61-1-14(2)(k) – Red Herring Transactional Exemption


(2) The following transactions are exempted from Sections 61-1-7 and 61-1-15:

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(k) an offer, but not a sale, of a security for which a registration statement is filed under both this chapter and the Securities Act of 1933 if no stop order or refusal order is in effect and no public proceeding or examination looking toward such an order is pending;

Division Interpretive Commentary

This exemption permits the publication and distribution of a preliminary prospectus, which is also known as a red herring prospectus. This is a prospectus that is given to potential investors in a new security issue before the selling price has been set and before the issuer's registration statement has become effective. This document, which provided details of the issue and facts concerning the issuer, is so named because of a statement on it, printed in red, that the issue has not yet been approved by the SEC. The purpose of a red herring is to provide the investor preliminary information in conjunction with an offer to purchase the security. This exemption only covers the offer, not the sale.

To qualify for this exemption, the issuer must have already filed the registration statement under the registration provisions with both the Division and the SEC. See Corporate Finance