Federal regulators on Tuesday proposed loosening restrictions on executives’ comments in the weeks before their company goes public, a move that could bring the first significant changes in 70 years to a fixture known as the quiet period.
The Securities and Exchange Commission voted 5-0 to seek public comment on the proposal, which is part of a broader plan to ease regulation of new stock offerings.
If the SEC adopts it, companies will be allowed to disseminate more information to investors in the weeks before an initial public offering. Executives could give interviews and conduct “road shows” for prospective investors.
“We are in an age where … our current framework and restrictions are outmoded,” said Alan Beller, director of the SEC’s division of corporation finance.
The current system, he told the agency’s commissioners, “has had the effect of chilling communications” from companies to investors.
“A free-market philosophy requires a free flow of information,” said Republican Commissioner Cynthia Glassman. “Issuers are spending thousands of dollars to deliver a print prospectus to investors that typically arrives days after they’ve made their decision to invest.”
The quiet period begins when a company files a statement with the SEC to register new stock and ends when the agency approves the registration statement. During that period, laws limit the information that company executives and investment bankers underwriting the stock offering can release, other than through the prospectus.
Under the new proposal, public statements that tend to hype the new stock would continue to be prohibited, and executives would be held liable for any misstatements.
