What is a Waiting Period?

The waiting period refers to the time period between a company filing a registration statement with the US Securities and Exchange Commission (SEC) and the SEC declaring that statement to be effective. This is also referred to as the 'quiet period.'

How Does a Waiting Period Work?

Under the SEC rules, once a company makes its SEC registration filing for its initial public offering, it must not release information about its activities or related parties to the public until the SEC approves the registration for the offering. The SEC interprets this rule broadly, even including board members, management, and employees talking about the company.

In 2005, the SEC changed many provisions of the waiting period and now allows companies to continue to publish information about themselves electronically and to continue to publish and report company activities through normal company networks.

Why Does a Waiting Period Matter?

The waiting period precedes the introduction of a company into the capital market. During that time, the amount of public exposure and hype must be minimized to prevent any interference with SEC efforts to evaluate the company's filings. The release of any information may cause investors to 'jump the gun' on valuations and expectations for the company. The SEC's intention is to create a level playing field for all investors in the capital market, ensuring that all have the same information about the company when it goes out for sale on the market.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.