SEC Follows Rep. Budd’s Lead on New “Test-the Waters” Rulemaking
Washington, D.C.- Representative Ted Budd (R-NC) released the following statement after the Securities and Exchange Commission (SEC) announced the adoption of a new rule to allow all issuers to “Test-the-Waters,” which mirrors the bill Rep. Budd introduced in 2017:
“I applaud SEC Chairman Jay Clayton for this recent rulemaking and I appreciate his commitment to facilitating capital formation. This rule reduces the process risk to companies that are contemplating going public in order to make listing on exchanges more attractive, strengthening America’s financial markets.”
Background: “Testing the waters” refers to communications between a would-be issuer and accredited institutional buyers and investors prior to an IPO to gauge interest in a potential securities offering. These communications occur between sophisticated parties, and no policy had ever been offered as to why Emerging Growth Companies should have access to “test the waters,” while others are denied the same capability. Today, the SEC made the decision to expand “testing the waters” to all issuers.
Representative Ted Budd (NC-13) introduced the Encouraging Initial Public Offerings Act last Congress that would have codified this recent decision by the SEC into law. It passed the House unanimously. Senator Thom Tillis (R-NC) introduced companion legislation in the Senate.