This article discusses a recently proposed rule by the Securities and Exchange Commission (SEC) that would expand the permitted use of “testing-the-waters” communications from emerging growth companies (EGCs) only to all issuers, regardless of size or reporting status. Proposed by the SEC on February 19, 2019, Rule 163B under the Securities Act of 1933, as amended (the Securities Act) would permit all issuers, and persons acting on their behalf, to gauge market interest in a prospective registered securities offering by engaging in oral or written communications with potential investors that are, or are reasonably believed by the issuer to be, qualified institutional buyers (QIBs) or institutional accredited investors (IAIs). These communications could occur prior to, or following, the filing of a registration statement with the SEC.
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