The Securities and Exchange Commission (“SEC”) voted 4 to 1 to lift an 80-year-old ban on advertisements of private offerings. The Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) required the SEC to amend Rule 506 of Regulation D to permit general solicitation and advertising in private placements as long as all purchasers are accredited investors. The new rule will take effect 60 days after the SEC publishes it in the Federal Register.
Issuers and EB-5 projects seeking to raise capital through the sale of securities generally must either register the securities offering with the SEC or rely on an exemption from registration. Most of the exemptions from registration prohibit companies from engaging in general solicitation. The exemption from registration contained in Rule 506 of Regulation D is often used by EB-5 projects.
For the past 80 years, issuers seeking to raise capital under Rule 506 could not advertise to the general public. With today’s rule change, issuers under Rule 506 will be able to freely advertise to any potential investors.
However, issuers still need to take reasonable steps to verify that investors are accredited. Additionally, the SEC has also voted to issue new rules containing stronger investor protections.
This will fundamentally alter the marketing landscape for EB-5 projects by allowing project companies to solicit investors through social media, press releases, newspapers, billboards and other traditional marketing campaigns.
Find out more by reading the full article.