- 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.