Offerings of private investment fund interests routinely rely on Rule 506 of the Regulation D “safe harbor” from registration under the Securities Act of 1933. Historically, such offerings have been strictly required to avoid any “general solicitation” or “general advertising.” On July 10, 2013, the Securities and Exchange Commission amended Regulation D to provide an additional option to allow general solicitation in certain Regulation D offerings. 1 The SEC also added a disqualification rule that amended Regulation D to disqualify offerings involving certain felons and other “bad actors” (broadly defined) from relying on Regulation D. 2 The amendments and new rules became effective September 23, 2013.

Repeal of General Solicitation Prohibition Section 4(a)(2) of the Securities Act provides an exemption from Securities Act registration for transactions by an issuer “not involving any public offering.” Regulation D under the Securities Act provides a nonexclusive “safe harbor” for compliance with Section 4(a)(2). Private funds most commonly rely on Regulation D and, accordingly, have been required to avoid any form of general solicitation...

Originally published in PREA Quarterly, Fall 2013.