(1) Gun jumping in Securities Regulation.
In the context of securities regulation, gun jumping refers to issuer communications and actions prohibited by Section 5 of the Securities Act and Securities and Exchange Commission (SEC) regulations. Gun jumping regulations break down the IPO process into three timeframes, based on the SEC’s review of the issuer’s registration statement: the pre-filing period, the waiting period, and the post-effective period.
- Pre-filing period: Prior to filing their registration statement, the issuer is in the pre-filing period. During this time, Section 5(c) prohibits the issuer from making any communications that may condition the market for the sale of the securities.
- Waiting period: Once the issuer files the S-1, they are in the waiting period. During the waiting period, the issuer and underwriter begin to gauge market interest and the SEC reviews the registration statement. Section 5 of the Securities Act allows the issuer to make offers to sell their security under certain conditions. Section 5(b)(1) allows oral offers, and companies often conduct roadshows during this time. For essentially all written offers, however, Section 5(b)(1) requires that written offers satisfy Section 10, which regulates what prospectuses must contain.
- Post-effective period: Once the SEC approves the issuer’s S-1, then they are in the post-effective stage and may sell their security without restriction.
(2) Gun jumping in Anti-trust.
In the anti-trust context, gun jumping refers to actions that merging companies may take prior to closing to further the integration of their operations. The federal government regulates gun jumping activities in Section 1 of the Sherman Act, which prohibits agreements that restrain free trade, and Section 7A of the Hart-Scott-Rodino Act, which establishes a waiting period for the acquiring company to exercise control over the target company. An example of gun jumping would be collusion between merging parties on product prices prior to the closing of the merger.
[Last updated in January of 2022 by the Wex Definitions Team]
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