On December 22, the Securities and Exchange Commission announced that it has proposed amendments to Rule 163(c) under the Securities Act of 1933 to enhance the capability of certain large companies to communicate with potential investors to assess the interest in the market for their securities offerings. The SEC believes that the proposed amendments to Rule 163(c) would facilitate capital formation and encourage more companies to conduct their offerings on a registered basis, which would enhance investor protection.

The proposed amendments would allow companies that are “well-known seasoned issuers” (WKSIs) to authorize an underwriter or dealer to act as its agent or representative to communicate about offerings of the issuer’s securities before the filing of a registration statement if the following conditions are satisfied: (1) the underwriter or dealer receives written authorization from the WKSI to act as agent or representative prior to initiating any communication on the WKSI’s behalf; (2) the WKSI authorizes or approves the written or oral communication before the agent or representative makes such communication to a potential investor; and (3) any authorized agent or representative that has made any authorized communication on behalf of a WKSI in reliance on Rule 163(c) must be disclosed in any prospectus in the registration statement filed for the offering to which such communication relates. Under the current Rule 163, only WKSIs themselves, and not any other offering participants, are permitted to communicate directly with potential investors prior to the filing of a registration statement.

In its release, the SEC cautions that Rule 163 communications, including communications made in reliance on the proposed amendments, are not exempt from Regulation FD compliance. Therefore if the authorized underwriter communicates material non-public information to persons enumerated in Regulation FD, a confidentiality agreement must be obtained or public disclosure made pursuant to Regulation FD.

Public comments on the proposed amendments to Rule 163 must be received by the SEC within 30 days after publication in the Federal Register.  

Click here for the SEC press release.

Click here for the Proposed Amendments to Rule 163.