²¹⁸ These issuers are subject to our interpretations in Limited Partnership Reorganizations and Public Offerings of Limited Partnership Interests, Release No. 33-6900 (June 17, 1991) [56 FR 28979].

²¹⁹ Ineligibility based on an involuntary bankruptcy filing arises on the earlier of 90 days after the date of filing of an involuntary petition (if the case was not earlier dismissed) or the conversion of the case to a voluntary proceeding under federal bankruptcy or state insolvency laws. As a result, issuers will not immediately be considered ineligible because an involuntary bankruptcy petition has been filed. In addition, ineligibility tied to bankruptcy will no longer apply after an issuer files an annual report with audited financial statements after emergence from bankruptcy.

²²⁰ 15 U.S.C. 77h.

²²¹ 15 U.S.C. 77h-1.

²²² The covered decrees or orders (including settlements) are prohibitions on future violations of the anti-fraud provisions of the federal securities laws, orders requiring issuers to cease and desist from violating the anti-fraud provisions of the federal securities laws, and determinations of violations of the anti-fraud provisions of the federal securities laws. The settlements include settlements in  which the issuer or its subsidiary neither admits nor denies that it violated the anti-fraud provisions of the federal securities laws.

²²³ See amendments to Securities Act Rule 405.

²²⁴ See, e.g., Penny Stock Definition for Purposes of Blank Check Rule, Release No. 33-7024 (Oct. 25, 1993) [58 FR 58099] (the Commission stated that Congress found blank check companies to be common vehicles for fraud and manipulation in the penny stock market, and concluded that the Commission's disclosure-based regulation and review of such offerings protects investors); Delayed Pricing for Certain Registrants, Release No. 33-7393 (Feb. 20, 1997) [62 FR 9276] (blank check and penny stock issuers would be ineligible to use rule providing for delayed pricing because of “prior substantial abuses”); and the Shell Companies Release, note 109.

²²⁵ See Securities Act Section 27A and Exchange Act Section 21E.

²²⁶ Two commenters suggested that business development companies should be permitted to rely on the rules permitting the use of a free writing prospectus. See letters from Allied and Fried Frank. A third commenter suggested that Securities Act Rule 482 should be conformed to Rule 433 for registered investment companies and business development companies. See letter from ABA.

²²⁷ See, e.g., letters from ABA; Alston; the Business Roundtable (“BRT”); Citigroup; Credit Suisse First Boston, LLC (“CSFB”); Davis Polk; Merrill Lynch; Morgan Stanley; NYSBA; Paul ,Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”); S & C; and SCSGP.

²²⁸ See, e.g., letters from ABA; AICPA; Davis Polk; Deloitte; E & Y; and KPMG.

²²⁹ See, e.g., letters from Davis Polk and TBMA.

²³⁰ See, e.g., letters from ABA-ABS; ASF; CMSA; Davis Polk; and TBMA.

²³¹ See, e.g., letters from ABA; AICPA; E & Y; and KPMG.

²³² See, e.g., letters from ABA-ABS and ASF.

²³³ See, e.g., letters from ABA; Alston; BRT; Citigroup; Richard Hall; Merrill Lynch; Morgan Stanley; the NYSBA; Paul Weiss; SCSGP; and SIA.

²³⁴ See, e.g., letters from ABA; Alston; BRT; Citigroup; Cleary; CSFB; Davis Polk; Intel Corporation (“Intel”); Morgan Stanley; NYSBA; SCSGP; S & C; SIA; and TBMA.

²³⁵ See, e.g., letters from Richard Hall; Paul Weiss; and TBMA.

²³⁶ See, e.g., letters from Alston; Morgan Stanley; NYSBA; Paul Weiss; S & C; and SIA. Some commenters were concerned that acquired subsidiaries that had securities law violations prior to the acquisition would cause the acquiring issuer to be ineligible. See, e.g., letters from Alston; Intel; NYSBA; S & C; and SCSGP.

²³⁷ See, e.g., letters from Davis Polk and TBMA.

²³⁸In addition, we believe that the new check box on the Form 10-K and Form 20-F for issuers to indicate whether they are well-known seasoned issuers should facilitate an offering participant’s ability to develop such a reasonable belief with respect to an issuer’s status as a well-known seasoned issuer.

²³⁹ Base prospectuses, preliminary prospectuses, summary prospectuses, and prospectuses subject to completion that are permitted under our rules are not prospectuses that satisfy the requirements of Securities Act Section 10(a), but they are statutory prospectuses that satisfy the requirements of Securities Act Section 10. Rule 433 makes clear that the prospectus condition may be satisfied by any Section 10 prospectus, other than a summary prospectus permitted by Securities Act Rule 431 [17 CFR 230.431] or a free writing prospectus.

²⁴⁰ For purposes of the prospectus delivery condition, Rule 433 provides that a prospectus will be deemed to accompany a free writing prospectus that is an electronic communication if the free writing prospectus contains an active hyperlink to the statutory prospectus. In initial public offerings, a preliminary prospectus that does not contain a price range does not satisfy our rules or, therefore, the requirements of Section 10.

²⁴¹ “In any format” is meant to encompass all means of dissemination of the materials, including graphic, television or radio broadcast, or written.

²⁴² The rules we are adopting provide that written materials for which Securities Act Section 17(b) requires disclosure will be treated as free writing prospectuses of the issuer or other offering participant on whose behalf the payment has been or will be made or consideration has been or will be given.

²⁴³ See the discussion below regarding the treatment of media publications. See Section III.D.3 below under “Media Publications and Broadcasts.”

²⁴⁴ If there are material changes in a preliminary prospectus, or preliminary prospectus supplement, the issuer and offering participants generally will recirculate the revised preliminary prospectus or supplement to potential purchasers.

²⁴⁵ If a final prospectus is given or sent prior to or with a written offer, under the exception in clause (a) of Securities Act Section 2(a)(10), the written offer is not a prospectus and therefore will not be a free writing prospectus and Rules 164 and 433 will not apply.

²⁴⁶ Under