February 20, 2019

SEC Proposes “Test the Waters” For All Companies

Yesterday, the SEC issued this 76-page proposing release would expand the “test-the-waters” accommodation from EGCs to all companies, including investment companies. Here’s the SEC’s press release – we’ll be posting memos in our “Securities Act Reform” Practice Area as they come in (and here’s Steve Quinlivan’s blog and this MarketWatch article).

With this proposal, the SEC seeks to allow all companies to benefit from all the changes that the JOBS Act gave EGCs. Some of the JOBS Act benefits had already been widely available, as Corp Fin opened up the confidential filing process to all companies two years ago. If this proposal is adopted, the “testing-the-waters” part of the JOBS Act will also be extended to a broader range of companies. There’s a 60-day comment period.

Nasdaq Clarifies “Direct Listing” Rule Change

Recently, John blogged about high-profile companies starting to use the “direct listing” route to go public rather than the traditional IPO path. This type of offering was facilitated by the NYSE changing its rules last year to permit a direct listing.

As noted in this Steve Quinlivan blog, Nasdaq recently filed an immediately effective rule proposal with the SEC that clarifies how the process works for direct listings on that exchange without an IPO. Over the years, there have been a handful of direct listings on Nasdaq…

Internal Controls: Some EGCs Might Get Their 404(b) Exemptions Extended

Here’s the intro from this blog by Cooley’s Cydney Posner:

A bipartisan group of senators has introduced a new bill, the ‘Fostering Innovation Act of 2019’ (S. 452), that would amend SOX to provide a temporary exemption from the auditor attestation requirements of Section 404(b) for low-revenue issuers, such as biotechs. The bill is designed to help those EGCs that will lose their exemptions from SOX 404(b) five years after their IPOs, but still do not report much revenue. For those companies, proponents contend, the auditor attestation requirement is time-consuming and expensive, diverting capital from other critical uses, such as R&D.

According to the press release, the bill would provide “a very narrow fix that temporarily extends the Sarbanes-Oxley Section 404(b) exemption for an additional five years for a small subset of EGCs with annual average revenue of less than $50 million and less than $700 million in public float.”

Broc Romanek