The US Securities and Exchange Commission has adopted final rules eliminating the prohibition on general solicitation and general advertising in Rule 144A and Rule 506 offerings. On 10 July 2013, in order to implement Section 201(a) of the Jumpstart Our Business Startups Act (the “JOBS Act”), the US Securities and Exchange Commission (the “SEC”) adopted final rules to eliminate the prohibition against general solicitation and general advertising (together, “general solicitation”) for certain offerings to “accredited investors” (“accredited investors”) conducted under Rule 506 of Regulation D under the US Securities Act of 1933 (the “Securities Act”) and offerings to “qualified institutional buyers” (“QIBs”) under Rule 144A under the Securities Act.
The SEC also adopted final rules to disqualify offerings from relying on Rule 506 if they involve certain “bad actors”. These rule changes will be effective 60 days after their respective publication in the US Federal Register. Until the effective date of the new rules, the SEC’s existing rules and regulations for Rule 506 and Rule 144A offerings remain unchanged.
The SEC has also proposed further amendments to Regulation D designed to increase the SEC’s ability to monitor developments in Rule 506 offerings following the elimination of the prohibition on general solicitation. If adopted, these proposed amendments would require issuers to, among other things, file a Form D with the SEC 15 days before engaging in general solicitation, submit written general solicitation materials on a non-public basis to the SEC and publicly disclose additional information about Rule 506 offerings that involve general solicitation (e.g., the types of general solicitation employed and the methods used to verify the accredited investor status of purchasers). The proposed amendments will be open for public comment for 60 days from their publication in the US Federal Register.
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