General Solicitation and General Advertising Allowed Under Rule 506(c) Beginning September 23, 2013

In April 2012, Congress passed the Jumpstart Our Business Startups Act (“JOBS Act”).  Section 201(a)(1) of the JOBS Act directed the Securities and Exchange Commission (“SEC”) to remove the prohibition on general solicitation and general advertising for securities offered under Rule 506 of Regulation D, provided that such sales were limited to accredited investors and an issuer took reasonable steps to verify that all purchasers of the securities are accredited investors.

On July 10, 2013, the SEC adopted a new rule to implement the JOBS Act requirement proposed in Section 201(a)(1).  The new Rule 506(c) permits general solicitation and general advertising, an is set to become effective on September 23, 2013.

Issuers who intend to issue private offerings under the new Rule 506(c), and promote such private offering with general solicitation and advertising, need to be aware of the additional duties that Rule 506(c) places on issuers.  These additional duties include:

  • All purchasers must be limited to accredited investors;
  • The issuer must take reasonable steps as outlined in Rule 506 to verify that the purchasers of the securities are accredited investors;
  • The issuer must comply with new filing requirements, including new Form D requirements and submission of its advertising materials with proper legends to the SEC prior to the general solicitation and advertising; and
  • Issuers must satisfy the other safe harbor requirements under Rule 506, including the new “bad actor” rules.

For more information on an issuer’s additional duties under the new Rule 506(c) including the new Form D filing requirements, please contact Ashley Bess at or (812) 423-3183, or contact any member of the KDDK Business Law Practice Team.

About the Author

Ashley Hollen

Ashley R. Bess, an attorney at Kahn, Dees, Donovan & Kahn, LLP (KDDK), in Evansville, Indiana, practices in the areas of business law, contract negotiation and creditors’ rights and collections. Ashley earned her B.S. in political science magna cum laude from the University of Evansville, and her J.D. magna cum laude from Valparaiso University School of Law.

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