Rule 163B
Rule 163B is an SEC rule allowing issuers and persons authorized to act for them to test institutional investor interest in a contemplated registered securities offering before or after filing.
How it works
Rule 163B exempts qualifying oral and written communications from Securities Act Sections 5(b)(1) and 5(c). The permitted audience consists of Qualified Institutional Buyers and institutions that are Accredited Investors under the specified Rule 501 categories, or investors reasonably believed to meet those standards. Communications under Rule 163B remain statutory offers and are not required to be filed with the SEC under the rule. Reliance on Rule 163B is nonexclusive.
The issuer or an authorized person can communicate
Investment banks and other representatives can act on the issuer’s behalf when properly authorized.
Communications can be oral or written
The rule covers both formats and permits them before or after filing.
QIBs and institutional Accredited Investors are eligible
Natural-person Accredited Investors are not included merely because they meet an individual Accredited Investor category.
The communications are statutory offers
Rule 163B expressly says the communications are offers even though they receive exemptions from Sections 5(b)(1) and 5(c).
Worked example: no filing requirement under the rule
An issuer sends a written Testing-the-Waters deck to a limited QIB audience. Rule 163B itself does not require the communication to be filed with the SEC.
Other exemptions remain available
Attempted compliance with Rule 163B does not prevent reliance on another applicable exemption or exclusion.
Common mistakes
Treating Rule 163B as a public-solicitation rule; assuming communications are not offers; including individual Accredited Investors; and assuming the rule eliminates antifraud obligations.
Example
A public company considering a convertible-note offering authorizes its investment bank to contact institutional investors before filing. The bank speaks only with QIBs and institutional Accredited Investors under Rule 163B to assess demand.
Example
A public company considering a convertible-note offering authorizes its investment bank to contact institutional investors before filing. The bank speaks only with QIBs and institutional Accredited Investors under Rule 163B to assess demand.
Professional note
Rule 163B is broader than the older emerging-growth-company-only Testing-the-Waters regime, but its audience remains institutional. It is not a general pre-filing marketing exemption.
Related terms
- Accredited investor
An investor who meets SEC income or net worth thresholds and may access private offerings.
- Securities Act Section 5
Securities Act Section 5 is the core federal provision regulating offers, sales and prospectus use for securities that must be registered, unless an exemption or other exclusion applies.
- Testing the Waters
Testing the Waters is a securities-offering practice that allows eligible issuers or authorized persons to communicate with specified institutional investors to gauge interest in a contemplated registered offering before or after filing.
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