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Testing the waters

In February 2019 Securities and Exchange Commission voted to propose a new Securities Act Rule 163B that would permit any issuer to engage in oral or written communication with potential investors that are, or are reasonably believed to be, qualified institutional buyers and institutional accredited investors either prior or following the filing of registration statement. This means the expansion of the JOBS act, which created Section 5(d) of Securities Act that permits only emerging growth companies to engage in communication with investors prior or following the filing the registration statement of the offering. Companies that have more than $1 billion in annual revenues cannot qualify as emerging growth companies and use the benefit of "test-the-waters" provision. The new rule will extend it beyond EGC to all issuers, including investment company issuers. The proposal from the SEC follows action taken by The Division of Corporate Finance in July 2017 to allow all ...