SEC Finally Adopts New Regulation D Amendment – Lifting General Solicitation Ban



On July 10, 2013, the Securities and Exchange Commission (“SEC”) adopted a new rule that lifts the ban on general solicitation of private offerings.  The rule was adopted as a part of the commission’s decision to implement Section 201(a) of the Jumpstart Our Business Startups Act (the JOBS ACT”).     Prior to July 10, Companies who wanted raise capital through a private offering had two options: (1) Register the securities offering with the SEC; or (2) rely on an exemption from registration.  In a separate release, in order to implement Section 926 of the Dodd-Frank Act, the SEC adopted amendments to Rule 506 which disqualified issuers from utilizing Rule 506 if “felons and other bad actors” are participating in the offering.

While the SEC lifted the ban on advertising, they issued a rule proposal for Regulation D that requires issuers to provide a greater amount of information regarding the offerings in order to allow the SEC to regulate the market.  The proposal is aimed to protect victims from fraudsters trying to solicit stocks to inexperienced investors.  The proposed rule would require one who wishes to solicit a private offering to file a Form D before they engage in the advertising.

Potential Impact of New Rule

Lifting the ban on general solicitation will allow startups, venture captilists, EB-5 Regional Centers, and hedge funds to openly advertise that they are raising money in private offerings.  That should make it significantly easier for companies to raise financing and/or expand operations — the Rule still limits solicitation from accredited investors (for now, until the remaining part of the JOBS Act is implemented)

Investment is still limited to accredited investors worth more than $1 million liquid net worth, and fundraisers must take reasonable steps to ensure investors are in fact accredited. To help the SEC collect data on how investment will change, fundraisers have to file a Form D with the SEC at least 15 days before they begin general solicitation, and amend that Form D to state that they’re done soliciting within 30 days of finishing.

However, the lift on the Ban will create a significantly new and large pool of investors.

For more information, including access to the Final Rule and Proposal, please visit the SEC’s website which can be found here.


2 thoughts on “SEC Finally Adopts New Regulation D Amendment – Lifting General Solicitation Ban

  1. From my point of view as an investor, I think that it is a great idea to relax the solicitation ban via the JOBS Act and other countries should follow suit also. In the age of social media – FACEBOOK, TWITTER, LINKEDIN …etc, someone even talking about securities can be charged with an offense. A lifting of the solicitation ban can help for example raise funds to build a children’s hospital in Africa and not land him in front of a securities tribunal. (Example of my friend here: Solicitation of investors on the Internet – Dr. David Kam, MD is seeking philanthropist to help Africa) In this day and age everyone is soliciting something, whether for love, garage sale, eyeballs, friends or something. People these days are smarter than you think and do not need to be govern by draconian caveman rules.

  2. To loosen the Solicitation Ban is something positive. Anything that will increase revenue that keeps or attracts or makes it easier for investors in our country, will make it worthwhile short term and long term & should remain as long as it maintains economic growth.

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