The SEC finally voted to approve Rule 506(c) which effectively allows companies, hedge funds and other asset managers to advertise private securities offerings to accredited investors. This lifts a 80 year ban on general solicitation, due to the changes mandated by Congress in Title II of the JOBS Act, which passed in April 2012.
Warning: These rules will not go into effect until 60 days after they are published in the Federal Register.
The lifting of the general solicitation ban is just one of the first major steps in implementing rules mandated by Congress in the JOBS Act.
In an attempt to mollify those who think general advertising will lead to increase securities fraud, the SEC approved two other items this morning.
The first is the “bad actor” rule required by the 2010 Dodd-Frank Act, which disqualifies securities offerings involving “felons and other ‘bad actors.’”
The second ruling concerns Form D. Currently issuers must file with the SEC within 15 days after the first sale of securities. The proposed rules will require issuers utilizing Rule 506(c) for an offering to file a Form D 15 days in advance of advertising (not the sale of securities), and to provide more information about their company. This ruling is tied to the lifting of the general solicitation; because it is only proposed and may change following the 60-day comment period, which could push back the lifting of the general solicitation ban, adding further delays.
PPMSOURCE will keep you up-to-date and let you know when you can start using 506(c) to advertise your offering.
By: Elizabeth Brandon-Brown, Esq.
for PPMSOURCE, LLC