Free Writing Prospectus
A Free Writing Prospectus is a written offering communication used in connection with a registered securities offering that qualifies under Securities Act rules governing permissible free writing prospectuses.
How it works
Rule 433 permits qualifying post-filing Free Writing Prospectuses subject to issuer eligibility, prospectus-access, legend, filing and record-retention conditions. A Free Writing Prospectus can contain information not included in the Registration Statement, but it remains an offering communication subject to securities-law liability. Filing obligations depend on who prepared or used the communication and how it was distributed. Final-term communications can have specific filing timing.
Rule 433 governs post-filing use
The rule applies to qualifying written communications after a related Registration Statement has been filed.
Eligibility and prospectus conditions vary by issuer
Seasoned issuers, well-known seasoned issuers and nonreporting or unseasoned issuers can face different use conditions.
A prescribed legend is generally required
The communication directs investors to the Registration Statement and prospectus for more complete information.
Some Free Writing Prospectuses must be filed
Issuer communications, broadly disseminated participant communications and final-term materials can trigger filing obligations under the rule.
Worked example: final terms
Pricing establishes the final coupon and issue price on Monday. A term sheet containing those final terms is first used Tuesday. Rule 433 determines whether and when the issuer must file it.
Why investors should compare documents
A Free Writing Prospectus can add useful deal terms but does not replace the prospectus and incorporated risk disclosure.
Common mistakes
Assuming any investor presentation is automatically a Free Writing Prospectus; treating the communication as outside securities-law liability; ignoring filing conditions; and reading a term sheet without the prospectus.
Example
After filing a Registration Statement, an issuer distributes a one-page term sheet stating the final coupon, maturity and price of a debt offering. The term sheet can be a Free Writing Prospectus and may need to be filed under Rule 433.
Example
After filing a Registration Statement, an issuer distributes a one-page term sheet stating the final coupon, maturity and price of a debt offering. The term sheet can be a Free Writing Prospectus and may need to be filed under Rule 433.
Professional note
The word “free” means the communication is outside the statutory prospectus format, not that it is informal or unregulated. Legends, filing rules and liability remain important.
Related terms
- Stock Split
A stock split increases the number of shares while proportionally reducing the price per share, all else equal, without mechanically changing shareholders’ equity or ownership percentage.
- Registration Statement
A registration statement is a filing with the SEC that provides required disclosures when a security or securities offering is registered under federal securities laws.
- Shelf Registration Statement
A Shelf Registration Statement is a Securities Act registration statement structured to permit securities to be offered on a delayed or continuous basis when the transaction satisfies Rule 415 and the applicable form requirements.
- Prospectus Supplement
A Prospectus Supplement is an offering document that adds transaction-specific terms and updates to a base prospectus for a particular registered securities offering.
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