SEC Proposes Rules to Implement JOBS Act Provision About General Solicitation and Advertising in Securities Offerings

Yesterday, the SEC proposed rules to eliminate the prohibition against general solicitation and advertising in private offerings under Securities Act Regulation D Rule 506 and Rule 144A. The proposed rules do not develop in any meaningful way the provisions contemplated in the JOBS Act. The SEC will seek public comment on the proposed rules for 30 days.

Under proposed rules for Rule 506 offerings, companies issuing securities would be permitted to use general solicitation and advertising to offer securities if they take reasonable steps to verify that the purchasers of the securities are accredited investors.

Under the proposed rules for Rule 144A offerings, securities may be offered to persons other than Qualified Institutional Buyers, including by means of general solicitation, if the securities are sold only to persons whom the seller reasonably believes is a QIB.

We will have to see how final rules may provide more, if any, specificity around verification methods; the proposing release notes that any "specific" methods would be "impractical."
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