The new SEC chairman has allowed companies to file confidentially prior to their IPOs. The rule will apply to even those companies who have yet to make their first year into the public reporting system.
In a development that is likely to have widespread impact, on Thursday, the U.S. Securities and Exchange Commission stated it was expanding the Jumpstart Our Business Startups (JOBS) Act, by allowing all public companies to file confidentially prior to their IPOs.
This new policy change, is the first by new SEC Chairman Joe Clayton, aimed at revitalizing the IPO market and help companies raise money more readily.
Currently, only publicly-traded companies who have an annual gross revenues equal to or less than $1 billion file confidential draft IPO paperwork with the SEC.
Known as the emerging growth companies (EGCs), they won this perk in 2012 thanks to the JOBS Act, which aims at lowering regulatory hurdles and give companies time to work out kinks with the SEC, before they unveil their IPO, and pitching to investors.
The new rule, which will be effective from July 10, will be available for IPOs as well as for those companies who have yet to make their first year into the public reporting system, said the SEC.
The SEC went on to add, the confidential review process, after the IPO, will reduces the potential for lengthy exposure to market fluctuations.
As per Clayton, the move has been designed to reverse the steep decline in IPOs and give individual investors more access to smaller, successful companies.