Dawn of a Brave New World! Advertising in "private offerings" under new SEC Rule 506(c), but no "bad actors"


Exempt securities offerings are nearing the dawn of what promises to be a truly Brave New World: Beginning September 23, 2013, new SEC Rule 506(c) will allow advertising and general solicitation in certain “private” securities offerings.  In addition to existing Regulation D requirements, the new Rule 506(c) exemption is subject to three important new compliance provisos: 

  • All purchasers must be “accredited investors”
  • The issuer must take “reasonable steps to verify” accredited investor status, and
  • No “bad actors” as described under new SEC Rule 506(d) may be involved
The “bad actor” prohibitions of new Rule 506(d) apply to all Rule 506 transactions – those relying on new Rule 506(c) and also those relying on "old" Rule 506(b) (i.e., private offerings made without advertising).  The bad actor provisions of Rule 506(d) also are effective on September 23, 2013.
How will these new rules impact the choice and structure of exempt offerings?  
To assist securities professionals, Stan Keller (Edwards Wildman, Boston), Jean Harris (Greenberg Traurig, Phoenix) and I recently updated our Alternatives to Registration Chart, appearing in the most recent paper edition of The Corporate Counsel (Executive Press, May/June, August 1, 2013).  Our update includes changes from new Rules 506(c) and 506(d). Stan, Jean and I are pleased to have published versions of The Chart for more than 20 years.
If you are not a securities lawyer, rather than stop reading now, please take a moment and pass along this email to your partners or colleagues who are corporate and securities transactions attorneys.  Download your copy of the Alternatives to Registration Chart, along with printing instructions.
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