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The Public Offering of Securities: The Three Main Stages

Nearly every week major media stories unfold regarding new sales of various securities. However, most of us aren’t very familiar with how this process works. It's important to gain a better understanding of this subject since many of will one day own some type of securities, regardless of whether they’re stocks, bonds, investment contracts or other similar items.              

The process basically begins with the filing of a registration statement with the SEC (Securities Exchange Commission). A “waiting period” then follows during which the issuer waits for his/her statement to be deemed “effective.” This usually occurs 20 days after the filing.

Shortly before the 20-day waiting period ends, the registration statement is usually amended to include the price terms.

Rules Tied to Events Occurring During the Three Periods

  1. The first of the three periods is the “pre-filing” period. This refers to the time before the registration statement is actually filed with the SEC. It's during this stage that all underwriters or issuers are forbidden to sell the stock (or even offer to sell it to anyone). In general, this means the issuer is usually not allowed to issue any notices or press releases concerning the upcoming sale. Even oral offers to sell stock are not allowed. (Only minor exceptions to these rules are ever permitted);

  2. The second stage is the “waiting period.” Between the time when the registration statement is filed with the SEC and it’s deemed effective, parties can make offers to sell or to buy. However, binding contracts cannot be drawn up during this time. It’s common during this stage for underwriters to distribute a document called a “prospectus” which normally doesn’t include any prices. Should a party attempt to make a binding offer – or accept one during the waiting period, s/he can avoid being bound by it (by simply revoking it), as soon as the registration statement is deemed “effective;”

  3. The third and final period is the “post-effective” stage. Once the registration has become effective, binding offers to purchase and sell securities can be made. Yet there's one final rule or general requirement governing this stage. The seller of the securities must issue a new prospectus stating the final price of the securities to the buyer – either at the time of the sale when the securities are delivered – or just shortly before that time.

 

To obtain help with handling all of your Georgia business planning needs, please contact the Law Offices of Shane Smith today.  You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.


Shane Smith
Advocate for the Seriously Injured in Georgia