On March 27, 2012, Congress passed the Jumpstart Our Business Startups Act (the JOBS Act), which President Obama has said he will sign into law. The JOBS Act includes significant reforms intended to facilitate capital raising by small businesses and has profound ramifications for private companies, broker-dealers (including underwriters, placement agents and research analysts), private investment funds (including hedge funds, venture capital funds and private equity funds), the ongoing activities of existing public companies, and "emerging growth companies," a newly created category. It represents the most comprehensive reform to the laws governing capital raising since the Securities and Exchange Commission (SEC) issued its 2005 Securities Offering Reform.

Elimination of the Ban on General Solicitation and Advertising

The JOBS Act significantly expands the options issuers (including both operating companies and investment funds) have to raise capital without registering their securities under the Securities Act of 1933 (the Securities Act). Such issuers can now engage in general solicitation and make use of general advertisements when selling to accredited investors under Regulation D, so long as they take "reasonable steps" to ensure that all purchasers are accredited investors. They can also engage in general solicitation and make use of general advertisements when selling to qualified institutional buyers under Rule 144A, so long as they take reasonable steps to ensure that all purchasers are qualified institutional buyers. This fundamental change in law means that a private operating company or investment fund can use print, broadcast or outdoor advertisements, Internet advertisements, websites without password protection and other forms of communication to market Regulation D offerings, so long as all investors who actually purchase securities in the offering are accredited investors.