• Major SEC Rule Changes Will Impact Equity Fundraising
  • October 1, 2013 | Author: Aaron D. Zibart
  • Law Firm: Wyatt, Tarrant & Combs, LLP - Louisville Office
  • Effective September 23, a new SEC rule (506(c)) will allow advertising and general solicitation in certain unregistered securities offerings. The basic requirements of the new rule are:

    • All purchasers must be accredited investors (meaning they must meet income or net worth criteria)

    • The issuer must take reasonable steps to verify that all purchasers are accredited

    • No “bad actors” may be involved in the offering

    The “bad actor” prohibitions will apply to all Rule 506 transactions - those relying on new Rule 506(c) and also those relying on the existing Rule 506(b) private offering exemption.

    Note: These rule changes are NOT to be confused with the “crowdfunding” portion of the JOBS Act. The SEC has yet to issue the rules needed to make equity crowdfunding a reality (at least for the non-accredited crowd), so that remains off-limits for now. Stay tuned.