On September 5, 2012, I discussed the provisions of Title II of the Jumpstart Our Business Startups Act (JOBS Act), signed into law by President Obama on April 5, 2012, and the proposed rules that the Securities and Exchange Commission (SEC) issued on August 29, 2012 to implement Title II, each of which would eliminate the prohibition against general solicitation and general advertising in the offer of securities under Rule 506 of Regulation D of the Securities Act and Rule 144A of the Securities Act.

In July 2012, the SEC announced that it would miss the July 4, 2012 deadline for implementing Title II of the JOBS Act and would not be issuing interim final rules at such time. Because of the delay, the SEC instead issued proposed rules on August 29, 2012, and sought public comments on such rules over the following 30-day period. Since the closing of the public comment period on October 5, 2012, the SEC has been reviewing the comments and will determine whether to adopt the proposed rules in their current form or with one or more revisions. The question remains: after considerable delay, when will final rules be adopted?

On December 3, 2012, the SEC said that its decision to delay implementing the general solicitation and advertising rules in July 2012 was made in line with its overall effort to protect investors in response to allegations from Rep. Patrick McHenry (R-NC) and others that SEC Chairwoman Mary Shapiro was simply trying to protect her legacy and avoid being labeled as anti-investor, and that she succumbed to pressure from special interest groups. The SEC further stated “Chairman Shapiro strongly believes that protecting investors should be the desired legacy of all SEC chairmen. It is part of our mission, and she believes it should inform our decisions at all times. She also believes that the agency should not consider investors—or the groups that represent them—to be special interests.”

On November 26, 2012, Chairwoman Shapiro announced that she would be stepping down as head of the SEC, effective December 14, 2012. President Obama subsequently named Elisse B. Walter, a Democrat who was appointed an SEC commissioner in 2008, the new chair. It is unclear if this regime change at the top of the SEC will create an effort to expedite implementing Title II of the JOBS Act as well as other provisions thereof (including the crowdfunding provisions). There have been no further updates from the SEC, despite the fact that the public comment period for the proposed rules on general solicitation and advertising expired more than two months ago. It is anticipated that further delays are on the horizon, and it is unknown what priorities the new chair and the yet un-nominated fifth commissioner will have. Until the new appointment, the commission is politically split between the parties. Stay tuned…

Until final rules are adopted, companies are reminded that the use of general solicitation and general advertising to offer securities under Rule 506 and Rule 144A is prohibited.

Please refer to Title II of the JOBS Act and the SEC’s August 29 proposed rule release for more information on these amendments to the general solicitation and general advertising provisions of Rule 506 and Rule 144A.