SEC Rules Expanding "Testing the Waters" For Registered Offerings

On September 26, 2019, the SEC adopted final rules permitting all companies to gauge market interest in registered offerings (including possible initial public offerings) through “testing the waters” by reaching out to certain institutional investors before filing a registration statement. Prior to these rules, only emerging growth companies had been able to engage in this activity under provisions of the JOBS Act. New Securities Act Rule 163B will allow any issuer to engage in oral or written communications with potential investors who are (or are reasonably believed to be) institutional accredited investors (IAIs) or qualified institutional buyers (QIBs), either before or after the filing of a registration statement, to determine whether such investors have an interest in a contemplated registered securities offering. The rule is non-exclusive and an issuer may rely on other Securities Act communications rules or exemptions when determining how, when, and what to communicate about a contemplated securities offering. The rules will be effective in 60 days after publication in the Federal Register.

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