A Major Change for Traditional Private Placements: General Solicitation and General Advertising Coming Soon


On April 5, 2012, President Obama signed into law the JOBS (Jumpstart Our Business Startups) Act (H.R. 3606), a package of bills aimed at easing the regulatory burdens on private and newly public companies during the capital-raising process. One part of the JOBS Act will remove the ban on general solicitation and general advertising for private offerings of securities under Rule 506 of Regulation D. In addition to easing regulation of these private offerings, removing the ban will likely facilitate the raising of early-stage capital online.

The Securities and Exchange Commission (SEC) will have 90 days to publish rules that will govern the new Rule 506. Rule 506, which contains no limits on offering size, is the most widely relied upon rule used for private offerings that are exempt from registration under Section 4(2) of the Securities Act of 1933.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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