SEC Proposes More Talk on Stock Sales

Companies selling stock to the public would be allowed to talk much more freely about their offerings, and even advertise, under a preliminary proposal from the Securities and Exchange Commission.

In an effort to overhaul Depression-era rules, the SEC voted 5-0 on Tuesday to propose largely eliminating the so-called quiet period before secondary stock offerings by major companies that already are public.

Rules governing company communications before initial public stock offerings by smaller firms also would be eased.

Currently, companies must restrict public communications about offerings mostly to formal documents. For the largest 2,000 to 2,500 companies, most of those restrictions would end.

The SEC voted to seek public comment on the proposed changes until January.

The current list of restrictions “has had the effect of chilling communications” between companies and investors, said Alan Beller, director of the SEC’s corporation finance division.

Some of the old rules are “almost silly,” said SEC Commissioner Roel Campos, citing one that bars a broker from faxing a stock offering prospectus to a potential investor, but permits him to read it over the phone.

Under the changes, major companies conceivably could advertise secondary stock sales on TV to attract investors.

Balancing the new freedoms would be strict rules about legal liability for major misstatements or omissions of important facts in interviews, ads or other communications outside the traditional SEC filing regime.

Rules governing IPOs would be changed to allow companies to disseminate more information to investors before the stock sale -- using, for example, online updates to the prospectus.

Executives could give media interviews and conduct “road shows” for a wide audience of investors.