The SEC proposed a new rule and related amendments that would allow issuers to communicate with certain potential investors to determine whether such investors might be interested in a “contemplated registered securities offering.” Under the proposed rule, such communications would be exempt from restrictions imposed by Securities Act Section 5.
The proposal is intended to give more flexibility to issuers regarding their communications with institutional investors. According to the SEC, the proposal would expand the “test-the-waters” accommodation to all issuers, including investment company issuers. The accommodation is currently only available to emerging growth companies. Under the proposal:
- there would be no filing or legending obligations;
- “test-the-water” communications must not be at odds with material information in the related registration statement; and
- issuers that are subject to Regulation FD would be obligated to consider whether any information in a “test-the-water” communication would lead to disclosure obligations under Regulation FD.
Comments must be received by the SEC no later than 60 days after the date of publication of the proposal in the Federal Register.