Pre-IPO Disclosures – Why are there limitations on corporate public statements? – (42)

not true”). There may be more than one comfort letter if the financial statements included in the registration statement are audited by more than one auditor, and the allocation of agreed-upon procedures between the different auditors may also require negotiation.Agreed-upon procedures may also uncover errors in the prospectus. Therefore, it is best practice to finalize theagreed-upon procedures prior to printing the preliminary prospectus for any road show.
Pre-IPO Disclosures
Why are there limitations on corporate public
statements?
Section 5(c) of the Securities Act prohibits offers of a security before a registration statement is filed. Section 5(b)(1) prohibits written offers other than by means of a prospectus that meets the requirements of Section 10 of the Securities Act, such as a preliminary prospectus. The bans are designed to prohibit inappropriate marketing, conditioning or “hyping,” of the security before all investors have access to publicly available information about the company so that they can make informed investment decisions. Generally, a company contemplating an IPO does not have much publicly available corporate information and none of that information has been subject to regulatory review. Until 2005, the Section 5 bans were quite prohibitive, created significant uncertainty about the effects of ordinary business communications and did not address the explosion of new communication technologies since the 1930s. In 2005, in order to modernize the offering process, the SEC adopted the “Securities Offering Reform,” which included adding a number of

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