In a final rule approved yesterday, the Securities and Exchange Commission (SEC) amended Rule 506 of Regulation D to permit issuers utilizing the exemption from registration to engage in general solicitation and general advertising so long as all purchasers are accredited investors (or reasonably believed to be accredited) and the issuer has taken reasonable steps to verify accredited investor status. The final rule amendments allowing for general solicitation and advertising will be effective 60 days following publication in the Federal Register, which is likely to occur within three to ten days from today.
However, the impending elimination of the longstanding prohibition on general solicitation and advertising in Rule 506 offerings has caused many commentators and some of the SEC’s commissioners to express concern that investors will no longer be sufficiently protected in such offerings. Therefore, in conjunction with yesterday’s final rule, the SEC proposed additional rules that, if approved, would subject issuers that engage in general solicitation and advertising to additional disclosure requirements discussed below, which may discourage the use of general solicitation by some issuers.
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