As mandated by Section 201(a) of the Jumpstart Our Business Startups Act, on July 10, 2013, the Securities and Exchange Commission (the “SEC”) adopted final rules to permit advertising and other forms of “general solicitation” in private offerings made in reliance on Rule 506 of Regulation D of the Securities Act of 1933, so long as the purchasers in the offering are accredited investors. Notably, the final rules differ from the rules proposed on August 29, 2012 (as discussed in the September 4, 2012 Davis Polk Client Newsflash, SEC Issues Proposal to Eliminate General Solicitation Ban as Mandated by the JOBS Act) in that the final rules include a non-exclusive list of methods, in respect of natural person investors, to satisfy the requirement that an issuer that uses general solicitation in a Rule 506 offering take “reasonable steps” to verify that the purchasers of the securities are accredited investors. The final rules will go into effect 60 days after publication in the Federal Register.
In addition, the SEC proposed other amendments to Regulation D under the Securities Act that would, among other things, (1) require additional information on Form D, (2) require that additional Form D filings be made if general solicitation is used in a Rule 506 offering and (3) impose additional requirements – primarily disclosure-related – on private fund general solicitation materials, but that would stop short of applying the full mutual fund advertising regime to private funds. Significantly, the proposed rules would impose content requirements for offerings by private funds, including specific requirements for advertisements containing performance data.
For further discussion of the final rules and SEC’s proposed rules, please see the July 10, 2013 Davis Polk Client Newsflash, SEC Adopts Private Offering Reforms Mandated by JOBS Act.