In 2012, the U.S. Securities Act of 1933 (Securities Act) was amended to permit emerging growth companies (EGCs) and people acting on their behalf to engage in “test-the-waters” communications with potential investors that are qualified institutional buyers (QIBs) or institutional accredited investors (IAIs) before or after filing a registration statement to gauge such investors’ interest in a contemplated securities offering. On February 19, the U.S. Securities and Exchange Commission (SEC) proposed rules that, if adopted, will permit all issuers, including investment companies, to engage in this type of test-the-waters communication. The amendments are intended to give issuers more flexibility regarding their communications with institutional investors about public securities offerings and enable them to evaluate market interest before incurring the costs of such an offering. The comment period closes on April 29.

The Canadian Securities Administrators (CSA) already permit issuers of any size to engage in some test-the-waters communications in connection with initial public offerings (IPOs), but reporting issuers are subject to greater restrictions. We expect that the CSA will monitor this SEC initiative as part of their ongoing project to reduce regulatory burdens for reporting issuers. They noted in their April 2017 Consultation Paper that they are considering whether to further liberalize the pre-marketing and marketing regime for capital-raising.