As directed under Title II of the JOBS Act, on Wednesday, July 10, the SEC approved long-awaited amendments to Rule 506 of Regulation D and Securities Act Rule 144A, allowing for general solicitation in private placements conducted thereunder. The final rules were adopted largely as proposed. Canadian issuers may utilize Rule 506 and Rule 144A to conduct private placements or debt or equity securities in the United States. In a step in the opposite direction, the SEC proposed several changes to Regulation D to help it assess developments in the private placement market in light of these new rules. As mandated under Section 926 of the Dodd-Frank Act, the SEC also adopted provisions that disqualify “bad actors” from using the Rule 506 exemption. For more information on these recent developments in the U.S. private placement regime, click here.
These rules are of particular significance to Canadian issuers that conduct public offerings in Canada with a simultaneous private placement in the United States. Practically speaking, Canadian issuers will now be able to freely disseminate press releases and other marketing materials issued in connection with a Canadian public offering if those issuers are relying on new Rule 506 and Rule 144A to sell those securities in the United States. Similarly, safeguarding the placement of marketing materials on websites accessible in the United States will no longer be required when conducting private placements under new Rule 506 and Rule 144A.
In addition, the SEC echoed its previous guidance on side-by-side offerings under Regulation S and either Rule 506 or Rule 144A. Regulation S provides a safe harbor for offers and sales of securities outside the United States. A requirement of Regulation S is that there be no directed selling efforts in the United States. In the adopting release, the SEC confirmed that offshore offerings that are conducted in compliance with Regulation S will not be integrated with domestic unregistered offerings that are conducted in compliance with new Rule 506 or Rule 144A. Thus, the use of general solicitation in compliance with new Rule 506 or Rule 144A will not necessarily prevent an issuer from conducting a concurrent offering in compliance with Regulation S.