Amid the recent flurry of House bills intended to facilitate capital formation, which we’ve discussed here and here, is the Access to Capital for Job Creators Act, H.R. 2940. H.R. 2940 would amend Section 4(2) of the Securities Act of 1933, as amended, to exempt from SEC securities registration:
transactions by an issuer not involving any public offering, whether or not such transactions involve general solicitation or general advertising.
- Permit general solicitation or general advertising in offers and sales of securities made pursuant to Rule 506, provided that all purchasers of the securities are accredited investors; and
- Require the issuer to take “reasonable steps” to verify that purchasers of the securities are accredited investors.
The House of Representatives passed H.R. 2940 by a vote of 413-11.
As we’ve noted previously, the concept of easing the ban on general solicitation has been the topic of Congressional and SEC attention. For decades, the statutory 4(2) exemption for non-public offerings has turned substantially on whether the there has been public advertising or solicitation. The SEC has long taken the position that public advertising of an offering is clearly incompatible with a private offering under Section 4(2) of the Securities Act. Rather than investors coming to the offering from such public advertising solicitations, the non-public offering exemption has been interpreted to require that investors have a pre-existing and substantive relationship with the issuer. H.R. 2940 is driven by a concern that these legal standards have unnecessarily limited the pool of investors from whom small companies can raise funds.
While similar concepts have been vetted previously, the overwhelming House approval of H.R. 2940 may signal momentum for the public solicitation of accredited investors.