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.
Rule 144A
The JOBS Act
On March 27, the U.S. House of Representatives approved the Jumpstart Our Business Startups Act (the JOBS Act). The Act had already passed the Senate and the President is expected to sign the Act shortly. The Act lifts the ban on “general solicitation and general advertising” for Rule 144A and certain Reg. D offerings, expands the Reg. A safe harbor limit from $5 million to $50 million and, in certain cases, raises the cap from 500 to 2,000 of the number of shareholders a company may have before it must register. The Act will also permit companies to raise up to $1 million in small amounts within any 12-month period without registering (“crowdfunding“). Finally, the Act creates the concept of an “emerging growth company” – generally companies with annual gross revenue of less than $1 billion – and relieves these companies from certain provisions of the Dodd-Frank Act and Sarbanes-Oxley Act. Most of the Act’s provisions, including the changes to Rule 144A and Reg. D, will become effective upon the effectiveness of rules to be adopted by the SEC. Full text of the Act could be found here.