How do you know if there is securities offering?

To complete a securities offering, under the Securities Act of 1933, an issuer first registers with the Securities and Exchange Commission (SEC). The SEC is part of the federal government, with the Chairman appointed by the President of the United States.

The SEC wants to see what the issuers will tell their potential investors in the prospectus, which is part of the registration statement. They require the issuers to provide the material or relevant facts on the company: history, competitors, products and services, risks of investing in the company, financials, board of directors, officers, etc. And, they require it to be written clearly. Only if investors understand the risks and rewards of an investment do they have a chance of determining a good opportunity from a bad one.
This topic may related to SIE exam.

The SEC and other securities regulators do not protect investors from making bad choices. Their concern is that the issuer provides enough pertinent information so investors can decide on investing or taking a pass.

If information is misstated or omitted from the offering documents, investors are defrauded. The SEC and state securities regulators are both out to protect investors from fraudulent offers of securities.

The issuer hires underwriters, also called investment bankers, to help them offer securities. The underwriters help the issuer file a registration statement with the SEC. Now, the cooling-off period, which lasts a minimum of 20 days, begins. During this period, no advertising is allowed, and, while indications of interest are taken, no final sales are made until the SEC finally clears the issue.

A registered representative must deliver a preliminary prospectus to anyone giving an indication of interest. This disclosure document contains all material information except the release date and the final public offering price. As amendments are filed to this preliminary prospectus, or "red herring," a range of likely prices for the stock are typically listed.

The SEC reviews the registration statement (part of which becomes the prospectus) for clarity and to make sure that at least the boiler plate disclosures have been made. If a section looks incomplete or unclear, they'll make the issuer/underwriters rewrite it.

But the SEC cannot and does not determine the information is accurate or complete. They don't know the issuer's history, and the financial statements the issuer provides "who knows if they're accurate?" Since the SEC cannot and does not verify information, the issuer and the underwriters hold a due diligence meeting during the cooling-off period, a final meeting or series of meetings to make sure they provided the SEC and the public with accurate and full disclosure.

The issuer can publish one type of advertising during the cooling-off period, called a tombstone. A tombstone lays out the basic facts: the issuer, the type of security, number of shares, amount to be raised, and then the names of the underwriters.

A tombstone is not an offer to sell the securities. As the disclaimer states, "The offer is made only by the Prospectus."
Even though the SEC requires issuers to register their securities offerings, they don't approve or disapprove of the offering or pass judgment on any aspect of the prospectus. They don't guarantee accuracy or adequacy of the information provided by the issuer and its underwriters. And there must be a prominent legend such as:

[Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.]

If the issue of stock is authorized for listing on NYSE, NASDAQ, or other major exchanges, the issuer and underwriters only register with the SEC, since the securities are federal covered securities.

But, if the issue will not trade on those exchanges, the stock also must be registered with the states where it will be offered and sold.


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