The Securities and Exchange Commission has 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, one of the exemptions widely used by U.S. and foreign issuers to raise capital without registering their securities offerings. In 2011, the estimated amount of capital raised in these types of exempt offerings was just over $1 trillion, according to SEC data. 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.
