The Jumpstart Our Business Startups Act (the “JOBS Act”) included a measure directing the Securities and Exchange Commission (the “SEC” or “Commission”) to relax the prohibition against general solicitation and general advertising pursuant to Rule 502(c) (“Rule 502(c)”) under Regulation D (“Reg D”) of the Securities Act of 1933, as amended (the “Securities Act”), for certain Rule 506 offerings. In July 2013, the SEC adopted final rules establishing that an issuer relying on Rule 506(c) may engage in general solicitation “provided that the sales are limited to accredited investors and an issuer takes reasonable steps to verify that all purchasers of the securities are accredited investors.”

Section 4(a)(2) of the Securities Act (“Section 4(a)(2)”) provides an exemption from the registration requirements under Section 5 of the Securities Act for a transaction undertaken by an issuer that does not involve any public offering. An issuer may rely on Rule 506(b) under the Securities Act and/or Section 4(a)(2) if it does not use general solicitation. The JOBS Act did not address the meaning of “general solicitation” under the Securities Act. However, since the new rules required issuers and other market participants to consider whether in connection with a proposed offering they would rely on Section 4(a)(2)/Rule 506(b) or on the new Rule 506(c), renewed attention was placed on the types of communications that may constitute a “general solicitation.”