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General Securities Law

Don’t Go Advertising Your Funding Needs Just Yet

Anyone who has been watching the regulatory environment for securities and fund raising over the last few years or even months is familiar with the changes coming from the JOBS Act.  On July 10, 2013, the SEC announced that they will implement rules following the JOBS Act requirement that the ban on general solicitation and advertising in private placements be lifted in certain circumstances. Although that sounds like good news, this was what the JOBS Act was intended to do when it was passed and the SEC is just now starting to implement rules based upon existing law.  The process is that the SEC proposes the rules to implement the provisions of the JOBS Act.  There is a public comment period and the rules go into effect 60 days after being published in the Federal Register.   This means the proposed rules are still not yet valid until that time frame has passed. The new rules require a Form D to be filed with the SEC 15 days prior to any general solicitation and materials about the proposed offering need to be provided to the SEC. Just like with crowdfunding, don’t listen to the hype and think that because the JOBS Act passed, people can start relying on crowdfunding exemptions.  The SEC has to fully implement the rules and procedures first. Here is the SEC Fact Sheet on the July 10th, 2013 proposed new rules:   July 10, 2013 Background Current Offering Process Companies seeking to raise capital through the sale of securities must either register the securities offering with the SEC or rely on an exemption from registration. Most of the exemptions from registration prohibit companies from engaging in general solicitation or general advertising – that is, advertising in newspapers or on the Internet among other things – in connection with securities offerings. Rule 506 of Regulation D is the most widelyused exemption from registration. In an offering that qualifies for the Rule 506 exemption, an issuer may raise an unlimited amount of capital from an unlimited number of “accredited investors” and up to 35 nonaccredited investors. Under SEC rules, accredited investors are individuals who meet certain minimum income or net worth levels, or certain institutions such as trusts, corporations, or charitable organizations that meet certain minimum asset levels. JOBS Act In April 2012, Congress passed the Jumpstart Our Business Startups Act (JOBS Act). Section 201(a)(1) of the JOBS...

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