The SEC’s Proposed New Rules on General Solicitation
Among the many bills packaged together in 2012 to form the JOBS Act was a measure that forced the Securities and Exchange Commission (SEC) to revisit its long-time ban on “general solicitation” – i.e. advertising – for private offerings. Although it has taken the SEC more than a year to craft final rules lifting the ban, those new rules took effect on Sept. 23, 2013.
Throughout the legislative and regulatory phase of this debate, NVCA has kept a finger on the pulse of member opinion regarding this issue, and has found little interest in using the new general solicitation regime. However, at its meeting in July of this year – the meeting at which the final rules were issued – the SEC asked for comment on additional proposed rules that deal with reporting requirements for firms that do generally solicit, as well as those that continue to operate under the “old” rules (no general solicitation.)
In our view, several aspects of the new proposal are troubling and could produce unintended effects on the industry. First, the proposed rule would require ALL firms to file a closing amendment to their Form D within 30 days after the termination of a Rule 506 offering. The proposal would also amend Form D, again for ALL firms, to require significant additional information including:
- Identification of the issuer’s website
- Expanded information on the issuer
- The offered securities
- The types of investors in the offering
- The use of proceeds from the offering
Additionally, for 506(c) offerings (those using general solicitation), the Form D would have to include:
- Information on the types of general solicitation used, and
- The methods used to verify the accredited investor status.
Finally, the SEC proposal, if adopted without change, would require firms that do want to use general solicitation to file an initial Form D 15 days prior to engaging in any general solicitation, and would require, for the first two years, submission of written general solicitation materials.
Despite what we believe will be limited application of the new regime regarding our member firms, NVCA believes that the proposed additional requirements are an over-reach by the SEC in terms of the depth and breadth of material requested from both soliciting and non-soliciting firms. As a result, NVCA will file a formal comment letter with the SEC on these topics and further concerns. We will post our comment letter on the NVCA website as soon as it is finalized.