The advent of the online road show, and its promise of broader disclosure to the investing public, has the Securities and Exchange Commission scrambling to set up clearer parameters in the gray area of road-show communications. New regulations are expected early this year, in an attempt to contend with pressing issues neglected through the seeming demise of the Aircraft Carrier proposal (see “A ‘Carrier’ is Sinking”).
Online road shows, recently opened up to a top tier of individual investors, put into sharp relief the anachronistic distinction that federal securities law makes between written and oral communication. While written and broadcast communication for a public offering is limited to the prospectus, the road show has been classified as oral–and looser restrictions apply. When face to face with executives on the cusp of an IPO, analysts and fund managers routinely push for forward- looking information that is not in the prospectus, says Richard Busis, a securities lawyer at Cozen and O’Connor, in Philadelphia. Putting such exchanges on the Internet raises difficult questions. For now, the SEC has ruled that the online road show remains, in essence, oral.