SEC to Small Business on Rule 506 Solicitation: DROP DEAD!

The JOBS Act mandates new rules 90 days after passage for Small Businesses that want to use Rule 506 Solicitation and Advertising for Investors.

The law seems pretty clear to me:

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JOBS Act and Rule 506 Solicitation for Investors

TITLE II–ACCESS TO CAPITAL FOR JOB CREATORS

SEC. 201. MODIFICATION OF EXEMPTION.

(a) Modification of Rules-

(1) Not later than 90 days after the date of the enactment of this Act, the Securities and Exchange Commission shall revise its rules issued in section 230.506 of title 17, Code of Federal Regulations, to provide that the prohibition against general solicitation or general advertising contained in section 230.502(c) of such title shall not apply to offers and sales of securities made pursuant to section 230.506, provided that all purchasers of the securities are accredited investors. Such rules shall require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission. Section 230.506 of title 17, Code of Federal Regulations, as revised pursuant to this section, shall continue to be treated as a regulation issued under section 4(2) of the Securities Act of 1933 (15 U.S.C. 77d(2)).

Silly me.

Here’s what SEC Chairman Mary Schipiro recently told Congress:

Title II requires the Commission to revise the Rule 506 safe harbor from registration to allow general solicitation and general advertising for offers and sales made under Rule 506, provided that all securities purchasers are accredited investors. The rules the Commission adopts are to require issuers to take “reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission.” The JOBS Act also states that Rule 506 will continue to be treated as a regulation issued under Section 4(2) of the Securities Act, and that offers and sales under Rule 506 as revised will not be deemed public offers under the Federal securities laws as a result of general solicitation or advertising. The Commission also is required to revise Rule 144A to provide that securities sold under the revised rule may be offered to persons other than qualified institutional buyers, including by means of general solicitation or advertising, provided that the securities are sold only to persons reasonably believed to be qualified institutional buyers.

The rulemakings to revise Rule 506 and Rule 144A are both required to be completed within 90 days of enactment of the JOBS Act. As I stated to Congress prior to the passage of the Act, time limits imposed by the JOBS Act are not achievable. Here, the 90 day deadline does not provide a realistic timeframe for the drafting of the new rule, the preparation of an accompanying economic analysis, the proper review by the Commission, and an opportunity for public input. Although we will not meet this deadline, the staff has made significant progress on a recommendation and economic analysis, and it is my belief that the Commission will be in a position to act on a staff proposal in the very near future.

We don’t like it.  We don’t want it.  We’ll just delay the whole thing and hope it goes away.  And if you don’t like it small business in America, Drop Dead!

Anyone want to lay bets on the SEC meeting the 270 day requirement for the JOBS Act Crowdfunding Rules???

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