The Hedge Fund Association—which represents investors, hedge funds and service providers— has asked the Securities and Exchange Commission to specifically tell private fund managers what they will need to do to safely verify whether investors are accredited once a new rule allowing solicitation and advertising of private funds is finalized.
Last month, the SEC approved a proposed rule to eliminate the current prohibition against general solicitation and advertising for private securities offerings. The proposed exemptions, mandated by the JOBS Act, focus on offerings conducted under Rule 506 of Regulation D. The elimination of the prohibition, as well as a similar one contained in Rule 144A of the Securities Act, permits general solicitation as long as issuers “take reasonable steps to verify” that all of the purchasers are accredited investors.
