SEC ponders rules change for pre-IPO written comms

WASHINGTON: The Securities and Exchange Commission may change its rules governing the written communications a company can engage in during its pre-IPO quiet period, something those on the IR and PR sides of IPOs welcome.

WASHINGTON: The Securities and Exchange Commission may change its rules governing the written communications a company can engage in during its pre-IPO quiet period, something those on the IR and PR sides of IPOs welcome.

The SEC has been considering the changes since at least last month. Speculation about them has intensified this month after an interview with Google's co-founders appeared in the September issue of Playboy - and nearly delayed their company's much-anticipated IPO, which happened last week.

"We are looking at the liberalization of communications, especially written communications," said Alan Beller, the SEC's corporate finance director, during a speech last month.

John Heine, the SEC's deputy public affairs director, confirmed that the agency's staff is looking into revamping the rules on written communications. Any changes would not take effect until at least next year.

Such changes would help IR, said Lou Thompson, president of the National Investor Relations Institute (NIRI).

Right now, the SEC rules on what constitutes written communication are hazy. Thompson, for instance, questioned whether an e-mail response by an IR officer to an investor's question would violate SEC rules.

"There is a need to get clarification from the SEC on what the quiet period means," he said. "Lots of lawyers say, 'Don't talk to the media at all.' I tell people they can talk to the media as long as they don't say anything beyond the prospectus."

Thompson said that NIRI plans to discuss possible changes during a meeting between it and the SEC in Washington on September 16.

Created in 1933, with the 1929 stock market crash fresh in the SEC's mind, the rules on written communication are archaic in an age of increasingly electronic communication, said Tom Taulli, finance lecturer at the University of Southern California.

"They just don't make sense anymore," said Taulli. "They just want to get rid of the distinction between written and oral and call it communications."

SEC rules on oral communication are generally more relaxed, but, as with written, can be confusing.

"With an IPO, the legal counsel at the company [and] at the underwriter, basically put a lid on external communications," said Howard Zar, IR partner at Porter Novelli. "It's not because SEC rules restrict that; it's because the counsels want to be extra careful."

If the written communications rules are relaxed, Zar said, IPO-related PR could be easier. Companies could communicate more without the fear of sanctions from the SEC.

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