Finance: True To Reform

Changes to securities offering rules take effect Dec. 1, 2005.

Modified only slightly from language the U.S. Securities and Exchange Commission (SEC) proposed in November 2004, new rules affecting the ways companies offer and register securities are slated to take effect on Dec. 1, 2005.

As well as the expanded and more timely disclosures required by the 2002 Sarbanes-Oxley Act and reforms the SEC has initiated, the new rules "reflect technological developments, such as the Internet, that have enhanced the accessibility of issuer disclosures to investors," Chadbourne & Parke LLP explained in a recent Client Alert.

The New York-based international law firm outlined four major areas of reform.

  • Communications related to registered securities offerings. Rules that had restricted certain communications during an offering -- so-called gun-jumping communications -- are relaxed.
  • Registration and other offering process procedures. The new rules create a new class of large and active issuers of securities known as "well-known seasoned issuers" and provide for them "automatic effectiveness of shelf registrations."
  • Information to investors. The new rules cover delivery through access and notice.
  • Additional disclosure. The new rules include risk-factor disclosure in Form 10-K annual reports.
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