SEC Approves Final Rules to Remove the Ban on General Solicitation and Advertising for Certain Private Placements and to Disqualify Bad Actors from Private Placements Under Rule 506 and Proposes Other Related Rule Amendments -

On July 10, 2013, the SEC adopted final rules to implement the JOBS Act mandate to eliminate the prohibition against the use of general solicitation and general advertising in private offerings made in reliance on Rule 506 of Regulation D or Rule 144A under the Securities Act. In connection with the final rules, the SEC issued proposed rules that would, if adopted, enhance its ability to evaluate market practices in Rule 506 offerings and provide, as needed, additional investor protections as the Rule 506 market evolves. Finally, the SEC also adopted rules to disqualify “bad actors” from Rule 506 offerings, as required by the Dodd-Frank Act.

The final and proposed rules have the potential to transform the private placement market. The rules attempt to strike a balance between facilitating capital formation and protecting investors, while implementing Congressional mandates. Based on the number and tenor of the public comments received during the rulemaking process and comments made during the SEC's open meeting on July 10, 2013, the debate over whether these measures will indeed strike the correct balance is sure to continue.