SEC Adopts Rules for General Solicitations Under JOBS Act

SEC1July 10, 2013 – (Updated 12:52 EST) – Washington, DC -  In a close three to two vote, the Securities and Exchange Commission today adopted rules to eliminate the prohibition against general solicitation and general advertising in private placements under the JOBS Act. The SEC also adopted so-called “bad actors” under the Dodd-Frank Act.

Under the JOBS Act, the SEC adopted amendments to eliminate the prohibition against general solicitation and general advertising in certain securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act, as mandated by Section 201(a) of the Jumpstart Our Business Startups Act.

SEC Chair Mary Jo White, July 10, 2013

SEC Chair Mary Jo White, July 10, 2013

In August 2012, the SEC issued a proposed rule to amend Rule 506 (well as the similar Rule 144A of the Securities Act) and permit these general solicitations as long as issuers “take reasonable steps to verify” that all of the purchasers are accredited investors.

The Commission also adopted amendments to disqualify securities offerings involving certain “felons and other ‘bad actors’” from reliance on the exemption from Securities Act registration pursuant to Rule 506 as mandated by Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  SEC Chair Mary Jo White urged the Commission to consider the two amendments in tandem to help implement the JOBS Act and safeguard investors.

SEC Viewpoints

SEC Chair Mary Jo White, who voted in favor of all provisions, urged the Commissioners to keep the JOBS Act mandate on track. “The Commissioners should act without delay,” she urged. In her vote in support of the general solicitation rules, Commissioner Elisse Walter pointed out “This will help issuers raise capital efficiently.”

Commissioner Luis Aguilar voted against the general solicitation proposals, criticizing the “reckless adoption” of the rules without providing adequate safeguards for investors.  Commissioners Dan Gallagher and Troy Paredes feared the general solicitation rules would thwart the purpose of the JOBS Act and place considerable burden on the equity market. “The proposals will do more harm than go,” said Commissioner Gallagher.


The SEC’s next step is to post the amendments on the Federal Register, which may take approximately two days, according to Sarah Hanks, CFIRA board member, CEO of and former General Counsel of the Congressional Oversight Panel, the overseer of the Troubled Asset Relief Program (TARP). The SEC will note the effective date of each amendment on the Federal Registry, which could range from a minimum of 30 days to 90 days.

Keith Higgins, the SEC’s DIrector of Division of Corporate finance and other SEC staff members advised the Commissioners that they will develop a list of methods that private firms can use to ensure that offerings are only made to accredited investors, and internal procedures for the agency to evaluate verification practices.

Today’s action fulfills Commissioner White’s promise to keep the SEC’s mandates under the JOBS Act on track. “This is a historic step towards the implementation of the crowdfunding provisions of the JOBS Act that we all have worked so hard for,” said Freeman White, former Executive Board member of CFIRA and CEO and Co-Founder of “Today’s ruling enables accredited investor crowdfunding and we look forward to hearing more about the effective date for these new rules.”

Article by A. Brian Dengler, CFIRA member  and contributing editor.

The Crowdfund Intermediary Regulatory Advocates

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