The SEC recently posted on its website the Final Report from the 2012 SEC Government-Business Forum on Small Capital Formation, which was held in the fall of 2012. The report may be accessed at http://www.sec.gov/info/smallbus/sbforum.shtml. The report includes 35 recommendations from the Forum, with quite a number of these focused on crowdfunding. Setting aside those… Continue Reading
Category Archives: Rule 506 Rulemaking
Subscribe to Rule 506 Rulemaking RSS FeedSEC Alleges JOBS Act Fraud While FINRA Cracks Down on Private Placement Activities
Posted in JOBS Act News, Rule 506 RulemakingThe SEC recently announced an action where the promoter allegedly told investors that the 2012 JOBS Act would allow his fund to raise billions of dollars by advertising to the general public and produce large profits for early investors. (SEC v. USA Real Estate Fund I, Inc. and Daniel F. Peterson.) In the press release… Continue Reading
Another Day, Another JOBS Act Hearing
Posted in Rule 506 RulemakingToday, Commissioner Elise Walter testified before the House Subcommittee on Oversight and Investigations of the Committee on Financial Services regarding the SEC’s implementation of Title II of the JOBS Act. Commissioner Walter noted that finalizing the rulemaking is one of the SEC’s “top priorities.” The Commissioner reviewed the pre-rulemaking comments that were received, as well… Continue Reading
SEC Commissioner Addresses Investor Protection Concerns
Posted in Rule 506 RulemakingIn a speech yesterday at NASAA’s Annual Conference, Commissioner Luis Aguilar commented again on concerns regarding the potential for fraud following the relaxation of the ban on general solicitation. The Commissioner noted that he considered “the Commission’s proposal to be fatally flawed” because it did not address investor protection concerns. Commissioner Aguilar suggested that the… Continue Reading
JOBS Act at Year 1
Posted in Crowdfunding, Decimalization, Emerging Growth Company Status, Exchange Act Registration Thresholds, IPO On-Ramp, Private Placements, Regulation A+, Research, Rule 506 RulemakingAny milestone, such as an anniversary, provides an opportunity for reflection and evaluation. At the one-year anniversary of the JOBS Act, preliminary experience gives reason for some optimism. The centerpiece of the JOBS Act, the “IPO on-ramp” provisions contained in Title I, have proven quite useful. The SEC Staff’s guidance in the form of Frequently… Continue Reading
FundersClub Obtains Broker-Dealer Registration No-Action Relief
Posted in Broker-Dealer Registration, Crowdfunding, Private Placements, Rule 506 Rulemaking, SEC NewsOn March 26, 2013, the SEC’s Division of Trading and Markets provided no-action relief to FundersClub Inc. and FundersClub Management LLC, indicating that the Division would not recommend enforcement action under Section 15(a)(1) of the Exchange Act if FundersClub and FundersClub Management LLC operated a platform through which its members could participate in Rule 506… Continue Reading
Senators Urge JOBS Implementation
Posted in Rule 506 RulemakingRecently, Senators John Thune and Pat Toomey and a number of other senators joined the chorus urging the Securities and Exchange Commission to move forward with Rule 506 rulemaking. The letter also expresses concern with any overly prescriptive investor verification test. This is consistent with letters from the House. The text of the letter: http://www.toomey.senate.gov/?p=press_release&id=772.
Rule 506 Rulemaking Balancing Act
Posted in Rule 506 RulemakingRecently, Congressmen Scott Garrett, Kevin McCarthy and Patrick McHenry wrote to urge Chairman Schapiro to consider, in connection with the SEC’s Rule 506 rulemaking, the regulatory burden that may be imposed by a complex investor verification process and noted that lawmakers did not contemplate a burdensome verification process when the JOBS Act was being considered. … Continue Reading
A Little History
Posted in Rule 506 RulemakingMany comment letters relating to the SEC’s proposed rules relaxing the ban on general solicitation suggest that the JOBS Act mandate was not well thought through and that relaxing the ban on general solicitation requires careful thought. While it is true that any change that would affect investor protections should require careful thought, it seems… Continue Reading
SEC’s Investment Advisory Committee Recommends Filing of General Solicitation Material
Posted in Rule 506 RulemakingThe SEC’s Investment Advisory Committee has recommended that the SEC should require issuers relying on the exemption from the ban on general solicitation and advertising to file a form as a precondition for claiming the exemption, and also file with the SEC general solicitation and general advertising material they use in private offerings that rely… Continue Reading
Investor Advisory Committee of the SEC
Posted in Crowdfunding, Rule 506 RulemakingOn Friday, September 28, 2012, the Dodd-Frank Investor Advisory Committee of the SEC met (see this agenda) and received an SEC Staff briefing on the JOBS Act. In connection with the Staff briefing, the Committee received an update from Jonathan Ingram, Deputy Chief Counsel and Lona Nallengara, Deputy Director (Legal and Regulatory) in the Division… Continue Reading
Yet Another Post-enactment JOBS Act Hearing
Posted in Crowdfunding, Private Placements, Regulation A+, Rule 506 RulemakingAmong the many distinctive aspects of the JOBS Act is that we could end up seeing more Congressional hearings on the JOBS Act after it was enacted than before it was enacted. The focus has now shifted from merits of the JOBS Act’s provisions to the pace at which those provisions are going into effect,… Continue Reading
Eliminating the Prohibition on General Solicitation for Commodity Pools
Posted in Rule 506 RulemakingWhen the SEC finalizes proposed rules that eliminate the prohibition on general solicitation and general advertising, private funds will be free to jump in and publicly offer their securities, right? Not so fast, especially if the private fund is a commodity pool under the Commodity Exchange Act. Among other things, Section 201(a)(1) of the JOBS… Continue Reading
If a Tree Falls in the Forest….
Posted in Rule 506 RulemakingOver the last few weeks, many commentators have written about the potential for widespread fraud and abuse in connection with Rule 506 offerings in which general solicitation is used. Some of these commentators have noted that if general solicitation is permitted, additional safeguards should be implemented in order to protect accredited investors. The argument seems… Continue Reading
SEC Proposed Rules Would Pave the Way for Private Fund Advertising
Posted in Rule 506 RulemakingNow that the SEC has proposed rules to eliminate the general solicitation and general advertising restrictions for certain offerings of securities, can advertisements for private funds on bus shelters and billboards be far behind? Not so fast. Private funds, including hedge funds, venture capital funds and private equity funds, often rely on Section 4(a)(2) and… Continue Reading
SEC Releases Proposed Rules Relaxing Ban on General Solicitation
Posted in Rule 506 RulemakingFollowing this morning’s meeting, the Commission has published its proposed rules: http://www.sec.gov/rules/proposed/2012/33-9354.pdf Summary The SEC published its guidance today as a proposed rule, with a comment period, and not as an interim final rule. The SEC proposes to amend Rule 506 to provide that the prohibition against general solicitation contained in Rule 502(c) shall not… Continue Reading
SEC Proposes Rules to Relax the Ban on General Solicitation: First Take
Posted in Rule 506 RulemakingAt a meeting this morning, the SEC voted to propose rules relaxing the ban on general solicitation for certain offerings conducted pursuant to Rule 506 and resales under Rule 144A. In a meeting that lasted approximately 45 minutes, the Staff outlined the principal aspects of the proposed rules. The Staff indicated that it was proposing… Continue Reading
Threat Level Orange
Posted in Crowdfunding, Rule 506 RulemakingThe state securities regulators, NASAA, just recently published their list of financial products that pose investor protection concerns. Not surprisingly given the level of rhetoric from the states, crowdfunding and internet-based offers of securities are at the top of the list of “new threats” to investors. The state securities regulators caution that once JOBS Act… Continue Reading
SEC Postpones Consideration of Title II Rule Changes
Posted in Rule 506 RulemakingToday, the SEC removed from the August 22nd Open Meeting agenda the consideration of rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act, as mandated by Section 201(a) of the JOBS… Continue Reading
PIPE As Usual
Posted in Rule 506 RulemakingWe’ve been thinking about whether the changes to Rule 506 offerings are likely to have any effect on the PIPE market. Our preliminary conclusion is that the ability to use general solicitation is unlikely to have much effect on PIPE transactions. An already public company generally turns to a PIPE transaction for financing because the… Continue Reading
A Capital Idea
Posted in Rule 506 RulemakingMany smaller banks in the United States recently received a bit of surprising news. The banking agencies published their notices of proposed rulemaking relating to the bank capital requirements. The Basel III NPR made clear that only the smallest banks in the United States would be exempt from compliance with the heightened regulatory capital requirements… Continue Reading
Integration Disintegration?
Posted in Rule 506 RulemakingOne of the thorniest issues for securities lawyers always has been addressing potential integration questions. We have been trained to recognize that there are heightened concerns associated with offerings occurring in close proximity to one another, or changes in offering format (from private to public or public to private offering). Over time, the SEC has… Continue Reading
Trust, and Verify
Posted in Rule 506 RulemakingIn considering the relaxation of the prohibition against general solicitation and general advertising that was incorporated into the JOBS Act, Congressional attention seemed to focus on some quid pro quo arrangement that demands verification of accredited investor status. This leads us to wonder why it takes a “trade” of this sort to justify removing the… Continue Reading
The JOBS Act and Private Funds
Posted in Rule 506 RulemakingSection 201(a)(1) of the JOBS Act directs the SEC to repeal the ban on general solicitation and general advertising in securities offerings under Rule 506 of Regulation D and Rule 144A. Can advertisements for hedge funds in Cigar Aficionado and The Wine Spectator be far behind? Not so fast. The SEC has missed its July 4 deadline… Continue Reading