Final Rules
We are adopting testing the waters provisions in the final rules as proposed. Under the final rules, issuers will be permitted to test the waters with all potential investors and use solicitation materials both before and after the offering statement is filed, subject to issuer compliance with the rules on filing and disclaimers.550
The final rules require, as proposed, that testing the waters materials used by an
issuer or its intermediaries after the issuer publicly files an offering statement be accompanied by a current preliminary offering circular or contain a notice informing potential investors where and how the most current preliminary offering circular can be obtained.551 This requirement may be satisfied by providing the URL where the preliminary offering circular or the offering statement may be obtained. Solicitation materials will remain subject to the antifraud and other civil liability provisions of the federal securities laws.552 Further, the final rules require issuers and intermediaries that use testing the waters materials after publicly filing the offering statement to update and redistribute such material in a substantially similar manner as such materials were originally distributed to the extent that either the material itself or the preliminary offering circular attached thereafter becomes inadequate or inaccurate in any material respect.553
550 Rule 255. For a discussion of the use of solicitation materials as it relates to (i) the doctrine of integration, see Section II.B.5.c. above and Rule 255(e), and (ii) the application of state securities laws, see Section II.H.3. below.
551 Rule 255(b)(4).
552 See fn. 538 above.
553 Issuers would not, however, be required to update and redistribute solicitation materials to the extent that: (i) any such changes occur only with respect to the preliminary offering circular, (ii) no similar changes are required in the solicitation materials previously relied upon, and (iii) such materials included (when originally distributed) a URL where the preliminary offering circular or
As discussed in Section II.C.2. above, first-time issuers that are eligible for, and elect to, non-publicly submit draft offering statements are required to publicly file their offering statements not later than 21 calendar days before qualification so that any solicitation of interest made in the 21 calendar days before the earliest date of potential sales of securities by such issuers will be conducted while potential investors have access to the most recent version of the preliminary offering circular. Additionally, in light of the preemption of state securities laws registration requirements in the final rules for
Tier 2 offerings, the 21 calendar day requirement will enable state securities regulators to require such issuers to file such materials with them for a minimum of 21 calendar days before any potential sales to investors in their respective states.554
As proposed, the final rules require that issuers submit or file solicitation materials as an exhibit when the offering statement is either submitted for non-public review or filed (and update for substantive changes in such material after the initial non- public submission or filing). However, issuers are no longer required to submit solicitation materials at or before the time of first use.555 The treatment of solicitation materials in Regulation A offerings is generally consistent with the Commission staff’s treatment of solicitation materials used by emerging growth companies under Securities Act Section 5(d), with two exceptions that we believe will provide investors in Regulation A offerings with additional protections:
the offering statement may be obtained and that URL continues to link to the most recent version of the preliminary offering circular. See Rule 255(d).
554 See fn. 277 above.
555 Rule 255.
solicitation materials used in Regulation A offerings are required to be included with the offering statement;556 and
solicitation materials used by Regulation A issuers that file an offering statement with the Commission will be publicly available as a matter of course.
Contrary to the views of commenters that suggested we keep solicitation materials confidential, or not require such materials to be filed (either publicly or at all), we believe the submission and filing requirements for solicitation materials are important elements of the final rules for the use of solicitation materials.557 We believe that issuers should be accountable for the content of solicitation materials and that such information must be consistent with the information contained in the offering circular. We believe that making these materials publicly available as an exhibit to the offering statement, and thereby subjecting them to staff review and comment and scrutiny by the public, will help ensure that issuers use solicitation materials with appropriate caution. However, for the
reasons discussed in Section II.F. below, we do not believe that the filing of such materials should be a condition to relying on the Regulation A exemption.