Can sales literature be used prior to the effectiveness of a registration statement?

Sales literature cannot be used prior to the effectiveness of a registration statement because it can promote a security that has not yet been formally registered or approved by the regulatory authorities, such as the SEC. This rule is in place to protect investors by ensuring that they only receive information that has been reviewed and deemed appropriate by regulators.

During the pre-registration period, any literature or communication that could be construed as an offer to sell the security would be considered misleading or premature since the investment has not been officially authorized for sale. This helps to prevent the dissemination of potentially inaccurate or incomplete information that could mislead investors before they have access to the full, officially sanctioned details of the investment opportunity. Therefore, the prohibition on using sales literature before registration ensures compliance with securities laws and provides a level of safety for potential investors.