Later this week, on May 22nd, a full House Financial Services Committee mark-up session has been scheduled that will include consideration of

  • HR 4200, The SBIC Advisers Relief Act of 2014,
  • HR 4554, the Restricted Securities Relief Act,
  • HR 4568, a bill that would effect certain changes to registration statements on Form S-1,
  • HR 4569, a bill that would require certain changes to Form 10-K and to Regulation S-K,
  • HR 4570, a bill that would make certain changes to Regulation D, and
  • HR 4571, a bill that would modify Rule 701.

On May 1st, the House Financial Services Committee will hold a hearing (see: on various proposed bills related to the JOBS Act.  One of the bills addresses the crowdfunding framework and would have the effect of striking Title III of the JOBS Act and reverting to the House version of the crowdfunding title in most respects.  Another bill addresses certain issues raised by the SEC’s proposed amendment to Regulation D, Form D and Rule 156 and has as its aim encouraging use of the ability to use general solicitation in connection with certain Rule 506.  Perhaps most significant, a bill titled the Startup Capital Modernization Act of 2014, would address state preemption in Regulation A+ offerings.  State preemption continues to raise significant controversy.  The bill makes clear that Congress intended that Tier 2 Regulation A offerings not be subject to state review.  In addition, the bill addresses various other aspects of Regulation A+, such as the Exchange Act reporting threshold.  The same bill would codify the Section 4-1/2 exemption for resales of restricted securities.

Today is the end of the comment period on the SEC’s proposing release concerning Regulation A+.  A number of comment letters already have been filed and are available here:  Additional comment letters are likely to be received in the next few days.  The letters overwhelmingly support the SEC’s approach.

In a recent speech, SEC Chair White noted that the SEC remains focused on various investor protection measures related to the JOBS Act.  She noted that the SEC is considering Staff recommendations for final rules related to the SEC’s proposal from last summer relating to proposed amendments to Regulation D, Form D and Rule 156.  Read her full remarks here:  White noted that the SEC’s “ultimate goal is to craft rules that provide effective, workable paths for companies to raise capital that also protect investors.”  So, it would appear that we should expect to learn more soon on this.

On the same day that the SEC adopted changes to Rule 506 and Rule 144A in order to relax the prohibition against general solicitation, the SEC proposed for comment amendments to Form D, Regulation D and Rule 156.  These proposed rules were met with an extraordinary number of comments given that many felt that the proposed changes to the Form D filing requirements and the proposed changes to the content requirements of Form D would impose significant burdens on issuers.  However, in recent weeks, the tide seems to have turned.  Some commentators have called on the SEC to take action to move forward with the proposed rules.  For example, in a speech (available here:, Commissioner Aguilar focused on investor protection concerns.  He stated that:  “It is now almost five months since those proposals were issued for public comment.  I urge the Commission to move forward promptly to adopt the proposed rules. Doing so will not only provide a number of important investor protections that were unjustifiably omitted when the general solicitation rule was adopted, it will also provide the Commission’s staff with the necessary tools to assess whether that change has actually had the desired effect on capital formation. Every day these proposals are not adopted is another day that investors face greater harm.”  Similar views were expressed in a comment letter from Senator Levin to the Commission (available here: regarding the proposed amendments.  Senator Levin’s letter suggests that the SEC impose requirements beyond those contained in the proposed amendments.  Could this be a sign of things to come?

Morrison & Foerster lawyers Anna Pinedo, David Lynn, Nilene Evans and Bradley Berman have prepared several standard representations, warranties and covenants relating to the use of general solicitation under Rule 506(c) offerings and to the bad actor disqualification provision of Rule 506(d). To view the resources, please visit:

Private placements and the due diligence obligations of broker-dealers in such transactions have recently come under increased scrutiny from FINRA as part of a broader trend reflected most notably in the filing requirements for private placements that went into effect on December 3, 2012 (FINRA Rule 5123). This trend of increased scrutiny also is likely to continue in light of the SEC’s recent adoption on July 10, 2013, pursuant to Section 201(a) of the JOBS Act, of final rules relaxing the prohibition on general solicitation and general advertising for certain private placements under Rule 506 of Regulation D. For more information, see our client alert, “FINRA Actions and the Due Diligence Obligations of Broker-Dealers in Private Placements,” available at

Morrison & Foerster, together with Practical Law Company, presented a webcast on the new general solicitation rules.

The webcast analyzed the impact of the SEC’s removal of the ban on general solicitation in certain private offerings that was required by the JOBS Act. The program also discussed conducting Regulation D and 144A offerings going forward, related changes to Form D and bad actor disqualifications and how established companies, startups and private funds can protect themselves while taking advantage of the new rules.


  • David M. Lynn
  • Anna T. Pinedo

To view a recording of the webcast, please visit:

To download a copy of the slides, please visit:

The recent SEC adopting releases cite an updated SEC Risk Fin (now renamed the Division of Economic and Risk Analysis) study titled, Capital Raising in the U.S.:  An Analysis of Unregistered Offerings Using the Regulation D Exemption, 2009-2012.  This new study updates in part the Risk Fin 2012 study on exempt offerings, which we have previously cited in this blog.  The study can be accessed here:

The study provides interesting insights on the exempt offering market, and emphasizes once again the importance of exempt offerings in capital-raising efforts.  The study notes that approximately $900 billion was raised in Regulation D offerings in 2012.  Not surprisingly, almost all of this was raised in Rule 506 offerings.  The study provides detailed data points on the types of issuers using Rule 506 offerings; the size of the offerings; the use of financial intermediaries; etc.  However, given that many issuers neglect to file Form Ds in connection with offerings, it is possible that some of the information may be understated.  In considering the new Section 3(b)(2) (Regulation A+) exemption, it will be important to consider the requirements for compliance with the exemption, and weigh those against the appeal of a Rule 506 offering if the new Regulation A+ exemption is to be utilized.

This morning, the SEC adopted amendments to Rule 506 of Regulation D and Rule 144A under the Securities Act to implement Section 201(a) of the JOBS Act.  The SEC adopted new paragraph (c) in Rule 506, which would permit the use of general solicitation and general advertising, subject to the following conditions:

  • the issuer must take reasonable steps to verify that the purchasers of the securities are accredited investors;
  • all purchasers of securities must be accredited investors, either because they come within one of the enumerated categories of persons that qualify as accredited investors or the issuer reasonably believes that they qualify as accredited investors, at the time of the sale of the securities; and
  • the conditions of Rule 501 and Rules 502(a) and 502(d) are satisfied.

The Staff indicated that “reasonable efforts” to verify investor status will be an objective determination by the issuer based on the SEC’s principles-based guidance.  In its proposed rules, the SEC had noted that “reasonable efforts” to verify investor status should consider the nature of the purchaser; the nature and amount of information about the purchaser; and the nature of the offering.  In a departure from the proposed rules, the final rule will provide a non-exclusive list of factors to consider in verifying the accredited investor status of natural persons.  Following the initial proposal, many commenters had advocated that a “safe harbor” be established to establish legal certainty that the verification process had been sufficiently robust.  Including this illustrative list as part of the rule will likely prove helpful, even if it does not go as far as some commenters had requested.

In addition to the changes adopted to Rule 506, the SEC amended Rule 144A to eliminate references to “offer” and “offeree,” and as a result Rule 144A will require only that the securities are sold to a QIB or to a purchaser that the seller and any person acting on behalf of the seller reasonably believe is a QIB.  Under this amendment, resales of securities pursuant to Rule 144A could be conducted using general solicitation, so long as the purchasers are limited in this manner.

Commissioner Luis Aguilar strongly opposed the new rules, saying he was “saddened and disappointed” that the new rules did not do more to protect investors.