Internet startups continue to enjoy unprecedented media attention, and many of these companies are fueling the fire by generating extra publicity around their initial public offerings. In doing so, they're walking a fine regulatory line. But so far most have enjoyed the protection offered by the vagueness of the Securities and Exchange Commission's guidelines governing the "quiet period" before and after an IPO.

According to Section 17b of the Securities Act of 1933, it is unlawful for any person involved with the security in question to hype the offering -- "to publish ... or circulate any ... advertisement, newspaper ... or communication which, though not purporting to offer a security for sale, describes such security for a consideration" -- once an underwriter is found and until 25 days after the security has begun trading. Since the act's inception, the SEC has tweaked the wording only once, in 1971. Nevertheless, "the offline rule applies to online companies during the quiet period," says SEC Commissioner Laura Unger. "They're the same rules, just in a slightly different context."

But mindful that today's retail investors still seem to be suckers for any offering that ends in ".com" -- and that the traditional metrics for evaluating potential investments (profits, for example) have been replaced by Web traffic numbers, media coverage, and short-term revenue growth rates -- pre-IPO Internet startups are spending millions on ad campaigns strategically positioned around their S-1 filings. "For many electronic-commerce companies, the IPO has become a critical element in branding," says Chris Vroom, an e-commerce analyst with the investment bank Thomas Weisel Partners. One recent high-profile example: Mothernature.com, an online health-product peddler, filed for an IPO on August 13; a mere 18 days later, it began a $17 million print, TV, and radio advertising campaign.

The SEC most often employs a "cooling off" tactic for quiet-period violations -- essentially delaying the IPO registration process to make the advertisement or publicity stunt in question immaterial. That's what it ordered for the much-hyped online grocer WebVan, whose $280 million IPO was postponed indefinitely by the SEC on October 7. The commission can also impose a stop order, in which it forces the company to cease all marketing activities for a period of time.

Even the lawyers representing these e-commerce companies admit that they have noticed a willingness to bend the quiet-period rules. "The dot-com companies are pushing the envelope because they believe that without continued visibility they'll die," says Rubi Finkelstein, a partner with Orrick, Herrington & Sutcliffe, a San Francisco law firm involved with the IPOs of iVillage and Bigstar Entertainment. "The SEC's current guidance makes practitioners a bit queasy; I wish that it would offer more."

The SEC, however, appears content to evaluate situations case by case and put the onus of interpretation on the law firms representing the Internet companies. "The SEC needs to remain flexible," says Ms. Unger. Until the commission takes some action -- either by refining the wording or making a real example of a quiet-period violator -- Internet companies will continue to test the rules in their quest for media and investor attention.