US Private Offerings: SEC Approves JOBS Act Requirement to Permit General Solicitation and Dodd-Frank Requirement to Disqualify “Bad Actors” from Using Rule 506 to Offer Securities

September 27, 2013

The SEC has amended Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933 (“Securities Act”) to (1) permit, in certain circumstances, an issuer to engage in general solicitation and general advertising in connection with Rule 506 and Rule 144A offerings (“General Solicitation Rules”) and (2) disqualify securities offerings involving certain “felons” and other “bad actors” from relying on Rule 506 of Regulation D (“Bad Actor Rules”), whether or not the issuer is relying on the new General Solicitation Rules. These rules took effect on September 23, 2013. The SEC also has proposed rules that are intended to enhance the SEC’s ability to monitor how the General Solicitation Rules will affect the private offering market and to provide additional investor protection safeguards (“Proposed Rules”). The new General Solicitation Rules and the Bad Actor Rules are discussed below. The Proposed Rules were addressed in a separate OnPoint.

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