SEC votes for the full adoption of a pilot modernization program to all issuers

The US Securities and Exchange Commission (SEC) has voted in favor of expanding its pilot program on the modernization of allowing investors to share their opinions regarding potential offerings at a much earlier stage than the current one.

According to the provisions of the new rule and its amendments, the “test-the-waters” accommodation currently used by emerging growth companies (EGCs) would be made available to all issuers including investment companies.

The new provisions would allow all issuers to gauge investor interest in a company’s shares before launching a full IPO or other types of registered stocks by allowing them to consult their target investor before filing an official registration statement.

The SEC’s proposal is a major boon to companies with more than $1 billion in revenues that are considering going public as they are not categorized as EGCs, hence, they could not legally use this provision in the past.

Jay Clayton

Jay Clayton, SEC

Jay Clayton, the SEC Chairman commented that:

Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings and lower their cost of capital, and ultimately to provide investors with more opportunities to invest in public companies.

I have seen first-hand how the modernization reforms of the JOBS Act have helped companies and investors. The proposed rules would allow companies to more effectively consult with investors and better identify information that is important to them in advance of a public offering.

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