S-4690-119
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
Sponsored by Ted Budd (R-NC)
What it does
This bill would amend the Securities Act of 1933 to extend two IPO-preparation tools — "testing the waters" communications and confidential draft registration submissions — to all companies seeking to go public, not just "emerging growth companies" (smaller firms with under ~$1.07 billion in annual revenue). It would allow any company to privately gauge investor interest before a public offering and to submit draft registration documents to the SEC for confidential review. All confidential submissions would still be required to become public at least 15 days before a road show or the requested effective date of the registration statement.
Who benefits
Large and mid-size companies planning an IPO that previously could not use these tools. Investment banks and underwriters who advise companies going public. Institutional investors who participate in pre-IPO "testing the waters" conversations. Law firms and financial advisors specializing in securities offerings. Domestic stock exchanges (NYSE, Nasdaq) that compete with foreign exchanges for listings. Indirectly, retail investors who may gain access to a broader range of newly public companies.
Who is hurt
Retail investors and the general public who currently have earlier access to registration information for large companies, since confidential submissions delay public disclosure. Market transparency advocates who argue that earlier public filings allow more time for scrutiny of large, systemically significant offerings. Competitors of companies going public who currently benefit from earlier disclosure of a rival's financial condition and business plans. Short sellers and financial analysts who rely on early public filings to assess market conditions.
Supporters argue
Supporters argue that the existing two-tier system is arbitrary — the confidential review and investor-gauging tools available to smaller "emerging growth companies" since the JOBS Act of 2012 have proven effective at reducing IPO risk and cost without harming investors, and there is no principled reason to deny the same tools to larger firms. They contend that the U.S. has lost ground to foreign exchanges partly because the IPO process is more burdensome here, and that expanding these tools would encourage more companies to list domestically, deepening U.S. capital markets and ultimately benefiting a broader pool of investors.
Opponents argue
Opponents argue that large companies — unlike the small emerging growth companies for whom these tools were designed — have greater market impact, and that delaying public disclosure of their registration materials reduces the time available for regulators, journalists, and the public to scrutinize potentially significant offerings before they proceed. They contend that the 15-day public disclosure window before a road show is insufficient for complex, large-company filings, and that the bill prioritizes issuer convenience over the investor-protection principles that underlie mandatory disclosure requirements in the Securities Act of 1933.
Constitutional context
Congress has broad authority to regulate securities markets under the Commerce Clause (Art. I, §8, cl. 3), as securities transactions are quintessentially interstate commercial activity. This bill modifies existing statutory text rather than delegating new sweeping authority to the SEC, though it does preserve SEC rulemaking authority subject to a pre-rulemaking congressional report requirement — a procedural check that may be tested under the Necessary and Proper Clause if challenged as an unconstitutional legislative veto or reporting condition.
Checks and balances
Congress expands issuer rights by statute; the SEC retains rulemaking authority to impose additional conditions on non-emerging-growth-company issuers, but must submit findings to Congress before doing so — adding a legislative oversight step that slightly constrains agency discretion.
Historical precedent
The JOBS Act of 2012 first introduced "testing the waters" and confidential draft registration for emerging growth companies; subsequent SEC rulemaking in 2019 administratively extended confidential review to all issuers, though this bill would codify and expand those tools into statute.