Privately held small businesses may soon face one less obstacle when it comes to finding potential sources of capital. Currently, capital raising efforts for these businesses, and anyone acting on their behalf, are constrained by a prohibition under the Securities Act of 1933 (Securities Act) on general solicitation and general advertising for all private offerings. But in recent months, the House of Representatives and a new advisory committee to the Securities Exchange Commission (SEC) have proposed that for most private offerings this prohibition should no longer apply. A removal of such general solicitation restrictions would clearly facilitate the raising of earlystage capital “on-line.”

In early November of 2011, the House passed the Access to Capital for Job Creators Act (H.R. 2940) by a large and bi-partisan majority of 413-11. If the bill becomes law, the SEC would be required within 90 days to revise Rule 506 of Regulation D to permit general solicitation and general advertising for a private offering, as long as all purchasers are accredited investors. 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. Immediately after H.R. 2940 passed, an identical version (S. 1831) was introduced in the Senate by Senator John Thune, but has not been voted upon yet.

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