The SEC has adopted final rules allowing all issuers to test the waters prior to the effectiveness of a registration statement in a public offering. The proposed rules were published in February of this year (see HERE). The final rules are largely the same as proposed. The rule change is designed to encourage more companies to go public. Although it will help in this regard, a much larger expansion of testing the waters, allowing unlimited testing the waters (subject to anti-fraud of course) for all registered offerings under $50 million, would go far to improve the floundering small cap IPO market.
Prior to the rule change, only emerging growth companies (“EGCs”) (or companies engaging in a Regulation A offering) could test the waters in advance of a public offering of securities. The proposal implements a new Securities Act Rule 163B. For an in-depth analysis of testing the waters and communications during an offering process, see my two-part blog HERE
As anticipated, on February 19, 2019 the SEC voted to propose an expansion of the ability to “test the waters” prior to the effectiveness of a registration statement in a public offering, to all companies. Currently only emerging growth companies (“EGCs”) (or companies engaging in a Regulation A offering) can test the waters in advance of a public offering of securities. The proposal would implement a new Securities Act Rule 163B. For an in-depth analysis of testing the waters and communications during an offering process, see my two-part blog HERE and HERE. The SEC proposal is open for public comment for a sixty (60)-day period.
Historically all offers to sell registered securities prior to the effectiveness of the filed registration statement have been strictly regulated and restricted. The public offering process is divided into three periods: (1) the pre-filing period, (2) the waiting or pre-effective period, and (3) the post-effective period. Communications made by the company during
House Appropriations Bill
The House continues its busy activity of passing legislation designed to reduce securities and market regulations. In early July, the House passed H.R. 2995, an appropriations bill for the federal budget for the fiscal year beginning October 1st. No further action has been taken. The 259-page bill, which is described as “making appropriations for financing services and general government for the fiscal year ending September 30, 2017, and for other purposes” (“House Appropriation Bill”), contains numerous provisions reducing or eliminating funding for key aspects of SEC enforcement and regulatory provisions.
Earlier this year, I wrote this BLOG about three House bills that will likely never be passed into law. The 3 bills include: (i) H.R. 1675 – the Capital Markets Improvement Act of 2016, which has 5 smaller acts imbedded therein; (ii) H.R. 3784, establishing the Advocate for Small Business Capital Formation and Small Business Capital Formation Advisory Committee within the SEC; and (iii) H.R. 2187, proposing