SEC Adopts Long-Awaited Final Rule Removing Ban On General Solicitation In Rule 506 Private Offerings

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On July 10, 2013, the SEC adopted a “game changing” new final rule that lifts an 80-year-old ban on general solicitation and advertising for certain private securities offerings. Previously, investors conducting private offerings under Rule 506 of Regulation D were prohibited from engaging in general solicitation. From a practical standpoint, this meant that businesses were required to establish a preexisting relationship with potential investors before making a Rule 506 offering and were prohibited from advertising the offering through public means such as the internet, printed publications or radio.

Under the new rule, entrepreneurs will be able to use public advertising methods to reach a broader group of potential investors, making it easier to raise capital and grow their businesses. This marked change has the potential to revolutionize the way private securities offerings are conducted, and the rule becomes effective in approximately 60 days...

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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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