Rule 163B lets any issuer — not only emerging growth companies — communicate with qualified institutional buyers and institutional accredited investors to gauge interest before or after filing a registration statement. No filing or legend is required, but the communications are still offers subject to anti-fraud rules and Section 12(a)(2), and Regulation FD still applies to reporting companies.
Key takeaways
- Adopted in 2019, Rule 163B extends test-the-waters to all issuers.
- Only QIBs and institutional accredited investors (or those reasonably believed to be) may be contacted.
- No filing or legend requirement — but anti-fraud and Section 12(a)(2) liability apply.
- Reporting companies must still manage Regulation FD.
What Rule 163B allows
In September 2019 the SEC adopted Rule 163B, extending to all issuers a test-the-waters accommodation that had previously been limited to emerging growth companies [1][2]. Under the rule, an issuer, or a person authorized to act on its behalf such as an underwriter, may engage in oral or written communications with potential investors that are, or are reasonably believed to be, qualified institutional buyers (QIBs) or institutional accredited investors (IAIs), before or after filing a registration statement [3].
The rule does not prescribe how an issuer establishes that reasonable belief, and it does not require test-the-waters communications to be filed or to carry legends [3].
What still applies
Rule 163B communications are offers, exempt only from certain Section 5 restrictions [3]. Statements must not contain material misstatements or omissions, the anti-fraud provisions apply, and the communications carry Section 12(a)(2) liability [3]. For reporting companies, selectively sharing material nonpublic information can trigger Regulation FD unless an exception, such as a confidentiality agreement, applies [3].
Why it matters for roadshows
Testing the waters lets an issuer learn — before committing to a costly registered offering — whether institutions have appetite at the expected size and valuation, and adjust structure accordingly. Institutional roadshows and curated investor events are natural venues for those conversations, provided attendance is limited to QIBs and IAIs when 163B is the basis, and materials are prepared with the same care as an offering document.
For private placements, the equivalent marketing question is governed by Regulation D instead: Rule 506(c) permits general solicitation to an all-accredited, verified purchaser group, while Rule 506(b) does not.
Frequently asked questions
- Who can rely on Rule 163B?
- Any issuer, including non-emerging-growth companies, registered investment companies, and business development companies, and persons authorized to act on the issuer's behalf, such as underwriters.
- Do Rule 163B communications need to be filed with the SEC?
- No. Rule 163B does not require filing or legends, but the communications are offers subject to anti-fraud provisions and Section 12(a)(2) liability.
- Can retail investors be contacted under Rule 163B?
- No. Communications must be limited to QIBs and institutional accredited investors, or those reasonably believed to be.
Sources
- [1]U.S. Securities and Exchange Commission, “SEC Adopts New Rule to Allow All Issuers to "Test-the-Waters" (Press Release 2019-188),” September 26, 2019.
- [2]U.S. Securities and Exchange Commission, “Solicitations of Interest Prior to a Registered Public Offering (Release No. 33-10699),” 2019.
- [3]U.S. Securities and Exchange Commission, “Solicitations of Interest Prior to a Registered Public Offering — Small Entity Compliance Guide,” Accessed November 2026.
How Baird Augustine helps
This article is for informational purposes only and is not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Regulatory proposals described here may change before adoption. Securities offered through Umergence LLC, Member FINRA/SIPC.
