Testing the Waters for All? Proposed New Rule Would Expand Accommodation to All Issuers

Since the Jumpstart Our Business Startups (JOBS) Act was enacted in 2012, emerging growth companies (EGCs) have benefited from the opportunity to test the waters with investors and gauge interest in a potential offering. Title I of the JOBS Act amended Section 5 of the Securities Act of 1933 (the Securities Act) in order to provide that certain communications made by EGCs or persons acting on their behalf with institutional accredited investors and qualified institutional buyers (QIBs), either prior to or following the filing of a registration statement, would not constitute “gun jumping.” 

Now, the US Securities and Exchange Commission (Commission) has proposed a new rule under the Securities Act that would extend the ability to test the waters to all issuers. This has been highly anticipated.