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SEC Rules to Permit General Solicitation Likely to Slip Further…

Posted in For Entrepreneurs and Companies, Fundraising, News and Recent Events, SEC

A_Ledbetter_LR.jpgCONTRIBUTED BY
Andrew Ledbetter
andrew.ledbetter@dlapiper.com

Earlier this month, the SEC announced that at its meeting tomorrow it would be considering rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act. However, in response to a flurry of comments, the SEC has clarified it will not be adopting interim final rules at the meeting tomorrow and, instead, would follow the usual rulemaking process of proposing revisions to the rules, receiving public comment on the proposals, considering those comments, and then adopting final rules.

As we have previously blogged, the JOBS Act included a mandate that the SEC revise these rules within 90 days of the adoption of the JOBS Act, but the SEC was not able to meet that statutory deadline and has not proposed a rule for public comment to implement the mandate. Many interpreted the SEC’s meeting announcement to mean that the SEC would be adopting interim final rules (which do not follow the typical notice and comment process for rulemaking) to permit general solicitation and general advertising in Rule 506 deals if all purchasers are accredited investors, and to permit offers to persons who are not qualified institutional buyers (QIBs) in Rule 144A deals provided that all sales are to QIBs.

However, following the meeting announcement, the SEC received a number of comment letters expressing concern about adopting interim final rules, including letters from a number of investor protection groups, the North American Securities Administrators Association, and others. In response to these comments, the SEC has clarified it will not be adopting interim final rules at the meeting tomorrow and, instead, would follow the usual rulemaking process of proposing revisions to the rules, receiving public comment on the proposals, considering those comments, and then adopting final rules. This rulemaking process generally takes several months to complete.

We are attending the SEC meeting tomorrow, are actively following this issue, and will keep you posted on any developments.