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)

(D) Road Shows

(1) Definition of Electronic Road Show

Issuers and underwriters frequently conduct presentations known as “road shows” to market their offerings to the public. These road shows are a primary means by which issuers are involved directly and actively in a selling effort to investors. Historically, these presentations were conducted in person and limited to institutional investors.

Today, due to advances in electronic media, road shows also are being conducted or re-transmitted over the Internet or other electronic media and in some cases to broader audiences.

We indicated in the Proposing Release that we intended to clarify the treatment of all electronic communications, including electronic road shows, as graphic communications under the Securities Act. Under the proposed rules, all electronic road shows would have been written offers and prospectuses, but also would have been permitted subject to conditions, as free writing prospectuses.

As discussed above, we have revised the definition of graphic communication from the proposal to exclude a communication that, at the time of the communication, originates live, in real-time to a live audience and does not originate in recorded form or otherwise as a graphic communication, although it may be transmitted through graphic means. This revision applies in the context of road shows. Under the definition, a live, in real-time road show to a live audience that is transmitted graphically will not be a graphic communication, and therefore not a written communication, or a free writing prospectus. It will still, however, be an offer subject to Securities Act Section 12(a)(2) and the other liability provisions of the federal securities laws.²⁹¹ Thus, as we discuss below, information that is presented as part of the live, in real-time road show to a live audience will not be a free writing prospectus. As discussed below, we have added a note to the effect that where a communication (such as slides or other visual aids) is provided or transmitted simultaneously as part of a live road show that is not a written communication, including a live, in real-time graphically transmitted road show, and that communication is provided or transmitted in a manner designed to make it available only as part of the road show and not separately, that communication is deemed part of the road show. Such a communication is thus deemed also not to be a written communication.²⁹²

Road shows that do not originate live, in real-time to a live audience and are graphically transmitted are electronic road shows that will be considered written communications and, therefore, free writing prospectuses. Under our new Rules, they are, of course, permitted if the conditions of our new Rules for free writing prospectuses are satisfied. As we noted in the Proposing Release, issuer involvement or participation in an electronic road show that is a written communication will make it an issuer free writing prospectus.²⁹³

(2) Treatment of Electronic Road Shows

Electronic road shows have to date proceeded in reliance on a series of no-action letters granted by the staff of the Division of Corporation Finance.²⁹⁴ The rules we are adopting today permit the use of electronic road shows without many of the conditions in the electronic road show no-action letters.²⁹⁵ As we discussed in the Proposing Release, the electronic road show no-action letters for registered public offerings are withdrawn as of the effective date of Rule 433.²⁹⁶

For road shows that are free writing prospectuses, the filing conditions of Rule 433 do not apply, with one exception. In the case of an issuer that is not required to file reports under Exchange Act Section 13 or Section 15(d) at the time of filing the registration statement and is registering an offering of common equity or convertible equity securities, the filing condition applies to a road show that is a free writing prospectus unless the issuer makes at least one version of a bona fide electronic road show²⁹⁷ for the offering in question readily available without restriction electronically to any potential investor. If there is more than one version of a road show that is a written communication, the unrestrictedly available bona fide electronic road show must be available no later than the other versions.

We also have modified the filing conditions from the proposal to eliminate the specific obligation to file any material issuer information provided at an electronic road show. The filing condition for electronic road shows is as described above. We have added a note that a where a communication that is provided or transmitted simultaneously with a live road show that is not a written communication and that communication is provided or transmitted in a manner designed to make it available only as part of the road show and not separately, that communication is deemed to be part of the road show.²⁹⁸Therefore, as discussed above, if the road show is not a written communication, such a communication, such as slides or visual aids, even if it would otherwise be a graphic or other written communication is deemed to be part of the road show and thus not to be written. This provision also would cover, for example, a communication of visual aids provided in a separate feed from a live, in real-time road show to a live audience transmitted by graphic means, where the separate communication is provided or transmitted in a manner such that the separate communication can only be seen as part of the road show. If the road show is written and not required to be filed, such a simultaneous communication is also not required to be filed. This provision also would cover visual aids transmitted in a manner designed to make them available simultaneously only as part of an electronic road show. If the electronic road show is not subject to filing, neither are the visual aids. Otherwise, graphic or other written communications provided separately, for example by graphic means in a separate file designed to be available to be copied or downloaded separately, will be treated as a written communication and, if an offer, will be a free writing prospectus.

Whether or not road shows are written communications, all road shows that are offers are subject to Securities Act Section 12(a)(2) liability. In addition, all road shows that are offers that are written communications are free writing prospectuses, whether or not required to be filed.

(3) Comments on Electronic Road Shows

Commenters generally supported permitting electronic road shows.²⁹⁹ While commenters supported the filing exclusion for electronic road shows, a significant number of commenters were concerned about the proposed rules conditions affecting electronic road shows.³⁰⁰ Most of the comments related to the treatment of live, real-time road shows transmitted electronically as graphic communications.³⁰¹ These commenters believed that all live, real-time road shows, including those that are transmitted graphically to “overflow rooms,” should be treated as oral communications.³⁰² The commenters also argued that all materials provided or made available at these live graphically transmitted road shows, including slides and other materials used but not retained by participants should be treated as oral communications and should not be required to be filed with us under Rule 433.³⁰³ Many commenters were concerned that putting greater restrictions on these road shows would eliminate the ability of out of town investors to participate in these road shows and view PowerPoint® and similar presentations which would, therefore, reduce the amount of information that these investors receive.³⁰⁴

We have addressed many of these comments and concerns through our modification of the definition of graphic communications, which as adopted excludes communications originating live, in real time to a live audience, even if transmitted by graphic means. The materials presented as part of these road shows, such as slides or PowerPoint® presentations will similarly not be graphic communications unless they are separately transmitted as graphic communications. As a result, live communications, such as live road shows transmitted electronically (whether to an overflow room or another city) are not graphic communications and thus not free writing prospectuses. They will be treated as oral communications and will be subject to liability under Securities Act Section 12(a)(2) and the anti-fraud provisions.

We also have revised the filing conditions applicable to electronic road shows in response to certain suggestions of commenters. Commenters generally supported the definition of “bona fide electronic road show,”³⁰⁵ although two commenters suggested limiting the requirement for a bona fide electronic road show only to initial public offerings³⁰⁶ and another suggested limiting it to equity but not debt offerings.³⁰⁷

Within the category of road shows that are graphic under our rules as adopted, we have retained the concept of bona fide electronic road show only for initial public offerings of common equity or convertible equity securities. We have excluded the concept for all other registered securities offerings. We believe that it is appropriate to limit the filing condition to require a bona fide electronic road show to initial public offerings of common equity or convertible equity securities, due to the greater potential for involvement and interest of the retail investor in these types of offerings and securities of the issuer. We believe this change addresses commenters’ concerns that an unrestricted bona fide electronic road show should not be required in what are essentially registered institutional offerings. Finally, we believe the note added to Rule 433(d)(8) as adopted will clarify the characterization and treatment of materials provided or transmitted as part of or simultaneously with road shows, oral or written.

Some commenters also did not support requiring the filing of any issuer information used at any road show,³⁰⁸ while two commenters thought that all electronic road shows should be filed and available to anyone.³⁰⁹

We believe that our treatment of road shows, including electronic road shows, strikes the appropriate balance between the need to market an issuer’s securities to institutional investors and the desires of retail and other investors to have access to issuer information, such as management presentations, that are normally available only at road shows that often have not been open to retail investors generally. We also believe that the Rule as adopted addresses some of the concerns that important information about an issuer or an offering can be communicated at electronic (as well as live) road shows, rather than in the statutory prospectus. In this regard, as we noted in the Proposing Release, the Report and Recommendations of the NASD/NYSE IPO Advisory Committee recommended that issuers be required to make a version of their IPO road show available electronically to unrestricted audiences.³¹⁰ While we are not requiring that road shows be made available to unrestricted audiences, issuers and underwriters are free to make road shows available to all investors and we believe that our new rules will encourage issuers to do so where retail interest justifies such unrestricted availability.

(E) Treatment of Communications on Web Sites and Other Electronics

Issues

(1) General

The communications rules we are adopting will enable issuers and market participants to take significantly greater advantage of the Internet and other electronic media to communicate and deliver information to investors. We have addressed previously the circumstances under which an issuer retains responsibility for information included on its web site;³¹¹ however, the rules we are adopting today expand possibilities in this regard due to the ability to communicate outside the statutory prospectus, including posting information on web sites that will be free writing prospectuses.

We are adopting Rule 433(e) as proposed to make clear that an offer of an issuer’s securities that is contained on an issuer’s web site or that is contained on a third party web site hyperlinked from the issuer’s web site is considered a written offer of such securities made by the issuer and, unless otherwise exempt, will be a free writing prospectus of the issuer. Accordingly, the requirements of Rule 433 will apply to these free writing prospectuses.³¹²

(2) Historical Information on an Issuer Web Site

As we discussed in the Proposing Release, we recognize the importance of an issuer’s web site as a means to communicate with the public, not just with potential investors in an offering, about its business. In this regard, commenters on our 2000 Electronics Release expressed concerns regarding the possibility that historical issuer information on an issuer’s web site that is accessed at a later time would be considered “republished” at that later date, with attendant securities law liability.³¹³

We believe that the availability of historical issuer information provides investors with more readily accessible information about the issuer. We also believe that issuers in registration should be able to maintain historical information on their web site in a manner by which that information will remain accessible to the public but will not be considered to be reissued or republished for purposes of the Securities Act.

Historical information that is not an offer under the Securities Act, either because its use and content are such that it does not fall within the Securities Act definition of that term or, for example, because it falls within a safe harbor (such as those we are adopting today), will not become an offer if accessed at a later time, unless it is updated or used or referred to (by hyperlink or otherwise) in connection with the offering.³¹⁴ We believe it is appropriate, however, to provide additional certainty regarding the treatment of historical information on web sites as “offers” under the Securities Act. Accordingly, Rule 433, as adopted, includes an exception to its general standard. This exception, contained in Rule 433(e)(2), provides that historical information will not be considered a current offer of the issuer’s securities and, therefore, will not be a free writing prospectus, if that historical information is:

• separately identified as such; and

• located in a separate section of the issuer’s web site containing historical information.

The use of that historical information will become a current offer if it is:

• incorporated by reference into or otherwise included in a prospectus of the issuer for the offering; or

• otherwise used or referred to in connection with the offering.

While Rule 433(e)(2) addresses particular situations in which information retained on a web site will not be considered a free writing prospectus, other information located on or hyperlinked to a web site might similarly not be considered a current offer of the issuer’s securities and, therefore, not a free writing prospectus, where it can be demonstrated that the information was published previously.³¹⁵ For example, certain information that, while not contained in a separate section of an issuer’s web site, is dated or otherwise identified as historical information and is not referred to in connection with the offering activities may not be a current offer, depending on the particular facts and circumstances.

(3) Comments on Treatment of Communications on Web Sites and Other Electronics Issues

Commenters supported the provisions of proposed Rule 433 clarifying the treatment of information contained on or hyperlinked to web sites of issuers and offering participants.³¹⁶ Some commenters requested that the Commission provide greater explanation of what might constitute “historical” information, including whether and how information is archived.³¹⁷ Commenters also desired further clarification of the treatment under the free writing prospectus rules of information on an issuer’s web site hyperlinked from a third party’s web site.³¹⁸

Rule 433(e)(2) addresses particular situations in which information on an issuer’s web site will not be considered a current offer or a free writing prospectus. Whether or not other information is historical information of the issuer will depend on the facts and circumstances. Further, we have not provided additional detail regarding the nature of “archiving” information because we believe that the provision in Rule 433(e)(2) regarding separately located, identified historical information provides issuers with the necessary flexibility in operating their web sites within the federal securities laws. Finally, information that is an offer and is contained on the web site of an offering participant or contained on the web site of another person hyperlinked from the web site of an offering participant could be a free writing prospectus of that offering participant.

(F) Media Publications or Broadcasts

(1) Overview

As we discussed in the Proposing Release, we believe it is important to identify the circumstances under which information released or disseminated to the media by an issuer or offering participant in connection with a registered offering will be considered the use of a free writing prospectus under the new rules. We recognize that the financial news media are a valuable source of information about issuers to the public at large. Issuers and offering participants use the media to disseminate important information about themselves, such as through the use of press releases and interviews. The media plays an integral role, therefore, in providing information about issuers to the market.

We want to encourage the role of the media as an important communicator of information and some media publications regarding an offering are not categorized as offers, under the gun-jumping provisions, by issuers or other offering participants. However, we do not want issuers and offering participants to avoid responsibility for their offering or marketing efforts by using the media. We, therefore, believe that it is appropriate to address in our new rules offers that take place using the media as a communication vehicle. Under the rules we are adopting today, where an issuer or any offering participant provides information about the issuer or the offering that constitutes an offer, whether orally or in writing, to a member of the media and where the media publication of that information is an offer by the issuer or other offering participant, we will consider the publication to be a free writing prospectus of the issuer or offering participant in question.

(2) Application of Rule 164 and Rule 433 to Media Publications

As we proposed, under the rules we are adopting today, the treatment of a media publication that constitutes an offer and therefore a free writing prospectus of the issuer or other offering participant will depend on whether the issuer or other offering participant prepares the publication or television or radio broadcast or pays for or provides other consideration for the publication or broadcast, or whether unaffiliated media prepares and publishes or broadcasts the communication for no consideration or payment from an issuer or offering participant.

(a) Prospectus Delivery or Availability

(i) Where Media Publications Are Prepared or Consideration Paid by Issuer or Offering Participant

If an issuer or offering participant prepares, pays for, or gives consideration for the preparation, publication or dissemination of or uses or refers to a published article, television or radio broadcast, or advertisement, the issuer or other offering participant will have to satisfy the conditions to the use of any other free writing prospectus of that offering participant at the time of the publication or broadcast. For example, in the case of a non-reporting issuer or reporting unseasoned issuer a statutory prospectus will have to precede or accompany the communication. As a consequence of this requirement, in offerings by non-reporting and unseasoned issuers, issuers and offering participants will not be able to prepare or pay for published or broadcast written advertisements, “infomercials,” or broadcast spots or similar written communications about the issuer, its securities, or the offering that includes information beyond that permitted by Rule 134. Well-known seasoned and other seasoned issuers and offering participants will have to comply with the other applicable conditions for the free writing prospectus. For seasoned issuers that are not well-known seasoned issuers and offering participants, a registration statement including a statutory prospectus (which can be a base prospectus) will have to be on file with us. These conditions may also include filing with us not later than the date of first use.

(ii) Unaffiliated Media Publications

Where, however, the free writing prospectus is prepared and published or broadcast by persons in the media business that are unaffiliated with the issuer and another offering participant,³¹⁹ and the preparation, publication, or broadcast is not paid for by the issuer or other offering participant, our rules include certain accommodations. In these cases, an issuer or offering participant would not have to have a statutory prospectus precede or accompany the media communication, although a filed registration statement including a statutory prospectus would be necessary, except in the case of a well-known seasoned issuer.³²⁰ Therefore, an interview or other media publication or television or radio broadcast where an issuer or offering participant participates (but does not prepare or pay for the event or article) could be a free writing prospectus, but because of the media intervention, we conclude that its use should not be conditioned on prior or simultaneous delivery of the statutory prospectus. For example, an underwriter or issuer will be permitted to invite the press to a live road show or an electronic road show, but, in most cases, we will consider an article including information obtained at that road show to be a free writing prospectus of the issuer or underwriter and subject to the rules regarding free writing prospectuses.³²¹ As another example, if a chief executive officer of a non-reporting issuer gives an interview to a financial news magazine without payment to the magazine for the article, the publication of the article after the filing of the registration statement will be a free writing prospectus of the issuer that will be subject to the filing conditions by the issuer after publication. In that case, there will be no requirement that a statutory prospectus precede or accompany the article at the time of the publication.

(b) Filing

We are adopting the filing condition applicable to free writing prospectuses that are media publications or television or radio broadcasts with some modifications from the proposals in response to comments. Rule 433(f) provides that the filing condition of Rule 433(d) will be satisfied where a free writing prospectus including information about the issuer, its securities, or the offering provided, authorized, or approved by or on behalf of the issuer or an offering participant, that is prepared and published or disseminated by persons in the media business who are not affiliated with or paid by the issuer or an offering participant (with certain exceptions for issuers in the media business), is filed by the issuer or offering participant involved within four business days after the issuer or offering participant becomes aware of its publication or first broadcast.³²² Persons in the media have no filing or other responsibilities under these provisions.³²³

We have made certain modifications to the filing conditions from the proposals. First, Rule 433 permits issuers and offering participants to satisfy the filing condition by filing:

• the media publication;

• all of the information provided to the media in lieu of the publication; or

• a transcript of the interview or similar materials that the issuer or other offering participant provided to the media, provided that all the information provided is filed.

We also have provided that an issuer or other offering participant does not have to file the media publication if the substance of the written communication has been previously filed with us. Finally, the issuer or offering participant may file, together with or after the media publication is filed, information that the issuer reasonably believes is necessary or appropriate to correct information included in the media publication.³²⁴ We believe that these additional provisions will give issuers and offering participants the ability to file the publications on a timely basis, to file the underlying materials in lieu of the publication, and to file correcting materials after publication, television or radio broadcast, or other dissemination, if there is concern about the accuracy of the publication.³²⁵

(c) Issuers in the Media Business

In response to comments about the impact the condition that the media entity is unaffiliated with the issuer has on issuers that are in the media business,³²⁶ we have provided a limited exclusion that would permit issuers that are in the media business to be able to rely on the unaffiliated media condition if the media issuer or its affiliated media business:

• is the publisher of a bona fide newspaper, magazine, or business or financial publication of general and regular circulation or bona fide broadcaster of news including business and financial news;³²⁷

• has established policies and procedures for the independence of the content of the publication or broadcast from the offering activities of the issuer; and

• publishes or broadcasts the communication in the ordinary course.

(3) Responses to Comments on Treatment of Media Publications

Among the issues commenters raised, many focused on the treatment of media reports under the proposed rules regarding free writing prospectuses.³²⁸ They expressed concern as to whether the issuer or offering participants were obligated to monitor media releases and provide correcting information.³²⁹ These commenters were concerned about the ability to satisfy the conditions of the exemption if the media reports or publicity about the issuer or its securities occurred prior to the filing of a statutory prospectus. Commenters also suggested that the filing condition be limited to the specific publication that was granted an interview or, if statements from that interview were carried by different media outlets, the issuer or offering participant should be able to file a representative statement.³³⁰ Additionally, some commenters suggested that if the media publication was based on a press release or other specifically authorized communication, then only the press release or other authorized communication should satisfy the filing condition.³³¹ One commenter suggested that media publications based on publicly disseminated information should be excluded from the definition of free writing prospectuses.³³² Commenters also suggested that the filing occur after a senior officer has actual knowledge of the publication and that the filing deadline be extended to three business days.³³³

We believe that the modifications we have made to the filing conditions and other provisions of Rule 433 should address most of the commenters’ concerns regarding unaffiliated media publications. We would observe first that, as discussed above, not every media publication about an offering is an offer or a free writing prospectus of the issuer or other offering participant. In particular, we have administered the gun-jumping provisions so that where there is no other involvement of an issuer or other offering participant, media publications based on information filed with us or available on an unrestricted basis are not offers of the issuer or other offering participant. This should substantially eliminate the need to monitor media publications unless offering participants are directly communicating offering information or otherwise involved with the media in connection with the offering. Further, the Rule only applies to written offers prepared, published, or disseminated by the media where an issuer or offering participant provides, authorizes, or approves the information. In addition, we have made the following modifications:

• extended the filing due date to four business days after the issuer or other offering participant becomes aware of the publication or first broadcast;

• permitted the filing of information reasonably believed necessary or appropriate to correct information included in the communication;

• in lieu of filing the article, permitted the filing of the transcript of the entire interview or other materials that formed the basis for the article; and

• provided that where the substance of the information provided by or on behalf of the issuer or other offering participants contained in the publication is already filed with us no filing is required.

We also have made accommodations so that issuers in the bona fide media business will be able to rely on these provisions.

As in the case of the safe harbors for factual business information, some commenters also requested that we revise the definition of “by or on behalf of” an offering participant to include only those communications that were made by specific authorized persons and to provide that the issuer or other offering participant is not liable for unauthorized communications.³³⁴ For the reasons noted above, we are not modifying the definition of “by or on behalf of” to limit it to specified persons.

(G) Liability Issues Affecting Free Writing Prospectuses

(1) General

Even when filed, a free writing prospectus will not be part of a registration statement subject to liability under Securities Act Section 11, unless the issuer elects to file it as a part of the registration statement. Regardless of whether a free writing prospectus is filed, any seller offering or selling securities by means of the free writing prospectus will be subject to disclosure liability under Securities Act Section 12(a)(2). A free writing prospectus also can, of course, be the basis for liability under the anti-fraud provisions of the federal securities laws.

(2) Filed Free Writing Prospectus Not Part of Registration Statement

A free writing prospectus used after a registration statement is filed complying with Rule 433 will be governed by the provisions of Securities Act Section 10(b), which provides that a prospectus permitted under that section is filed as part of the registration statement, but is not subject to Section 11 liability. We are adopting as proposed the modification to the Section 10(b) filing requirement to provide that a free writing prospectus filed pursuant to Rule 433 must identify the registration statement to which it relates, but Rule 433 provides that it will not have to be filed as part of the registration statement. We believe that the modified filing condition will enhance investor protection because it should facilitate filing of the free writing prospectus on a timely basis and more readily identify the filed information as a free writing prospectus.³³⁵

(3) Cross-Liability Issues

As we discussed in the Proposing Release, we provided that the filing condition applied only to an issuer free writing prospectus and issuer information or to information in a free writing prospectus broadly disseminated, to address the concerns that commenters on our 1998 proposals had about cross liability under Securities Act Section 12(a)(2) for free writing materials of other offering participants.³³⁶ As we discuss above, we are adopting the filing condition substantially as proposed so that it does not extend to a free writing prospectus prepared by an underwriter, even one including information prepared on the basis of or derived from issuer information that does not include issuer information, unless the free writing prospectus falls into the “broad dissemination” category. Free writing prospectuses sent directly to customers of an offering participant, without regard to number, are not broadly disseminated for purposes of the Rule.

Although we attempted in the proposals to address the cross-liability concerns by restricting the filing obligations only to limited situations, commenters on our proposals continued to express concern about cross liability for another participant’s free writing prospectus, whether or not the participant used that free writing prospectus. Commenters requested clarification that use of a free writing prospectus by one offering participant will not subject other offering participants who do not use the free writing prospectus to liability under Securities Act Section 12(a)(2).³³⁷ Some commenters recommended that the party should be considered to have offered and sold “by means of” a free writing prospectus, and liability for the free writing prospectus should arise, only if a party has used, prepared, or referred to the free writing prospectus.³³⁸

In response to commenters’ continuing concerns about cross liability for free writing prospectuses used by an issuer and other offering participants, we have included a new provision in Rule 159A that will clarify when an offering participant, other than the issuer, is considered to offer and sell securities “by means of” a free writing prospectus. Under the new provisions of Rule 159A, an offering participant other than the issuer will not be considered to offer or sell securities to a person “by means of” a free writing prospectus unless:

• the offering participant used or referred to the free writing prospectus in offering or selling the securities to that person;

• the offering participant offered or sold the securities to that person and participated in planning for the use of that free writing prospectus by other offering participants and such free writing prospectus was used or referred to in offering or selling securities to that person by one or more of such other offering participants;³³⁹ or

• under the conditions for use of the free writing prospectus in Rule 433, the offering participant is required to file the free writing prospectus with us pursuant to Rule 433.³⁴⁰

The Rule, as revised, also provides that a person will not be considered to offer or sell securities by means of a free writing prospectus solely because another person has used or referred to the free writing prospectus or filed the free writing prospectus with us. As a result of these provisions, we believe that offering participants will be able to determine when they will be considered to have offered or sold securities by means of any particular free writing prospectus.

c. Interaction of New Communications Rules with Regulation FD

i. Amendments to Regulation FD

As a consequence of our new rules to liberalize communications during the offering process and encourage continuing ongoing regular communications by reporting issuers, we are revisiting the exclusions from Regulation FD for communications made during a registered offering of securities.³⁴¹ The communications regime that we are adopting today contemplates that, in connection with an offering, certain material non-public issuer information can be made public through the prospectus filed as part of a registration statement or the issuer’s filing of free writing prospectuses. Oral communications of an issuer made in connection with a registered offering after the registration statement is filed will continue not to be subject to any filing or public disclosure requirement. As we stated in the Proposing Release, we continue to believe that subjecting oral communications that occur in connection with a registered offering in a capital formation transaction to a public disclosure requirement could adversely affect the capital formation process.

We are amending Regulation FD substantially as proposed to specify the circumstances, both in terms of the type of offering and the means of communication, in which issuer communications will be excluded from the operation of that Regulation in connection with a registered securities offering.

First, as amended, Regulation FD will not apply to disclosures made in the following communications in connection with a registered securities offering that is of the type excluded from the Regulation:

• a registration statement filed under the Securities Act, including a prospectus contained therein;

• a free writing prospectus used after filing of the registration statement for the offering or a communication falling within the exception to the definition of prospectus contained in clause (a) of Securities Act Section 2(a)(10);

• any other Section 10(b) prospectus;

• a notice permitted by Securities Act Rule 135;

• a communication permitted by Securities Act Rule 134; or

• an oral communication made in connection with the registered securities offering after filing of the registration statement for the offering under the Securities Act.

Second, prior to our actions today, Regulation FD applied to offerings of the types described in Rule 415(a)(1)(i) through (vi).³⁴² Rule 415(a)(1)(i) provides for offering by selling security holders. We are amending Regulation FD to clarify that, as to offerings of the type described in Rule 415(a)(1)(i) where the registered offering also includes a registered offering, whether or not underwritten, for capital formation purposes for the account of the issuer, Regulation FD does not apply, unless the issuer’s offering is included for the purpose of evading Regulation FD.³⁴³ The amendments do not otherwise change the types of registered offerings that are excluded from, or subject to, the operation of the Regulation.

In view of our new rules to expand permissible communications, we believe it is appropriate to clarify that the communications excluded from the operation of Regulation FD are, in fact, those communications that are directly related to a registered securities offering. Communications not contained in our enumerated list of exceptions from Regulation FD – for example, the publication of regularly released factual business information or regularly released forward-looking information or pre-filing communications – are subject to Regulation FD.

ii. Comments on Amendments to Regulation FD

Most commenters on the proposed changes to Regulation FD supported the inclusion of the specific enumeration of communications in connection with offerings that are not subject to the provisions of Regulation FD.³⁴⁴ Commenters expressed concern that the proposed changes limited the Regulation FD exclusion only to registered offerings involving capital formation transactions.³⁴⁵ Some commenters believed that the Regulation FD exclusion should cover all secondary offerings (those on behalf of selling security holders), regardless of whether conducted as part of an issuer capital raising transaction.³⁴⁶

We have clarified the modifications to Regulation FD from the proposals. We have not changed the types of offerings in which disclosures are subject to Regulation FD. The only change we are making from the current language is to provide that disclosures made in connection with registered offerings by selling security holders of the type described in Rule 415(a)(1)(i) are excluded from the application of Regulation FD if the offering also includes a registered primary offering that is a capital formation transaction for the account of the issuer.

The change to Regulation FD does not, as some commenters may have misinterpreted, mandate that all registered securities offerings be for capital formation purposes as a condition of exclusion from the operation of Regulation FD. The exclusions prior to and after the change have the general effect of excluding capital formation transactions, but there was, and after the change will be, no separate “capital formation” requirement for the exclusions. Rather, the change will provide that secondary offerings will be excluded from Regulation FD if the offering also includes a registered capital formation transaction for the account of the issuer.

²⁹¹ In addition, while we have revised the definition of graphic communication to exclude certain presentations that originate live, in real-time to a live audience, we have retained in the definition of written communications the statutory concept of radio or television broadcasts, regardless of the transmission means. Thus, a communication that is a television or radio broadcast, whether or not live, would still be a written communication.

²⁹² In-person road shows will continue to be considered oral communications. As we note, we have excluded road shows that originate and are presented live, in real-time to a live audience from the definition of graphic communication. The exclusion for presentations to a live audience that originate live, in real-time also covers overflow rooms at live, in-person road shows. The rules we are adopting today do not affect the treatment of written communications or road shows regarding business combination transactions to which Rule 425 and Regulation M-A apply.

²⁹³ We recognize that road shows may be used in marketing the issuer’s securities in certain private placement transactions, as well. Our rules do not address these offerings, although the treatment of electronic communications in the definitions of graphic communication and written communication apply to private placement transactions. For example, in an offering made in reliance on Securities Act Rule 505 or Rule 506 of Regulation D [17 CFR 230.505 and 17 CFR 230.506], an electronic road show or other communication that is a written communication would implicate the provisions of Securities Act Rule 502 [17 CFR 230.502] regarding information that must be provided to non-accredited investors and restrictions on general solicitation and general advertising.

²⁹⁴ See Division of Corporation Finance no-action letters to Private Financial Network (Mar. 12, 1997); Net Roadshow, Inc. (July 30, 1997); Bloomberg L.P. (Oct. 22, 1997); Thompson Financial Services, Inc. (Sep. 4, 1998); Activate.net Corporation (June 3, 1999); Charles Schwab & Co., Inc. (Nov. 15, 1999); and Charles Schwab & Co., Inc. (Feb. 9, 2000).

²⁹⁵ For example, under the rules we are adopting today for road shows that are free writing prospectuses, the road show audience does not have to be limited in any way, and the road show does not have to be the re-transmission of a live presentation in front of an audience and the electronic road show may be edited. In addition, those distributing the road show do not have to limit viewers to seeing it either within a 24-hour period or twice. They also can allow viewers to copy, print or download the road show. Multiple versions of the electronic road show are permitted. Each will be a separate free writing prospectus.

²⁹⁶ See discussion of Staff no-action letters in note 182 of the Proposing Release.

²⁹⁷ We are adding a definition of “road show” and adopting substantially as proposed the definition of “bona fide electronic road show.” For purposes of Rule 433, a “road show” is an offer (other than a statutory prospectus or a portion of a statutory prospectus filed as part of a registration statement) that contains a presentation regarding an offering by one or more members of the issuer’s management and includes discussion of one or more of the issuer, such management, and the securities being offered. In the case of asset-backed offerings, road shows can include presentations by management involved in the securitization or servicing by the depositor, sponsor, or servicers. For purposes of Rule 433, a “bona fide electronic road show” is a road show that is a written communication transmitted by graphic means that contains a presentation by one or more officers of an issuer or other persons in an issuer’s management and, if the issuer is using or conducting more than one road show that is a written communication, includes discussion of the same general areas of information regarding the issuer, such management, and the securities being offered as such other issuer road show or road shows for the same offering that are written communications. To be bona fide, the version need not address all of the same subjects or provide the same information as the other versions of an electronic road show. It also need not provide an opportunity for questions and answers or other interaction, even if other versions of the electronic road show do provide such opportunities.

A few commenters asked for further guidance on which categories of information could be properly excluded from the bona fide version. See, e.g., letters from Fried Frank and TBMA. One commenter thought that the bona fide electronic road show should be identical to the other electronic road shows that were being presented. See letter from Harrisdirect. We have not further revised the definition of bona fide electronic road show in response to these comments as we believe that the definition that we are adopting provides the flexibility to offering participants to use different versions of road shows depending on the particular facts and circumstances of their offering. As we indicated in the Proposing Release and note above, the bona fide version must only cover the same general areas regarding the issuer, its management, and the securities being offered and need not address all the same subjects or provide the same information as other versions.

²⁹⁸ See the Note to Rule 433(d)(8).

²⁹⁹ See, e.g., letters from ABA; Alston; NetRoadshow; and Thomson Financial (“Thomson”).

³⁰⁰ See, e.g., letters from ABA; Alston; E. Price Ambler; Kenneth Arnot; Lisa Baudot; Barry C. Bruneer; Harold Candland; Matt Crouse; Rick Dowdle; Robert Evans; Goldman Sachs; Marvin D. Lutz; Merrill Lynch; NetRoadshow; F. Thomas O’Halloran; Paul J. Rasplicka; Eric Ribner; Jeffrey A. Schaffer; Alison Shatz; SIA; Bob Smith; Steve Smart; Chris D. Wallace; WR Hambrecht + Co. (“WR Hambrecht”); and Kevin Yorke.

³⁰¹ See, e.g., letters from ABA; Alston; Bloomberg L.P. (“Bloomberg”); Goldman Sachs; Merrill Lynch; NetRoadshow; Jeffrey A. Schaffer; SIA; and Thomson.

³⁰² See, e.g., letters from Alston; Morgan Stanley; S & C; and SIA.

³⁰³ See, e.g., letters from ABA; Alston; Lisa Baudot; Citigroup; Cleary; Morgan Stanley; S & C; SIA, David Thickens; Douglas Workman; and WR Hambrecht.

³⁰⁴ See, e.g., letters from ABA; Alston; E. Price Ambler; Kenneth Arnot; Lisa Baudot; Barry C. Bruneer; Harold Candland; Matt Crouse; Rick Dowdle; Robert Evans; Goldman Sachs; Marvin D. Lutz; Merrill Lynch; NetRoadshow; F. Thomas O’Halloran; Paul J. Rasplicka; Eric Ribner; Jeffrey A. Schaffer; Alison Shatz; SIA; Bob Smith; Steve Smart; Chris D. Wallace; WR Hambrecht; and Kevin Yorke.

³⁰⁵ See, e.g., letters from ABA; Davis Polk; and WR Hambrecht.

³⁰⁶ See, e.g., letters from Alston and NetRoadshow.

³⁰⁷ See letter from Bloomberg.

³⁰⁸ See, e.g., letters from ABA; Alston; Lisa Baudot; Citigroup; Cleary; Morgan Stanley; S & C; SIA; David Thickens; and WR Hambrecht.

³⁰⁹ See, e.g., letter from Harrisdirect and Renaissance Capital. In addition, many commenters thought that more information should be made available to retail investors, particularly in connection with initial public offerings. See, e.g., letters from Trevor Boswell; Lyle Fell, Sr.; Eileen Fuls; Corey Gorman; Ronald Ricketts, Jr.; and Justin Swearingen.

³¹⁰ Report and Recommendations of a Committee Convened by the New York Stock Exchange, Inc. and NASD at the Request of the U.S. Securities and Exchange Commission, available at www.nasdr.com/pdf-text/iporeport.pdf (May 29, 2003). Consistent with the Committee’s suggestion, different versions of electronic road shows for initial public offerings of common equity or convertible equity securities are permitted for different audiences under the filing exemption, so long as at least one version of a bona fide electronic road show, where applicable, is available to all potential investors.

³¹¹ In our 2000 Electronics Release, we noted that the federal securities laws apply equally to information contained on an issuer’s web site as they do to other communications made by or attributed to the issuer. Web site content differs from traditional methods of distribution, however, in several important aspects. First, information that is placed on a web site can be continuously accessed as long as the information remains posted. Second, issuers are able to hyperlink to other documents, information, and web sites, thereby allowing instant access to such documents, information, and web sites. See 2000 Electronics Release, note 96, at II.B.

³¹² In this regard, if an issuer or other offering participant includes a hyperlink within a written communication offering the issuer’s securities, such as an electronic free writing prospectus, to another web site or to other information, the hyperlinked information will be considered part of that written communication. For example, while a research report published or distributed by a broker or dealer around the time of an offering may not be considered an offer by the broker or dealer under Rule 139, an issuer hyperlinking to that research report will not be able to rely on Rule 139. The research report could, therefore, be a free writing prospectus of the issuer. See the 2000 Electronics Release, note 96, at II.B.2.

³¹³ See, e.g., comment letters in File No. S7-11-00 from the American Corporate Counsel Association (“ACCA”); The Council of Infrastructure Financing Authorities; and the Florida Division of Bond Finance.

³¹⁴ See discussion in Section III.D.1 above under “Permitted Continuation of Ongoing Communications During an Offering” regarding Rules 168 and 169.

³¹⁵ See also the 2000 Electronics Release regarding retention of information on a web site during an offering. The 2000 Electronics Release contains a list of information that we believed could be retained on a web site without the information being considered an offer and we again concur that such information will not raise a concern. See the 2000 Electronics Release, note 96, at part II.B.2. Although such information may not be considered an offer and therefore not subject to liability under Section 12(a)(2), it may still be subject to the anti-fraud provisions of the federal securities laws.

³¹⁶ See, e.g., letters from ABA; Davis Polk; and S & C.

³¹⁷ See, e.g., letters from Davis Polk; Merrill Lynch; and S & C.

³¹⁸ See, e.g., letters from ABA and S & C.

³¹⁹ We have revised the provision from the proposals to address concerns of issuers that are media companies. See the discussion below under “Issuers in the Media Business.”

³²⁰ We believe that in a situation where a written communication is not prepared or paid for by an offering participant but rather by independent media, it still may be an offer and thus a free writing prospectus. There is less need in this situation, however, to have a statutory prospectus precede or accompany the free writing prospectus if a registration statement containing a statutory prospectus is on file with us and available. A media publication that is a free writing prospectus of a well-known seasoned issuer may also be published or broadcast prior to filing of the registration statement, as described above. In such a case, where another exemption is not available, the filing conditions would have to be satisfied by the issuer promptly after filing a registration statement covering the offering if one is filed.

³²¹ Assuming that the road show in question is an offer, an article published based on information obtained from a road show with a limited audience could be a free writing prospectus depending on its content. An article published based solely on information provided at a readily accessible electronic road show open to an unrestricted audience may not be an offer as discussed above where there is no other involvement by an issuer or offering participant.

³²² In media publications eligible for this accommodation, the inclusion of the necessary legend in the fling of the media publication will satisfy the legend condition of Rule 433(c)(2) with regard to that media publication. See Rule 433(f)(1)(ii). Further, the free writing prospectus will have to be filed only once, regardless of the number of publications in which the information is included. In addition, the publication will only have to be filed if, as discussed above, it is an offer.

³²³ As we note above, press releases that are offers sent out by issuers are free writing prospectuses of the issuer at the time of the issuer distribution.

³²⁴ Language that, while arguably in the notice of a correction, is in fact an impermissible disclaimer (such as a disclaimer regarding liability or reliance) or waiver is not permitted.

³²⁵ The provisions of Rule 433 apply only to free writing prospectuses, which by definition must involve a written offer. Whether or not the media publication is an offer and therefore a free writing prospectus of the issuer or the other offering participant providing the information will depend as today on the facts and circumstances. In addition, because the exception for free writing prospectuses is non-exclusive and does not preclude reliance on other exclusions or exemptions from the gun-jumping provisions, compliance with the conditions of Rule 433 for the use of a free writing prospectus, including filing, does not preclude reliance on the argument that the communication is not an offer.

³²⁶ See, e.g., letters from Davis Polk and NYSBA.

³²⁷ This accommodation is based on the media entity being a bona fide media entity. We are using essentially the same definition as included in Regulation Analyst Certification [17 CFR 242.500-242.505] (“Regulation AC”) and the Investment Advisers Act of 1940 [15 U.S.C. 80b-1 et seq.], except that we have not limited the publications to financial or business publications. See Rule 505(a) of Regulation AC (17 CFR 242.505(a)) and Section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) In addition, we have conditioned the accommodation on adequate policies and procedures being in place that require the media company’s content decisions to be independent of the issuer’s offering activities.

³²⁸ See, e.g., letters from ABA; Alston; Cleary; Fried Frank; and NYSBA.

³²⁹ See, e.g., letters from ABA; Cleary; Fried Frank; NYSBA; and Reuters.

³³⁰ See, e.g., letters from ABA; NYSBA; and Reuters.

³³¹ See, e.g., letters from Alston and NYSBA.

³³² See letter from Davis Polk.

³³³ See, e.g., letters from ABA and Reuters.

³³⁴ See, e.g., letters from ABA and Alston.

³³⁵ A free writing prospectus filed pursuant to Rule 433 will be filed as a separate filing similar to the way in which Rule 425 filings are made. A free writing prospectus will not have to be filed under Exchange Act Form 8-K. Issuers, of course, may file a free writing prospectus on Form 8-K if they wish to have the information incorporated by reference into the registration statement. The free writing prospectus also can be filed as part of the registration statement or, where permitted, included in an Exchange Act report incorporated by reference into the registration statement. In such case, the free writing prospectus would be subject to Securities Act Section 11 liability. Once a communication or other document is made part of or incorporated by reference into a registration statement, Section 11 applies to it as part of the registration statement, whether or not it is an offer.

³³⁶ See, e.g., comment letters in File No. S7-30-98 from ABA; Ford Motor Credit Company; ICI; Merrill Lynch; and S & C.

³³⁷ See, e.g., letters from ABA; Citigroup; Cleary; CSFB; Davis Polk; Deloitte; Goldman Sachs; ICI; Morgan Stanley; SIA; and TBMA.

³³⁸ See, e.g., letters from ABA and Goldman Sachs.

³³⁹ We do not intend that the typical inter-syndicate arrangement providing for sales out of the syndicate “pot” falls within this provision, unless the arrangement contemplates use of free writing prospectuses in a manner described in the provision.

³⁴⁰ The Rule does not address when an issuer offers or sells “by means of” a free writing prospectus. The Rule does address when an issuer is considered to be a seller for purposes of Securities Act Section 12(a)(2). See discussion in Section IV.B below under “Issuer as Seller.”

³⁴¹ See 17 CFR 243.100(b)(2).

³⁴² The types of offerings under these provisions of Rule 415 are delayed or continuous offerings that are (1) securities to be offered or sold solely by or on behalf of selling security holders other than the issuer or its subsidiaries; (2) securities offered pursuant to dividend or interest reinvestment plans or an employee benefit plan of the issuer; (3) securities to be issued upon the exercise of outstanding options, warrants, or rights; (4) securities to be issued upon conversion of other outstanding securities; (5) securities pledged as collateral; and (6) securities registered on Form F-6.

³⁴³ This provision will cover the situation, for example, where a de minimis issuer participation is included in what is otherwise entirely a selling security holder offering for the purpose of excluding communications in the offering from the application of Regulation FD.

³⁴⁴ See, e.g., letters from Cleary; Fried Frank; and NYCBA.

³⁴⁵ See, e.g., letters from ABA; Merrill Lynch; and TBMA.

³⁴⁶ See, e.g., letters from ABA and NYCBA.