Summary of Offering Summary of Offering Reform RulesReform Rules

Presented by Ed Gainor

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Key Elements of Offering Reform

Increased freedom to communicate with prospective investors prior to delivery of a final prospectus

• Free writing prospectuses

• Removal of restrictions on electronic road shows

Liability (for some purposes) is determined at the time a contract of sale is made, without regard to information conveyed to investors after that date

• Misstatements or omissions not cured by later correction in final prospectus

Access equals delivery

• Final prospectus no longer need be delivered at or prior to settlement

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Free Writing Prospectuses

Since December 1, the “free writing prospectus” has largely replaced computational material in the marketing of ABS

• FWP may contain virtually any type of information

• Lower standard of liability for FWPs than for comp mats

Conditions for Use

• Registration statement must be on file So, FWPs may be disseminated in shelf offerings

In S-1 offerings, FWPs must be preceded or accompanied by a preliminary prospectus

• Depositor must not be “ineligible issuer”

• Legend, filing and record retention requirements

• No impermissible legends or disclaimers

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Free Writing Prospectuses Legend, Filing and Retention Requirements

• Must include required legend

• Filing Issuer FWP or FWP containing “issuer information” must be filed on or

prior to date of first use

Underwriter FWP generally need not be filed at all

Final terms sheet must be filed within 2 days of first use

FWP containing solely comp mats may be filed by later of prospectus filing date or 2 days after first use

Many complexities in the filing requirements

• Copy of every FWP not filed must be retained for 3 years

Limited continuing importance of the computational material rules

• Less strict filing deadline for comp mats

• Use by ineligible issuers

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Road Shows

Various prior restrictions on electronic road shows no longer apply

• In shelf offerings, no longer need a preliminary prospectus Still need to provide preliminary prospectus in Form S-1

offerings

• Need not be recorded in front of a live audience

• May be edited

• May be provided in multiple versions

• No restrictions on number of times the recording may be accessed

• No restrictions on printing or downloading (of the road show presentation itself)

Downloading of visual aids used in road show may be restricted if visual aids are not filed as FWPs

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Road Shows Live road shows are oral presentations and therefore not free writing

prospectuses

• Even if transmitted via the internet or telephone in real time to a live audience

• Visual aids used in road show are not FWPs if they are provided “in a manner designed” to make them available “only as part of the road show and not separately”

Road shows that are not live and are graphically transmitted are electronic road shows

• Electronic road shows are FWPs and are therefore subject to the conditions for use of FWPs

But, generally need not be filed if they satisfy the new definition of “electronic road show”

Requires participation by the depositor, sponsor, or servicer

• Treatment of visual aids is the same as for live road shows

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Liability

Rule 159: Liability under Sections 12(a)(2) and 17(a)(2) of the Securities Act is determined at the time of formation of the contract of sale without regard to information conveyed to investors after that date

• Misstatements or omissions not cured by later correction in final prospectus

This is in addition to liability under Section 11 for material errors or omissions in the final prospectus

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Liability

If terms of the offering change or material error in disclosure is discovered, liability may be avoided if each investor that has committed to purchase agrees to terminate the old contract and enter into a new contract

• Not clear precisely what procedures must be followed

• Investor must receive Corrected disclosure

clear disclosure of his rights

• Cannot be “deemed” to agree

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Prospectus Delivery

Access equals delivery

• No longer necessary to deliver a prospectus, physically or electronically, at or prior to settlement

Prospectus need only be filed when required

Confirmation of sale should include a notice that the sale was made pursuant to a registration statement

Attorneys at Law

1919 M Street, NWSuite 800Washington, DC 20036Telephone 202.775.1880Facsimile 202.775.8586

One Battery Park Plaza34th FloorNew York, NY 10004Telephone 917.777.4200Facsimile 917.777.4299

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