Rule 506

New Compliance and Disclosure Interpretations

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On December 4, the Division of Corporation Finance of the SEC issued new Compliance and Disclosure Interpretations regarding, among other things, Rules 506(d) and (e) of Regulation D under the Securities Act of 1933.  These rules prohibit issuers from conducting private placements that rely on Rule 506 if felons and other “bad actors” participate in the offering.

Section 260 of the Interpretations addresses questions arising under “Rule 506 – Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering.”  Interpretations.

Eliminating General Solicitation and Advertising Prohibitions under Rule 506 and Rule 144A

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On August 29, the SEC proposed a rule to implement Section 201(a) of the JOBS Act that would amend Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933.  The proposed amendment to Rule 506 would eliminate the prohibition against general solicitation and general advertising in Rule 506 offerings if all purchasers are accredited investors.  The proposed amendment to Rule 144A would allow offerings to non-qualified institutional buyers so long as the seller reasonably believes that all purchasers are qualified institutional buyers.  Comments should be received within 30 days after publication in the Federal Register.  SEC Release.  SEC Proposed Rule.