Bradley & Riley PC

There is a new post which touches on this topic that can be found here.

On July 10, 2013, the SEC at last approved rules to implement a JOBS Act requirement to lift the ban on general solicitation or general advertising of certain private securities offerings for business start-ups and private funds. In an offering that qualifies for the Rule 506 exemption from registration under the Securities Act of 1933 (the "Securities Act"), an issuer may raise an unlimited amount of capital from an unlimited number of "accredited investors" and up to 35 non-accredited investors. "Accredited investors" are individuals who meet certain minimum income or net worth levels, or certain institutions such as trusts, corporations or charitable organizations that meet certain minimum asset levels. The final rule, implementing a key provision of the JOBS Act passed last year, permits issuers to use general solicitation and general advertising to offer their securities under Rule 506, provided that the issuer takes reasonable steps to verify that the investors are accredited investors.

In determining the accredited investor status of a prospective purchaser, an issuer is required to consider the facts and circumstances of each purchaser and the transaction. The rule provides a non-exclusive list of methods that issuers may use to satisfy the verification requirement for individual investors.

In another change from current practice, the rule requires issuers to file an advance notice of sale 15 days before and at the conclusion of an offering. Currently, an issuer—such as a company or a fund—selling securities using Rule 506 is required to file a Form D no later than 15 calendar days after the first sale of securities in an offering. That form is a type of notice that provides information about the issuer and the securities offering.

This change is not yet effective. The rule amendments become effective 60 days after publication in the Federal Register. The rule proposal will undergo a 60-day public comment period following its publication in the Federal Register.

If you have any questions regarding changes in SEC rules, please contact Bill McCartan.

Categories: Business Law

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