SEC Lightens Up On Quiet Period Rules
A long-anticipated modernization of 75 year-old rules regarding stock promotions has taken place.
The securities industry has long chafed under the ancient rules governing what may and may not be said ahead of a company’s initial public stock offering.
The SEC, fearful of potential scams and abuses that could artificially pump up a stock’s price, put rules into place to limit what could be said publicly by a company going public.
“The package that we consider today will modernize the securities offering and communication process while maintaining investor protection,” SEC Chairman William Donaldson said in Washington. “Investors are entitled to information at the point they commit to purchase a security.”
It appears that the SEC has responded to the needs and capabilities of a society where instant communication and information sharing takes place.
A company making public statements must ensure their accuracy, similar to existing requirements of prospectuses. Copies of media interviews and comments must be provided to the SEC.
Electronic roadshows for IPOs would have to make the material available to an unrestricted audience to avoid filing with the SEC. Other roadshows aren’t subject to filing, the agency said.
Google’s IPO nearly fell apart when the company’s founders did a media interview during the quiet period. That IPO went forward and was valued at nearly $3.5 billion USD.
David Utter is a staff writer for WebProNews covering technology and business. Email him here.