Securities Regulation Daily Wrap Up, INITIAL PUBLIC OFFERINGS—Petitioner seeks to expand pre-IPO communications to retail investors, (Mar 31, 2026)
Organizations Mentioned:Airbnb
The Radivision CEO believes it is time to harmonize the IPO communications rules with those of Regulation Crowdfunding, Regulation A+, and Rule 506(c).
A new rulemaking petition asks the SEC to amend 1933 Act Rules 163B and 169 to harmonize IPO communication rules with those of Regulation Crowdfunding and Regulation A+ by extending retail test-the-waters provisions to IPOs. Petitioner Mona DeFrawi, CEO of Radivision, also asked that the agency immediately issue interpretive guidance confirming that the Commission’s existing policy judgments permitting retail solicitation in Regulation Crowdfunding, Regulation A+, and Rule 506(c) apply with equal force to IPOs.
DeFrawi supports SEC Chair Paul Atkins’s pro-IPO agenda and efforts to address the issuer-side barriers to IPOs of cost, complexity, and regulatory uncertainty. Complementary reforms for the investor side of IPOs are also needed, she said. The proposed reforms would address who gets to participate when companies go public and would alter the communication rules to support, rather than impede, retail investor access to IPOs, she argued.
She noted that the Commission has determined three times—in Regulation Crowdfunding, Regulation A+, and Rule 506(c)—that retail solicitation is consistent with investor protection. However, the rules surrounding traditional IPOs still prohibit communications to retail investors and limit test-the-waters efforts to qualified institutional buyers (QIBs) and institutional accredited investors (IAIs), she pointed out.
Structural barrier. According to DeFrawi, since 2012 emerging growth companies have represented 87 percent of all IPOs, with 68 percent using test-the-waters as a standard practice. This gives institutions early access to shape pricing and secure allocations while retail investors are entirely excluded from equivalent communications, she stated. “This exclusion is not an investor protection; it is a structural barrier that channels retail capital toward riskier alternatives,” she wrote.
In her view, incorporating retail participation in the pre-IPO and allocation stages will encourage an easier transition from private to public ownership and encourage more companies to execute earlier, smaller IPOs. She cited Reddit’s and Airbnb’s IPOs—the companies reserved 8% and 7% of shares, respectively, for users and hosts through directed share programs and then delivered sustained aftermarket returns—as evidence that consumer-based participation in IPOs can support a smoother transition to public ownership.
In addition, there is international precedent, she argued, as markets in the U.K., Hong Kong, and India mandate minimum retail allocation tranches of 10 percent to 35 percent and permit retail-directed communications during the IPO process, demonstrating that retail participation in IPOs can coexist with robust investor protection.
Requested rulemaking. DeFrawi asked the SEC to amend Rule 163B to expand the class of permitted test-the-waters recipients beyond QIBs and IAIs to include retail investors in connection with IPOs and other registered offerings.
Specifically, she asked the Commission to expand permitted test-the-waters recipients to include, at minimum, accredited investors under Rule 501 of Regulation D, with a pathway to broader retail access consistent with the education-based accreditation framework proposed in HR 3339. She asked that the amendments retain existing anti-fraud protections under 1933 Act Sections 12(a)(2), 17(a) and Rule 10b-5, which apply to all test-the-waters communications regardless of recipient class. She also requested that the SEC permit use of digital channels, including company websites, email, and social media, for retail test-the-waters communications, subject to recordkeeping and anti-fraud provisions.
DeFrawi’s also requested an amendment to Rule 169 to broaden the safe harbor for factual business communications during registered offerings. She asked that the amendment clarify that the safe harbor for “regularly released” factual information applies to digital and social media communications. The amendment should harmonize Rule 169 with the communication standards under Regulation A+ and Regulation Crowdfunding, she said.
RegulatoryActivity: IPOs CorporateFinance FormsFilings SecuritiesOfferings