Testing The Waters

An issuer that is considering or that has commenced an initial public offering ("IPO") should take special care to familiarize itself with the communications rules applicable to offerings.

First, an issuer should keep in mind that communications may be viewed as impermissible "gun jumping" activities designed to condition the market for the issuer's securities.  Second, the issuer should bear in mind that it remains liable for oral communications, and the Commission may require that certain information included in interviews, for example, be incorporated into an issuer's prospectus.  Communications should therefore be closely controlled and vetted by counsel.

Title I of the JOBS Act expands permissible communications during a securities offering by amending the Securities Act to permit an Emerging Growth Company ("EGC"), or any person authorized to act on behalf of an EGC to "test-the-waters" by engaging in oral or written communications with potential investors