[author: Ethan Mark]
Pursuant to Section 201(a)(2) of the JOBS Act, the SEC recently proposed rules to eliminate the prohibition against general solicitation and general advertising in under Rule 144A offerings. Under the proposed rules, securities sold pursuant to Rule 144A could be offered to persons other than QIBs, including by means of general solicitation, provided that the securities are sold only to persons whom the seller and any person acting on behalf of the seller reasonably believe is a QIB.
In the proposed amendments, the SEC proposes to eliminate the references to “offer” and “offeree” in Rule 144A(d)(1). Accordingly, as amended, the rule would require only that the securities are sold to a QIB or to a purchaser that the seller and any person acting on behalf of the seller reasonably believe is a QIB. Under this proposed amendment, resales of securities pursuant to Rule 144A could be conducted using general solicitation, so long as the purchasers are limited in this manner.
Rule 144A currently provides a list of non-exclusive methods of establishing a prospective purchaser’s ownership and discretionary investments of securities for purposes of determining whether the prospective purchaser is a QIB. The SEC is requesting comments regarding how this non-exclusive list has worked in practice; whether issuers favor a non-exclusive list and whether the non-exclusive list has resulted in an assumption or practice that the listed methods are “de facto” requirements.
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