When the Jumpstart Our Business Startups Act, known as the JOBS Act, was enacted last year, a key piece was eliminating solicitation and advertising restrictions on hedge funds and private securities offerings. That gift, however, may come with the cost of greater scrutiny on how issuers verify that the investors they are targeting are sophisticated enough to qualify.
A proposed, but not yet finalized, rule by the Securities and Exchange Commission makes it clear that an issuer soliciting new investors through a publicly available Website, social media, or newspaper ads and billboards would be obligated to take greater measures to verify investor status.
