Today, the Securities and Exchange Commission adopted amendments to Rule 506 of Regulation D and to Rule 144A under the Securities Act of 1933 that eliminate the ban on “general solicitation” and “general advertising” of private securities offerings conducted under those rules and significantly liberalize the restrictions on publicity in connection with certain private offerings. The rule changes were mandated by the Jumpstart Our Business Startups Act (“JOBS Act”) and will become effective 60 days following their publication in the Federal Register.
Under amended Rule 506(c), an issuer may utilize general solicitation or advertising in connection with a Rule 506 offering if:
- at the time of the sale of the securities, all of the purchasers are, or the issuer reasonably believes them to be, accredited investors;
- the issuer takes “reasonable steps” to verify that the purchasers are accredited investors; and
- all of the terms and conditions of Rule 501 and Rules 502(a) and 502(d) of Regulation D are satisfied.
Similarly, the amendments to Rule 144A provide that securities sold pursuant to Rule 144A may be offered to persons other than QIBs, including by means of general solicitation, provided that the securities are sold only to persons that the seller and any person acting on behalf of the seller reasonably believe are QIBs.
Once the final rules are published by the SEC, we will circulate a more detailed memorandum.