Understanding the Quiet Period

By Cheri White, posted December 21, 2012

What all employees need to know during an IPO

When a company files for an Initial Public Offering (IPO), there is period of time after the registration statement is officially delivered to the Securities Exchange Commision until this statement is declared official called the "quiet period". During this time, there are laws limiting the type of information a company can release to the public.

The quiet period was largely created to prevent employees and other company insiders from artificially inflating the price of the company's stock. The Federal government takes these rules very seriously and employees could jeopardize the success of the IPO or incur fines if the rules are not followed.

So what do employees need to know? Here are a few of the most important tips to consider.

• Keep all confidential company information secret at all times.
• Do not discuss any news about your company to anyone: family, friends and most importantly, strangers.
• Normal advertising and publicizing of information can still continue during the quiet period, however if your role requires you to do these things, be sure to check with managers or co-workers if you have any questions.
• The quiet period can last anywhere from 40 to 90 days. Until you hear the official word, do not assume it is over for any reason.
• Companies that have been found to violate the quiet period rules have been fined up to $2 million in some cases, so play it safe and keep your head down!

The author is an expert on SEC accounting rules and can be contacted here.

© copyright 2012 Cheri White.