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SEC to change IPO rules

The US Securities and Exchange Commission (SEC) is considering changing 70 years of securities laws, by allowing some IPO issuers to communicate with investors before an offering.

Companies launching an IPO in the US (and in Europe) have always been prevented from making any information on the company available before a listing save that which is in the prospectus. But the five SEC commissioners voted unanimously yesterday, Tuesday, to put out a discussion paper suggesting the scrapping of these rules.

Under the new rules two classes of issuers would be allowed to communicate freely with investors before an IPO: those that are raising $700 million or more through their IPO and those that have issued $1 billion or more of registered debt in the previous three years. Less seasoned issuers would have their rules relaxed but not removed completely.

The SEC's decision has been sparked by several recent IPOs in the US that have almost been derailed by members of the management talking to the press. One high profile example was the interview the two founders of Google gave to Playboy magazine before their IPO.

The SEC hopes that eliminating the rules will also minimise the differences between information available to institutional investors and retail investors because retail investors that are unable to access IPO roadshows will be able to talk to the company separately about the offering.

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