Tombstone Advertisement
A Tombstone Advertisement is a limited securities-offering communication containing only information permitted by SEC rules so it can publicize an offering without becoming a statutory prospectus.
How it works
Rule 134 permits specified communications after a Registration Statement containing a qualifying prospectus has been filed. The communication can include limited factual information such as issuer identity, security title and amount, underwriters, offering schedule and specified procedural information. If the Registration Statement is not yet effective, Rule 134 generally requires a legend stating that the securities cannot be sold and offers to buy cannot be accepted before effectiveness. Regulation S separately recognizes a narrowly defined tombstone-advertisement exception within its Directed Selling Efforts rules.
Rule 134 limits the content
The communication receives special treatment only when it stays within the categories the rule permits.
A Registration Statement generally must already be filed
The rule is primarily a post-filing communication safe harbor rather than a pre-filing advertising license.
Pre-effectiveness legends can be required
Investors must be told that the securities cannot yet be sold and offers cannot be accepted before effectiveness.
Offering logistics can be included
Permitted information can cover underwriters, marketing-event schedules, account-opening procedures and methods for obtaining the prospectus.
Worked example: factual notice
A notice lists the issuer, $300 million principal amount of notes, expected offering date, lead managers and prospectus-access information. It omits promotional claims about expected returns.
Regulation S has a separate tombstone concept
An offshore-offering advertisement can avoid Directed Selling Efforts treatment only if it satisfies the specific Regulation S circulation, legend and content conditions.
Common mistakes
Using Tombstone Advertisement as a synonym for any offering ad; adding investment recommendations; assuming it can be used freely before filing; and confusing Rule 134 with Regulation S’s separate tombstone conditions.
Example
After filing an IPO Registration Statement, the underwriting group publishes a short notice identifying the issuer, number of shares, underwriters and where investors can obtain the prospectus, without adding promotional investment claims.
Example
After filing an IPO Registration Statement, the underwriting group publishes a short notice identifying the issuer, number of shares, underwriters and where investors can obtain the prospectus, without adding promotional investment claims.
Professional note
The value of a Tombstone Advertisement is its restraint. Adding performance claims, recommendations or information outside the permitted rule can change the communication’s legal treatment.
Related terms
- 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.
- Preliminary Prospectus
A Preliminary Prospectus is a prospectus used before a Securities Act registration statement becomes effective that contains substantially the required offering disclosure but can omit specified pricing-dependent information.
- Securities Act Section 5
Securities Act Section 5 is the core federal provision regulating offers, sales and prospectus use for securities that must be registered, unless an exemption or other exclusion applies.
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