As required by the JOBS Act, the U.S. Securities and Exchange Commission has proposed rules to eliminate the prohibition on general solicitation and general advertising in private placements exempt from registration by Rule 506 under the Securities Act of 1933, as long as all purchasers of the securities are accredited investors. The elimination of the prohibition on general solicitation and general advertising will result in issuers being able to attract a wider variety of investors with less cost. Increased competition for quality investments could also improve terms for issuers, reducing their cost of capital.
The firm’s client alert regarding the SEC’s proposal may be accessed here.
In follow-up to yesterday’s post, the SEC announced that it will delay consideration of rules to eliminate the prohibition against general solicitation and general advertising in non-public securities offerings from today until August 29, 2012.
In this year’s Jumpstarting Our Business Startups (JOBS) Act, Congress eliminated the prohibition on general solicitation or advertising in connection with private offerings of securities and required the SEC to adopt and implement Congress’s mandate via rulemaking within 90 days of the effective date of the Act. To meet this deadline, the SEC would have needed to issue an interim rule, which would have had an immediate impact on how capital raisers communicate with investors and the broader public.
Continue reading SEC Opts to Take Its Time and Try To Get The Rule Right