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SEC Proposal Includes Broader Pre-IPO 'Test-the-Waters' Program

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The U.S. Securities and Exchange Commission is looking to dramatically expand companies’ ability to gauge interest from large investors before going ahead with initial public offerings.

The agency said Tuesday that it is seeking comment on a proposal to remove restrictions on firms using the “test-the-waters” program, which had been limited to companies with less than $1 billion in annual revenue since it was created in 2012 as a product of the Jumpstart Our Business Startups Act.

SEC Chairman Jay Clayton, a former Wall Street deals lawyer, has focused on ways to make going public more attractive and reverse the decline in IPOs.

Just after he took the job in 2017, the agency announced that it would let all companies confidentially file early documents for offerings, another benefit that had been previously limited to so-called emerging growth companies.

“Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings,” Clayton said in a statement.

The agency plans to take comment on the plan for 60 days after its publication in the Federal Register.

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