SEC Adopts Rules to Eliminate Prohibition Against General Solicitation and Advertising in Certain Private Securities Offerings; Also Proposes New, Related Investor Protection Requirements – Private Investment Funds Perspective
Today, the SEC adopted amendments to Rule 506 of Regulation D under the Securities Act of 1933 that eliminate the ban on “general solicitation” and “general advertising” of private securities offerings conducted under those rules, as was mandated by the Jumpstart Our Business Startups Act (JOBS Act). Since private investment funds typically rely on Rule 506 in connection with their fundraisings in the United States, this will potentially allow for greater flexibility in the United States fundraising process by significantly relaxing existing regulatory restrictions. In conjunction with the ban lift, the SEC today also adopted rules barring felons and other "bad actors" convicted of securities fraud from participating in private securities offerings and proposed a number of related investor protection requirements for private fund offerings that engage in a general solicitation.