reporting, accounting, auditing, and corporate governance requirements.
EGC communications Title I of the JOBS Act provides EGCs, or any other person they authorise, the flexibility to engage in oral or written communications with QIBs and institutional accredited investors in order to gauge their interest in a proposed offering, whether before or following the first filing of any registration statement, subject to the requirement that no security may be sold unless accompanied or preceded by a Securities Act section 10(a) prospectus.20
This provision allows an EGC to test the
waters for a potential IPO by communicating with investors and gauging their potential interest in the offering.21
An EGC can use the test-the-waters provision
with respect to any registered offerings that it conducts while qualifying for EGC status. There are no form or content restrictions on these communications, and there is no requirement to file written communications with the SEC. In the course of reviewing the registration statements of an EGC, the SEC staff has requested the EGCs submit any written test-the-waters materials to the SEC, so that the SEC staff can determine whether those materials would provide any guidance as to information that should be included in the prospectus. The SEC has addressed the interplay of these test-the-
waters communications, and the requirements of Exchange Act Rule 15c2-8(e).22
Rule 15c2-8(e) requires
that a broker-dealer make available a copy of the preliminary prospectus (before the effective date) for a registered offering of securities before soliciting orders from customers. If read broadly, the prohibitions of Rule 15c2-8(e) might constrain the types of activities that are permissible during test-the-waters discussions. The FAQs note that while the JOBS Act does not amend Rule 15c2- 8(e) (that is, the JOBS Act does not modify the meaning of the term “solicit”), an EGC or a financial intermediary acting on the EGC’s behalf may engage in discussions with institutional investors to gauge their interest in purchasing EGC securities before the EGC has filed its registration statement with the SEC and after the EGC has filed its registration statement. During this period, the underwriter may discuss price, volume and market demand and solicit non-binding indications of interest from customers. Soliciting such a non-binding indication of interest, in the absence of other factors, would not constitute a solicitation for purposes of Rule 15c2-8(e). The JOBS Act also permits a broker-dealer to publish or distribute a research report about an EGC that proposes to register an offering under the Securities Act or has a
18 JOBS Act Quick Start
registration statement pending, and the research report will not be deemed an offer under the Securities Act, even if the broker-dealer will participate or is participating in the offering. Further, no SRO or the SEC may adopt or maintain any rule or regulation prohibiting a broker-dealer from publishing or distributing a research report or making a public appearance with respect to the securities of an EGC following an offering or in a period before expiration of a lock-up.23 greater detail in Chapter 8.
These provisions are discussed in
Confidential review process for EGC IPO registration statements Title I provides that the SEC’s staff must review all EGC initial public offering registration statements confidentially.24
An EGC may confidentially submit a
draft registration statement for an initial public offering for non-public review, provided that the initial confidential submission and all amendments are publicly filed with the SEC no later than 21 days before the issuer’s commencement of a road show.25
The SEC
requires that confidential draft registration statements and amendments be submitted through EDGAR using submission form types DRS and DRS/A, respectively. No filing fee is due at the time of submitting the draft registration statement.26 A confidential submission of a draft registration
statement is not required to be signed by the registrant or by any of its officers or directors, nor is it required to include the consent of auditors and other experts, as it is not filed with the SEC.27
While Securities Act section
6(e)(1) requires that the initial confidential submission and all amendments thereto be publicly filed with the SEC not later than 21 days before the date on which the issuer commences a road show, the SEC notes that upon public filing, the previous confidential submissions are not required to be signed and do not require consents.28 The SEC expects that any registration statement submitted for confidential review will be substantially complete at the time of initial submission, including a signed audit report, and the required exhibits (however, the registration statement itself is not required to be signed or to include the consent of auditors and other experts). The SEC will defer review any draft registration statement that is materially deficient.29 The confidential submission of a draft registration does
not constitute the filing of a registration statement for the purposes of the prohibition in Securities Act section 5(c) against making offers of a security in advance of filing a registration statement.30
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