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SEC proposes to expand ‘test-the-waters’ perk to all issuers

Joe Mont | February 19, 2019

The Securities and Exchange Commission has proposed expanding a popular reform to permit investor views about potential offerings to be taken into account at an earlier stage in the process. The new rule and related amendments would expand the “test-the-waters” accommodation—currently available to emerging growth companies (EGCs)—to all issuers, including investment company issuers.  

The proposal, made public on Feb. 19, would allow all prospective issuers, not just EGCs, to gauge market interest in a possible initial public offering, or other proposed registered securities offerings, by permitting discussions with certain investors prior to the filing of a registration statement. 

The proposal builds on a popular similar provision of the Jumpstart Our Business Startups Act (JOBS Act) that has, until now, been limited to EGCs. Generally, companies with more than $1 billion in annual revenues do not...

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