New SEC Rules Allow General Solicitations

On September 23, 2013, the JOBS Act goes into effect allowing businesses to advertise investment opportunities that can exceed $1 million to the public without having to go through the expense of securities registration. In order to make general solicitations, the businesses will have to limit investment to only accredited investors (typically high-income/high-net-worth individuals) and the business will be required to document verification of accredited investor status. These provisions modify Rule 506 of Regulation D, an often used exemption for private investment.

The ability to generally advertise and solicit investment provides valuable flexibility and reduced cost for those seeking to raise capital; however, be aware that this type of solicitation still requires substantial disclosures and compliance with all other Regulation D requirements under Rule 506.

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