Free Writing Prospectus
A Free Writing Prospectus (FWP) is any written communication used to offer or sell securities after a registration statement has been filed with the SEC that contains information beyond what appears in the statutory prospectus, and which must be filed with the SEC and include specific legends identifying it as subject to a full registration statement.
The Free Writing Prospectus concept was introduced by the SEC's Securities Offering Reform rules in 2005 to provide greater flexibility in investor communications during the offering process while maintaining the investor protection framework of the Securities Act of 1933. Before the 2005 reforms, the rules governing what could be communicated to investors during a registered offering were considerably more restrictive, limiting issuers and underwriters to narrow categories of permitted communications.
The FWP rules permit issuers, underwriters, and selling security holders to use written communications — including electronic communications, website postings, videos, and media appearances in script form — during and after the filing of a registration statement, provided certain conditions are met. The communication must be filed with the SEC promptly (generally the same business day it is used) via the EDGAR system. It must contain a legend directing the reader to the full registration statement and noting that the communication does not replace the prospectus.
For well-known seasoned issuers (WKSIs) — a category for large, established public companies — FWP usage is broadly permissive. For EGCs and other less-seasoned issuers, the rules are more restrictive: the company must have filed a registration statement before using most FWPs, and the FWP cannot contain information that conflicts with or contradicts the registration statement.
In IPO practice, FWPs most commonly appear in the form of roadshow presentations that are made available online to institutional investors, electronic term sheets or preliminary pricing supplements distributed during book-building, and media interviews conducted by company executives. The investor presentation used during an IPO roadshow is frequently filed as an FWP when it is made broadly accessible via a website.
The FWP filing requirement creates a public record of investor communications made during the offering. This record serves both an investor protection function — allowing the SEC and investors to compare roadshow statements with prospectus disclosures — and a liability management function for issuers, since inconsistencies between FWP statements and the final prospectus can expose issuers and underwriters to liability under Section 11 or Section 12 of the Securities Act. Practitioners pay careful attention to ensuring that all FWP content is vetted against the registration statement before use.