Changes in the Registration Process

In November 1998, the SEC proposed material changes in the rules governing the offering of securities in the United States. Due to the scope and significance of the change, the proposal was nicknamed "Aircraft Carrier." Five main changes were proposed: (1) The publication of information by the company and analysts' research of the company would continue regardless of the IPO (which amounts, in fact, to a cancellation of the quiet period); (2) The prospectus and any information filed with the SEC, also by foreign companies, would be transmitted in electronic form, so that investors will have access to the information via the EDGAR system (an electronic information system which includes most of the reports filed by companies in the United States to the SEC); (3) The company would be obliged to give investors information about the terms of the offering before they make the decision to invest (at present, investors make investment decisions based on the preliminary prospectus the red herring); (4) Non-permissible free writing liability would be imposed for written information given to investors outside the prospectus; and (5) Public offerings would be given preference over private placements by giving companies more control over the IPO process, on the one hand, and canceling some benefits enjoyed by private placements, on the other hand. When the change is effected, the form of all the registration statements now used in the United States (S-3/F-3, S-1/F-1) would be replaced by a new format (Form A/Form B).

Large groups in the financial community greatly oppose the change, claiming that it will encumber and slow down the current process. The date of effectuation of the change has therefore not yet been finally determined, and modifications may be made to it during the discussions leading to its adoption.