Issuer free writing prospectuses: Overview, definition, and example
What is an issuer free writing prospectus?
An issuer free writing prospectus (FWP) is a written communication used by an issuer or its authorized representatives to market securities during a registered offering. It supplements the information provided in the statutory prospectus filed with the SEC (Securities and Exchange Commission). FWPs can include additional details about the securities being offered, such as pricing, terms, or marketing materials, and are subject to specific rules to ensure compliance with securities laws.
For example, an issuer might distribute a presentation or brochure containing key highlights about an offering, which serves as a free writing prospectus alongside the official prospectus.
Why is an issuer free writing prospectus important?
An issuer free writing prospectus is important because it allows issuers to communicate effectively with potential investors, providing supplementary information in a more flexible format. This enhances transparency and helps investors make informed decisions.
For issuers, FWPs are valuable marketing tools that can be tailored to highlight the benefits of the offering. However, they must comply with SEC regulations to avoid misleading statements or omissions that could lead to legal or regulatory issues.
Understanding an issuer free writing prospectus through an example
Imagine a technology company planning an initial public offering (IPO). In addition to the statutory prospectus, the company distributes an FWP that includes a slide deck highlighting its growth metrics, competitive advantages, and revenue projections. This FWP complements the statutory prospectus by presenting key information in a concise and engaging format, helping attract potential investors.
In another scenario, a real estate investment trust (REIT) issues a free writing prospectus with detailed property portfolio information, expected returns, and market analysis. This document supplements the main prospectus and provides investors with a deeper understanding of the REIT’s value proposition.
An example of an issuer free writing prospectus clause
Here’s how a clause addressing issuer free writing prospectuses might appear in an offering agreement:
“The Issuer agrees that any Free Writing Prospectus prepared or authorized for use in connection with this offering shall comply with applicable securities laws, including SEC Rule 433, and shall not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made.”
Conclusion
Issuer free writing prospectuses provide a flexible and effective way to communicate additional information about a securities offering. They enhance investor understanding while serving as valuable marketing tools for issuers. By adhering to regulatory requirements, FWPs help maintain transparency and trust in the offering process, ensuring compliance with securities laws while promoting informed investment decisions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.