22 Sep Solicitation Ban Ends Tomorrow – Don’t Forget Bad Actor Disqualification

Tomorrow is the big day. On September 23, the new SEC rules ending the ban on general solicitation in certain private securities offerings, mandated by the Jumpstart Our Business Startups (JOBS) Act, become official. As long as you limit ultimate purchasers of securities to “accredited investors,” you can advertise, run a splashy website detailing securities offerings, or do a mass email to whomever you wish.

So far, before things even start, I see a few players wondering where the envelope can be pushed. Others are anxiously setting up platforms where investors can find deals and vice versa. Such is life on Wall Street, and in particular with the smaller cap world. But these new rules can be used by anyone – hedge funds, large companies, and the like. But, as was the intention with JOBS, the hope is to help spur economic and job growth for small business by easing restrictions on capital formation.

On the same day as the JOBS Act rules above were adopted, the SEC also adopted other rules, required by the Dodd-Frank Act, to disqualify “bad actors” from all Regulation D private securities offerings. These rules are also effective tomorrow. What does this mean? You now must get information from the major stakeholders in the company and its advisors to ensure their backgrounds do not trigger disqualification. Work with your counsel to develop questionnaires and other methods to verify this information.  Then let’s close some deals!