On August 29, 2012, the SEC released proposed amendments that, if enacted, would remove the ban on general solicitation and general advertising in connection with private placements under Rule 506 of Regulation D and Rule 144A under the Securities Act. These new amendments would satisfy the requirement contained in Section 201(a) of the Jumpstart Our Business Startups Act, or the “JOBS Act,” that the SEC remove these prohibitions. We summarize some of the highlights and potential implications of this proposal below.
The Proposed Changes
- Offers and sales conducted pursuant to a new clause (c) of Rule 506 of Regulation D would not have to comply with the ban on general solicitations and general advertising under Rule 502(c), provided that all of the purchasers of the offered securities are Accredited Investors,2 or “AIs,” and the issuer takes “reasonable steps to verify” that purchasers are Accredited Investors. According to the release: “[W]hether the steps taken are ‘reasonable’ would be an objective determination, based on the particular facts and circumstances of each transaction.”
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