Proposed Changes May Facilitate “Wall-Crossed” Offerings

by Eduardo Gallardo, for The Harvard Law School Forum at Harvard Law School, January 15, 2010.

On December 21, 2009, the Securities and Exchange Commission issued a proposed amendment to paragraph (c) of Rule 163 under the Securities Act of 1933, as amended. Rule 163 was initially adopted in 2005 as part of the SEC’s Securities Offering Reform, which, among other things, eased many of the “gun jumping” restrictions on communications by issuers and others in connection with registered securities offerings. The proposed amendments to Rule 163 would further ease some of these restrictions and may thereby facilitate so called “wall-crossed” offerings by well-known seasoned issuers, or WKSIs. [1]

As currently in effect, Rule 163 permits a WKSI to offer securities before filing a related registration statement. Such offers may be deemed made, for example, when discussions with potential investors take place to gauge market interest prior to broad public disclosure of a transaction. However, as currently drafted, Rule 163 applies only to communications made “by or on behalf of the issuer itself.” Other offering participants, such as underwriters or dealers, may not rely on this exception from the gun jumping restrictions. This limitation can create a significant impediment to a WKSI seeking to communicate with potential investors in advance of a securities offering, but has not filed an automatic shelf registration statement, or ASR, [2] covering the security to be offered…(continue reading)

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