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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Securities Offering Reform: Opening Statement before the SEC Open Meeting


Chairman William H. Donaldson

U.S. Securities and Exchange Commission

Washington, D.C.
June 29, 2005

The first item on our agenda is a recommendation from the Division of Corporation Finance that we adopt changes to improve the communications, offering, and registration processes under the Securities Act.

The notion of Securities Act reform goes back many years. The search for the best approach to effective regulation of the offering process is both necessary and continual. As such, the best minds within and outside the Commission have long contemplated the offering process over time and urged reforms. These efforts resulted in great advances, such as the 1954 amendments and Commission rules adopted in the late 70's and early 80's that gave markets the integrated disclosure system and shelf registration. The continuing evaluation of the registered offering process continued through the 90's and culminated in our proposals last Fall.

The package of reforms we consider today is the next step in that journey. The package we consider today will modernize the securities offering and communication process while maintaining investor protection. We received over 130 comment letters on our proposals, most of them strongly supportive. Many agreed that the proposals struck the appropriate balance in improving the capital formation process while preserving investor protection and avoiding unnecessary regulatory impediments. We also received many thoughtful comments and useful suggestions to improve the proposals further.

The reforms are mindful that the existing system of regulating public offerings provides a great number of advantages that should be preserved. As such, rather than create a far-reaching new system, today's reforms accomplish changes by making constructive, incremental adjustments to the integrated disclosure and shelf registration systems.

Today's recommended rules involve:

  • offering communications;
  • procedural improvements to the registration process; and
  • delivery of information to investors, including timeliness of that delivery and delivery of final prospectuses through access.

These reforms are appropriate now because communications in the capital markets have changed significantly over time. Today's markets would be unrecognizable to those who wrote the original Act, or even those who designed the shelf system in the early 80's. Today, electronic communications are the norm. Public companies engage in all types of communications on an ongoing basis, including, importantly, communications mandated or encouraged by our rules under the Exchange Act. Modern technologies, including the Internet, provide powerful, versatile, and cost-effective ways to communicate quickly and broadly. The recent changes to the Exchange Act disclosure regime, as well as advances in communications and information technology, are resulting in more information being provided to the market on a more non-discriminatory, current, and ongoing basis. Today's recommendations will encourage an increased flow of information between issuers and investors and eliminate outmoded "gun jumping" restrictions while maintaining investor protection.

A significant component of what is recommended involves timely delivery of information. Investors are entitled to information at the point they commit to purchase a security. We issued an interpretation to this effect as part of the proposals, and the recommendations would provide further guidance on how this can be accomplished without requiring any slowdowns, or "speed bumps" if you will, to the offering process.

I want to commend the staff for these recommendations. While its important to note the historic contribution of the many great minds on this topic, the end of this leg of the journey has required the hard work of a number of current staff members - just a few of whom are at the table today. Today's reform package reflects your thoughtful and creative solutions to issues that are at the very heart of effective regulation of public securities offerings in the modern environment. I thank you for your effort.


Modified: 06/29/2005