INVESTMENT ADVISER LAW BLOG

After lengthy delays, the SEC approved final rules to repeal the prohibition on advertising in connection with Rule 506 private placement offerings.  The final rules were modified only slightly from the previously proposed version. The repeal will become effective in early September.

The new rules permit advertising under in private placements under Rule 506 provided the following conditions are met:

• the securities issued are restricted securities, subject to resale limitations;
• each purchaser is an accredited investor; and
• the issuer takes reasonable steps to verify that the purchasers are accredited investors.

The SEC retained the option for issuers not wishing to advertise to rely on the pre-existing Rule 506 exemption where up to 35 non-accredited (but sophisticated) investors are allowed and the issuer need not demonstrate that it took “reasonable steps to verify” its investors’ accredited status.

Sources:

• Final Rule Adopting Release (SEC Release 33-9415)

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Jack G. Martel is the author of Investment Adviser Law Blog which is devoted to providing information and discussion of interest to investment advisers, private fund managers and others in the financial management industry. Jack is a partner in Ragghianti | Freitas LLP. He has over fifteen years experience in general business and securities transactions with a focus on assisting investment advisers, fund sponsors and managers in all manner of legal, regulatory and compliance issues. Jack can be reached at 415.453.9433 or by email.

Tagged: Compliance, Hedge Fund, Investment Adviser, JOBS Act, Private Equity, Regulatory, SEC

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