Chapter 8 Practice Question Answers
1. Answer: C. In theory, the cooling-off period is meant to last 20 calendar days. In practice, the volume of registration statements makes this timeframe impractical. Therefore, registration statements are routinely filed with a delaying amendment, which acts as a sort of rolling amendment that constantly pushes off the effective date by 20 calendar days. Once the SEC is satisfied that the registration statement appears accurate and complete, and that various criteria have been met—for example, widespread dissemination of the preliminary prospectus—the issuer may request acceleration of the effective date. Granting acceleration of the effective date is, for all practical purposes, how the SEC gives its go-ahead to conduct the offering.
2. Answer: B. The minimum wait between the filing of a registration statement, and the statement being permitted by the SEC to become effective, is 20 calendar days. In practice, it may be much longer.
3. Answer: B. The pre-filing period ends once the issuer and underwriter have completed their registration statement, which is then filed with the SEC. At this point, the cooling-off period ensues, during which the public is not permitted to purchase the securities. During this time, however, potential public investors may study the registration statement and the accompanying preliminary prospectus, or red herring. Additionally, the lead underwriter and issuer typically present the offering to potential investors in a series of road show presentations. Free writing prospectuses and generic announcements, known as tombstone ads, are also allowed at this time. The underwriter is permitted to collect indications of interest from investors and make oral offers during the registration period.
4. Answer: A. A seasoned issuer such as Unstable Isotopes may use an FWP in connection with an offering after a registration statement has been filed. A seasoned issuer is not required to provide or l