On August 29, 2012, the Securities and Exchange Commission (“SEC” or the “Commission”) proposed rules to implement section 201 of the Jumpstart Our Business Startups Act (the “JOBS Act”).1 The JOBS Act directed the SEC to eliminate the ban on general solicitation and advertising in offerings made under Rule 506 of Regulation D (“Reg D”)2 under the Securities Act of 1933 (the “Securities Act”), provided that all purchasers of the securities are accredited investors. The JOBS Act also prescribed new rules requiring issuers using general solicitation or advertising in private offers to take reasonable steps to verify that purchasers of the securities are accredited investors, using methods determined by the Commission. The JOBS Act similarly directed the Commission to revise Rule 144A3 under the Securities Act to permit unregistered offers of securities to persons other than qualified institutional buyers (“QIBs”),4 including by means of general solicitation or general advertising, provided that the securities are actually sold only to persons that the seller, and any person acting on behalf of the seller, reasonably believes are QIBs.
The SEC emphasizes in the Release that it sought to propose only those amendments that are, in the Commission’s view, necessary to implement the mandate in section 201(a) of the JOBS Act, given the tight time frame for compliance. It acknowledged, without currently responding to, public comments suggesting further amendment to the definition of accredited investor, to Form D filing requirements and contents, and to rules governing the content and manner of advertising and solicitations used in offerings conducted under amended Rule 506, particularly with respect to privately offered funds.
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