represents public and private companies in venture capital
financings, private placements and public offerings. Krevolin & Horst,
LLC is based in Atlanta, Georgia, and focuses on commercial real
estate, corporate, environmental, technology, and trial and appellate
litigation in all courts.
1201 West Peachtree Street
One Atlantic Center, Suite 3250
Atlanta, Georgia 30309
404.888.9700 Phone
404.888.9577 Fax
gbalboni@khlawfirm.com
www.khlawfirm.com
Our Business Startups Act (the "JOBS
Act") on April 5, 2012, making significant
changes to Rule 506 of Regulation D
and changing the trajectory of the law of
private offerings.
(the "Securities Act") prohibits the use of
the U.S. mail or other means of interstate
commerce to effect the offer or sale of any
security
Public and private issuers frequently rely
on two "private offering" exemptions,
Section 4(a)(2) of the Securities Act
provides an exemption for "Transactions
by an issuer not involving any public of-
fering." The term "public offering" is not
defined in the Securities Act, so issuers
have relied on guidelines synthesized
from various Securities and Exchange
Commission ("SEC" or "Commission")
releases and rules, no action letters,
and court cases. These guidelines have
relationship of the offerees to the issuer or
someone acting on its behalf, the rela-
tionship of the offerees to each other, the
manner of communication of information
regarding the offering and the sophistica-
tion of the offerees.
Uncertainty regarding availability of
then Section 4(2) of the Securities Act in-
creased when the Supreme Court rejected
the SEC's use of a specified number of
offerees or purchasers by holding that a
public offering occurs whenever purchas-
ers "need the protection of the Securities
Act," ostensibly because they are not
able "to fend for themselves."
if the person is sophisticated in financial
and business matters and has access to
the type of information disclosed in a
registration statement. The underlying
concepts of sophistication are knowing
what to ask for and having the bargaining
power to obtain it.
General solicitation and advertising
are not permitted in a private offering.
The SEC has stated that "negotiations or
conversations with, or general solicitation
of, an unrestricted and unrelated group
of prospective purchasers for the purpose
accept an offer of securities is inconsis-
tent with a claim that the transaction does
not involve a public offering even though
ultimately there may only be a few knowl-
edgeable purchasers.
Rule 146 limited offerees to 35, pro-
hibited general solicitation and general
advertising, and required issuers to pre-
screen offerees to evaluate their financial
means and sophistication.
Regulation D
lation D
an unlimited number of dollars from an
unlimited number of accredited inves-
tors and up to 35 non-accredited inves-
tors, subject to certain conditions.
general solicitation or advertising.
Rule 501(a)
that are presumed to be sophisticated and
able to fend for themselves. Accredited
investors include certain financial institu-
tions, pension plans, trusts, corporations
and other entities with total assets in
excess of $5 million, individuals with a
net worth of more than $1 million or net
income of more than $200,000 or joint
income with that person's spouse of more
than $300,000, and any entity owned
exclusively by accredited investors.
must have only a "reasonable belief" that
a purchaser is an accredited investor.