Tombstone advertisement
Also known as: tombstone ad, tombstone announcement
A tombstone advertisement is a plain, strictly limited notice announcing a new securities offering. It states basic facts such as the issuer, the type and amount of securities, the price, and where to obtain a prospectus — and nothing more.
A tombstone advertisement is the one form of public announcement an issuer and its underwriters may publish about a securities offering that is still in registration. The name comes from its appearance: a black-bordered box of sparse text with no images, no charts, and no promotional language, resembling a headstone.
Federal securities law prohibits any offer of a security before its registration statement is filed and prohibits sales until that statement becomes effective, and it restricts what can be said about the deal during the cooling-off period in between. A tombstone sits inside a narrow safe harbor. It may identify the issuer, describe the security and the number of shares or bonds offered, give the public offering price, name the underwriters, and tell readers how to request a prospectus. It must state that it is not an offer to sell and that offers are made only by prospectus.
What a tombstone may not do is just as important. It cannot recommend the security, project performance, describe the issuer's business prospects, or include any information beyond the permitted items. Because of these limits, a tombstone is a notice of availability rather than a sales document — the prospectus remains the only vehicle for actually offering the security.
The SIE, Series 6, Series 7, Series 65, and Series 66 exams all test tombstones as part of the primary market and registration material. Know that a tombstone may be published during the cooling-off period, that it is not an offer to sell, and that it cannot contain promotional or predictive statements about the issuer.
Key takeaways
- A tombstone advertisement is a bare-bones public notice of a securities offering, allowed while the registration statement is still in the cooling-off period.
- It may state the issuer, the security and amount offered, the price, the underwriters, and how to obtain a prospectus.
- It may not include recommendations, performance projections, or any promotional description of the issuer.
- Every tombstone carries a disclaimer that it is not an offer to sell; offers are made only by prospectus.