JOBS Act Reverses Ban on General Solicitations — But SEC Not Ready to Implement

Many entrepreneurs (and their lawyers) are eagerly awaiting the new rule from the Securities and Exchange Commission (SEC) that will allow companies to engage in general solicitations, provided that securities are sold only to “accredited investors.”  Originally, the SEC was directed to implement these rules by July 4, 2012, which was 90 days from Congress’ passage of the Jumpstart Our Business Startups Act (JOBS Act) in April 2012.  Not surprisingly, during a Congressional hearing on June 28, 2012, the SEC confirmed that it would not be able to make this deadline.   The SEC gave no firm timetable on when it expected these rules to be issued.

Note – On July 2, 2012, the SEC announced that it has scheduled an open meeting for August 22, 2012 to consider amendments to Rule 506 of Regulation D and Rule 144A that would remove the prohibition on general solicitation in these rules.  It is unclear whether the SEC will propose rules at this open meeting or adopt interim final rules.  The SEC’s announcement can be found here.