Access Equals Delivery

A customer reads the legend on the cover of a final prospectus stating that the Securities and Exchange Commission has not approved or disapproved the securities and has not passed upon the accuracy or adequacy of the prospectus. She asks her representative what the SEC actually did. The accurate answer is:

1. A.Guaranteed the issuer's financial condition through the effective dateThe SEC guarantees nothing about any issuer.
2. B.Verified that every statement in the prospectus is accurate before allowing the saleThe SEC does not audit or certify the accuracy of the disclosure; that liability rests with the issuer, underwriters and experts.
3. C.Determined that the securities are suitable for sale to retail investorsSuitability is a broker-dealer conduct obligation, not an SEC finding on a registration statement.
4. D.Reviewed the registration statement for full and fair disclosure and declared it effective, without approving the offering or verifying the accuracy of the disclosureCorrect. The 1933 Act is a disclosure statute; the SEC performs no merit review and gives no certification.

Why: The SEC's role under the Securities Act of 1933 is disclosure, not merit review. Staff examine the registration statement for completeness and for full and fair disclosure and, when satisfied, allow it to become effective. The Commission never endorses an offering, never judges whether the investment is a good one, and never certifies that the disclosure is truthful. Liability for a materially false or missing statement runs against the issuer, its officers and directors, the underwriters and the experts, not against the SEC.

Larkfield Corp's registration statement has gone effective and the final prospectus has been filed with the SEC. Under the SEC's ACCESS EQUALS DELIVERY approach, a broker-dealer confirming a customer's purchase of Larkfield shares in the offering:

1. A.May send the confirmation without attaching the final prospectus, because the filed prospectus is publicly available, though a separate notice of the sale must still be sent.Correct. Filing makes the prospectus accessible, satisfying delivery, while the notice requirement remains.
2. B.Has no prospectus-related obligation of any kind once the registration statement is effective.Wrong. Preliminary prospectus obligations during the cooling-off period and the post-sale notice requirement both survive.
3. C.Must mail or email a paper or electronic copy of the final prospectus to each purchaser before the confirmation is sent.Wrong. That is the pre-access-equals-delivery world. Physical delivery of the final prospectus is no longer required once it is filed.
4. D.Must obtain each purchaser's written consent to electronic delivery before relying on the approach.Wrong. Access equals delivery does not rest on customer consent; it rests on the prospectus being filed and publicly accessible.

Why: Access equals delivery reflects the reality that a filed prospectus is instantly available to anyone through the SEC's public filing system. Once the final prospectus has been filed - or the issuer has undertaken to file it - the broker-dealer's physical delivery obligation is deemed satisfied, and the firm may send the trade confirmation without a prospectus attached. A separate rule still requires the firm to send the purchaser notice that the sale was made pursuant to a registration statement, generally within two business days after the sale is completed.