Clarifications made as SEC extends testing-the-waters provision

Author: John Crabb | Published: 10 Oct 2019

The US Securities and Exchange Commission (SEC) has adopted a new rule that extends its test-the-waters accommodation to include all companies, not only emerging growth companies (EGCs) as had previously been the case.

In doing so it has made a number of clarifications to the wording of rule 163B as it was proposed in February, following a 60-day comment period. The rule will allow all issuers to engage in oral or written communications with potential investors to determine interest.

"It is a very positive change as far as making it easier for companies on the capital-raising front," said Anna Pinedo, partner at Mayer Brown. "What was adopted was virtually identical to what was proposed; the only things that were different were clarifications, which were very helpful."

One reference that, according to Pinedo, raised some concerns for the market was that the test-the-waters material that was filed had to be the...