US SEC lifts general solicitation ban

The US Securities and Exchange Commission has adopted much-anticipated amendments to its regulations on private offerings under Rule 506 of Regulation D of the Securities Act of 1933, as amended, that lift the more-than-80-year ban on general solicitation and advertising for certain purchasers, as mandated by Section 201(a) of the Jumpstart Our Business Startups Act (popularly called the JOBS Act).

Once effective, these amendments will permit issuers to use advertising and other forms of mass communication to sell securities solely to ‘accredited investors’ under Rule 506 of Regulation D. However, these amendments also include several new requirements and procedures. You will want to be aware of these changes before you launch a general solicitation campaign.

In remarks and in the adopting release, the SEC commissioners expressed concern over the potential for abuse and fraud under these new rules and cautioned issuers that the SEC would be closely monitoring general solicitation and advertising activities. SEC chairman Mary Jo White said: ‘As we fulfil our mission to facilitate capital formation and maintain fair and efficient markets, the Commission must always focus on strong investor protections… We want this new market and the private markets in general to thrive in a safe and efficient manner, and these rules we adopt and propose are designed to facilitate that objective’…

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