SEC Proposes Changes to Securities Offering, Registration Requirements

Washington, DC, November 15, 2004 - The SEC recently proposed modifications to provisions of the Securities Act of 1933.

Background
The proposed rules would modify the registration, communications, and offering processes under the Securities Act of 1933 and eliminate unnecessary and outmoded restrictions on offerings. The proposals are intended to provide more timely investment information to investors, without mandating delays in the offering process, and increase disclosure under federal securities laws.

Proposed modifications include:

• dividing securities issuers into four categories based on their SEC filing requirements;
• updating communication rules to allow more information to reach investors via a “free writing prospectus”, a new type of written communication issued after an issuer files its registration statement;
• establishing “automatic shelf registration” for offerings by well-known seasoned issuers; permitting issuers to use prospectus supplements to make material changes to the plan of distribution described in the base prospectus; and permitting immediate takedowns of securities off of shelf registration statements;
• changing the final prospectus delivery obligations under the Securities Act by creating an “access equals delivery” model;
• extending risk factor disclosure to annual reports on Form 10-K and registration statements; and
• as suggested by the Institute, applying the proposals to issuers of asset-backed securities.

ICI Position
In July 2004, an Institute comment letter expressed support for proposed rules governing asset-backed securities, stating that more rigorous disclosure standards are needed for asset-backed security offerings to ensure that investors can make informed investment decisions. ICI expects to comment on the most recent proposals by the January 31, 2005 deadline.