On August 29, 2012 the Securities and Exchange Commission (“Commission”) proposed a rule that will allow for general solicitation in private securities offerings conducted pursuant to Rule 506 under the Securities Act.

The proposed rule was directed by Congress in the JOBS Act enacted on April 5, 2012. The JOBS Act directs the Commission to amend Rule 506 to permit general solicitation or general advertising in offerings made under Rule 506, provided that all purchasers of the securities are accredited investors. Some commentators have worried that eliminating the prohibition on general solicitation will create opportunities for fraud. The JOBS Act attempts to alleviate this concern by directing the Commission to require issuers making offers and sales pursuant to Rule 506 to take “reasonable steps” to verify that purchasers of the securities are accredited investors.

Please see full update below for more information.