On July 10, the Securities and Exchange Commission (“SEC” or the “Commission”) approved final rules eliminating the decades-old prohibition against general solicitation and general advertising in all Rule 144A offerings and certainRegulation D transactions, as required by Title II of the JOBS Act. The new rules (the “General Solicitation Rules”) permit issuers, including start-ups, hedge funds, venture capital funds and private equity funds, to promote their offerings to the general public over the Internet, in traditional print and broadcast media, at public seminars, and through other means. For many issuers, the General Solicitation Rules will significantly impact the way that they raise capital.
The General Solicitation Rules eliminate the prohibition against general solicitation with respect to offers and sales ofsecurities conducted in reliance on new Rule 506(c) of Regulation D. Offerings made pursuant to Rule 506(c) must comply with the following conditions:
- All purchasers of the securities must be “accredited investors,” or the issuer must reasonably believe that all purchasers are accredited investors at the time of the sale of securities; and
- The issuer must take reasonable steps to verify that all purchasers of the offered securities are accredited investors.