After missing several earlier deadlines, the Securities and Exchange Commission has proposed its first set of rules implementing the provisions of the Jumpstart Our Business Startups Act (JOBS Act). The proposed rules remove the long-standing prohibition against general solicitation and advertising with respect to certain securities offerings under Rule 506 of Regulation D of the Securities Act.
As we highlighted on this business law blog in recent weeks, New York and New Jersey startups looking to raise funds through the sale of securities must generally either register the securities offering with the SEC or rely on an exemption from securities registration.
As proposed by the SEC, the rules would permit companies to use general solicitation and general advertising to offer securities pursuant to a Rule 506 offering, provided that all purchasers of the securities are accredited investors and the issuer takes reasonable steps to verify that the purchasers of the securities are accredited investors, at the time of the sale of the securities.
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