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SEC Adopts Final Rules on Amendments to Rule 506 Private Placement Exemption

Impact on Private Funds and Other Issuers

August 1, 2013

On July 10, 2013, the Securities and Exchange Commission adopted an amendment (the “Solicitation Amendment”) to Rule 506 of Regulation D, the ubiquitous and widely used safe harbor exemption from registration of securities purchased and sold under the Securities Act of 1933, as amended. The Solicitation Amendment eliminates the prohibition against “general solicitation” and “general advertising” for offerings made under Rule 506, provided that: (i) an issuer reasonably believes that all purchasers in such an offering are accredited investors; (ii) an issuer takes reasonable steps to verify that all purchasers in such an offering are accredited investors; and (iii) certain other conditions are met. The SEC was mandated last year to adopt the Solicitation Amendment as part of the Jumpstart Our Business Startups Act. The Solicitation Amendment will go into effect September 23, 2013, at which time an issuer that elects the new Rule 506(c) exemption may engage in all forms of general solicitation, subject to the conditions described in this Investment Management Alert.

Click to view a complete summary of the impact of the amendments on private funds and other issuers.

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