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SEC Proposes Rules Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and 144a Offerings Pursuant to Jobs Act

On August 24, 2012, the Securities and Exchange Commission ("SEC") proposed rules to eliminate the prohibition against general solicitation and general advertising in certain private securities offerings. This rulemaking measure implements Section 201(a) of the Jumpstart Our Business Startups Act ("JOBs Act").

According to the SEC, the proposed amendment to Rule 506 would require that the prohibition against general solicitation and general advertising contained in Rule 502(c) of Regulation D not apply to offers and sales made pursuant to Rule 506, provided that all purchasers are accredited investors. The issuer in a Rule 506 offering using general advertising and solicitation must take reasonable steps to verify that purchasers of the securities are accredited investors. The proposed amendment to Rule 144A(d)(i) would provide that securities may be offered pursuant to Rule 144A to persons other than qualified institutional buyers ("QIBs"), provided the securities are only sold to persons that the seller and any person acting on behalf of the seller reasonably believe are QIBs. Also, the SEC is amending Form D to add a check box to indicate whether an offering is being made pursuant to the proposed amendments to Rule 506 that would permit general solicitation.

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