growing businesses. Often acting as an outside general counsel, he
provides practical solutions to legal issues by working with company
management to understand and implement their business strategy.
He regularly assists companies in connection with the structuring and
documentation of private securities offerings.
4501 Highwoods Parkway, Suite 210
Glen Allen, Virginia 23060
804.322.1902 Phone
804.346.5954 Fax
wmichael@goodmanallen.com
www.goodmanallen.com
Exchange Commission (SEC) rules
have prohibited companies seeking
to raise capital in a private securities
offering from conducting any sort of
advertising or "general solicitation"
to obtain investors. In April 2012,
however, Congress attempted to make
it easier for companies to find investors
and raise capital by passing the JOBS
Act.
solicitation and general advertising
for securities offerings relying on Rule
506 of Regulation D (a commonly used
exemption). After a 15-month period,
the SEC issued a final rule in July 2013
containing the changes to Regulation D2
The rule changes became effective on
September 23, 2013.
announcements and publish information
concerning the offering in various
outlets (including newspapers, journals,
magazines and web sites).
email potential investors, utilize social
media to attract investors and engage in
other activity that previously would have
constituted "general solicitation."
using Rule 506(c)?
506(c) requires (among other things)
that all investors must be "accredited
investors"
investors are accredited investors.
must be undertaken?
and each offering to determine the types
of reasonable steps necessary to verify
that investors are accredited. According
to the release, companies should consider:
(1) the type of accredited investor that the
purchaser claims to be; (2) the amount
and type of information that the issuer has
about the purchaser; and (3) the nature of
the offering, such as the manner in which
the purchaser was solicited, and the terms
of the offering.
For example, if a purchaser is an indi-
vidual, was solicited via an advertisement
or a cold call, and the minimum invest-
ment amount is $25,000, the company
would likely be required to take greater
steps to verify the investor's status. On the
other hand, if the minimum investment
amount is $1,000,000, the company could
take fewer steps to verify the investor's
status. Note that the company has the
burden of proving that it took reasonable
steps. Accordingly, the company should
retain all documentation and verification
that it received.
Now Permitted for Companies Conducting
Private Securities Offerings