UPDATE – SEC Announces Rule to Eliminate Prohibition on General Solicitation and General Advertising (Rule 506)

After much anticipation, the SEC announced today that it had adopted a new rule to implement a JOBS Act requirement to lift the ban on “general solicitation or general advertising” for certain private offerings.

In April 2012, Congress passed the Jumpstart Our Business Startups Act (JOBS Act), and section 201(a) of the JOBS Act directed the SEC to remove the prohibition on general solicitation or general advertising for securities offerings relying upon Rule 506, provided that (1) sales are limited to accredited investors and (2) an issuer takes reasonable steps to verify that all purchasers of the securities are accredited investors. The Final Rule provides a “non-exclusive list” of methods that issuers may use to satisfy the verification requirement for individual investors (including written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or certified public accountant that such entity or person has taken reasonable steps to verify the purchaser’s accredited investor status).

The Final Rule amends the Form D to add a separate box for issuers to check if they are claiming the new Rule 506 exemption that would permit general solicitation or general advertising. The SEC noted that the rule amendments become effective 60 days after publication in the Federal Register.

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