Simple English definitions for legal terms
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Gun jumping refers to illegal activities that a company engages in while waiting for regulatory approval for a transaction. This term is used in two contexts: securities regulation and anti-trust regulation.
In securities regulation, gun jumping refers to actions and communications that are prohibited by Section 5 of the Securities Act and Securities and Exchange Commission (SEC) regulations. The IPO process is divided into three timeframes: pre-filing, waiting, and post-effective periods.
In anti-trust regulation, gun jumping refers to actions that merging companies may take before closing to further the integration of their operations. The federal government regulates gun jumping activities in Section 1 of the Sherman Act and Section 7A of the Hart-Scott-Rodino Act.
An example of gun jumping would be if two companies that are merging collude on product prices before the merger is finalized. This would be illegal because it would restrain free trade.
Both examples illustrate how gun jumping can be harmful and illegal. In securities regulation, gun jumping can affect the market for the sale of securities, while in anti-trust regulation, it can restrain free trade. Companies must wait for regulatory approval before engaging in any activities related to a transaction to avoid gun jumping.