Client Alert

The Securities and Exchange Commission recently proposed rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted in reliance on Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933, as directed by the Jumpstart Our Business Startups Act. The proposed rules are intended to create increased opportunities for private companies, including private funds, to reach a larger and broader potential investor audience. Comments on the proposed rules are due by October 5, 2012.

If adopted, the proposed rules would:

  • permit the use of general solicitation and advertising to offer and sell securities under Rule 506, provided that (i) the issuer takes reasonable steps to verify that the purchasers of the securities are accredited investors, (ii) all purchasers are in fact accredited investors at the time of sale (or the issuer reasonably believes they are), and
    (iii) all other applicable existing terms and conditions of Regulation D are satisfied; and

  • allow securities sold pursuant to Rule 144A to be offered to persons other than qualified institutional buyers, including by means of general solicitation and advertising, provided that the securities are sold only to persons that the seller and any person acting on behalf of the seller reasonably believe are QIBs. 

Relevant Documents

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