SEC Implements JOBS Act to Allow General Solicitation in Regulation D Offerings

by Baker Donelson

The U.S. Securities and Exchange Commission has issued regulations implementing the portion of the Jumpstart Our Business Startups Act (JOBS Act), enacted more than a year ago, allowing an issuer enjoying exemption from registration under Rule 506 of Regulation D under the Securities Act of 1933 to engage in general solicitation and advertising even in the United States. The SEC news release, with links to the regulations and related discussion, can be found at

Several aspects of the rule are worth particular note in the EB-5 context.

1. The rule will become effective 60 days from being published in the federal register, so around mid-September of this year, and general solicitations under Reg D before then are prohibited.

2. The new exemption is separate from the existing and continuing Reg D exemption that prohibits general solicitation but does not dictate specific methods for verifying accreditation status.

3. The rules do not require confirming that potential investors are accredited before soliciting them through general means—that would be nonsensical—instead they require verification of purchasers before they actually subscribe. This allows issuers of EB-5 investors, for instance, to put advertisements in U.S. and worldwide foreign language newspapers, on U.S. college campuses, etc., but it will not be sufficient for the subscriber’s parents to be accredited, which means that a gifted investor may need to be gifted a full $1 million even if the investment will be only $500,000.

4. The required methods to verify that a purchaser is accredited are as follows, the first two of which are not well calibrated for foreign purchasers:

  • Reviewing copies of any IRS form (W-2, 1099, K-1, 1040) that reports the income of the purchaser and obtaining a written representation from the purchaser that the purchaser will likely continue to earn the necessary income in the current year.
  • Reviewing assets statements (bank statements, brokerage statements, CDs, tax assessments, and independent appraisals) and liabilities statements (a consumer report from at least one of the nationwide consumer reporting agencies) and a written representation from the purchaser that all liabilities have been disclosed; or
  • Receiving a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or certified public accountant that such entity or person has taken reasonable steps to verify the purchaser's accredited status.

5. Issuers may still rely on Regulation S in lieu of the Regulation D safe harbor or may conduct concurrent offshore offerings in compliance with Regulation S and domestic offerings in compliance with Regulation D, Rule 506.

6. In a separate final rule, the SEC now bans any person that is a “bad actor” or who is affiliated with a bad actor from relying on the Regulation exemption. Acts that result in a person being deemed a bad actor include criminal convictions in connection with the purchase or sale of a security; court injunctions and restraining orders; CFTC and other financial regulators’ final orders; certain SEC disciplinary orders; SEC cease-and-deist and stop orders; suspension or expulsion from membership in a self-regulatory organization; and U.S. Postal Service false representation orders. Persons subject to this rule include the issuer directors, certain officers, general partners, and managing members of the issuer; 20-percent beneficial owners; promoters; investment managers and principals of pooled investment funds; persons compensated for soliciting investors; and the general partners, directors, officers, and managing members of any compensated solicitor. The disqualification applies only for events that occur after the effective date of the rule, but events occurring before that date must be disclosed to investors.

7. The SEC has also proposed a new rule that would change Form D filing requirements and certain disclosures made in offering memorandums. Adoption of the proposed rule will affect the disclosures that are made as well as the timing on filing the Form D prior to the sale of securities. Failure to timely file a Form D would result in an issuer becoming ineligible to rely on Regulation D for a year.

8. Allowing general solicitation under Reg D does not exempt anyone from the rules against misleading investors. Advertising naturally tends toward slick “puffing” language. The SEC probably will be looking for examples of overstatement to target for enforcement.

9. Allowing general solicitation under Reg D does not exempt issuers from prohibitions on using unregistered brokers. Many EB-5 issuers who have become accustomed to using foreign sales agents under Reg S exemption for purely foreign offerings may be tempted to use those same or other unregistered agents for general solicitation for investors who will not qualify under Reg S, and this is prohibited. For instance, if an issuer used a foreign agent who solicited prospective investors at a seminar outside the U.S., and one of the investors has a child in school or work in the U.S., that child may be tainted by the solicitation through an un-registered broker and should not be subscribed in the U.S. under the new Reg D channel otherwise allowing general solicitation. Likewise, an EB-5 issuer cannot use unregistered sales agents to make presentations to prospective investors on college campuses in the U.S. (although in limited circumstances the issuer’s own employees may be able to make the presentations).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.