March 9, 1995
TO: DIRECT MARKETING COMMITTEE No. 17-95
SALES FORCE MARKETING COMMITTEE No. 17-95
SHAREHOLDER COMMUNICATIONS COMMITTEE No. 14-95
RE: SEC STAFF ALLOWS FOR DELIVERY OF PROSPECTUSES IN AN
ELECTRONIC FORMAT
______________________________________________________________________________
The Division of Corporation Finance recently issued a no-action letter expressing the view
that the term "prospectus" as defined and used in the Securities Act of 1933 includes a prospectus
that is encoded in an electronic format (an "electronic prospectus"). Accordingly, compliance with
the Acts prospectus delivery requirements may be achieved by using an electronic prospectus, so
long as certain conditions are met. A copy of the letter, Brown & Wood (pub. avail. February 17,
1995), is attached.
In the letter, the staff addressed the issue of whether underwriters of securities or dealers
may comply with the prospectus delivery requirements of the Securities Act by downloading into
a computer the complete text of a prospectus and making the prospectus available to customers
through proprietary or "common carrier" deliver systems. In reaching its position, the staff noted
a number of conditions that should be followed when an electronic prospectus is used, including
the disclosure of the same information for the electronic and the paper prospectus, the
establishment of procedures to provide investors with an election to receive a prospectus (or future
prospectuses) in electronic form, the notification to investors who have elected to receive an
electronic prospectus of its availability, and the continuous accessibility without charge of the
prospectus through the designated electronic system. Finally, the staff specifically noted that
investment companies should consider including in any application for the purchase of shares that
is based on an electronically transmitted prospectus, an "item to be completed by the investor
confirming that a prospectus has been sent or given to the investor electronically." If the item is
answered negatively by the purchaser, the investment company should immediately send a paper
prospectus to the investor.
Alexander C. Gavis
Assistant Counsel
Attachment