The JOBS Act and General Solicitation
The JOBS Act directed the SEC to remove the prohibitions on general solicitation or public advertising for securities offerings relying on Rule 506. In particular, Section 201(a)(1) of the JOBS Act directed the SEC to amend Rule 506 to permit general solicitation or public advertising, provided that the issuer has taken reasonable steps to verify that all purchasers of the securities are accredited investors. On July 10, 2013, the Commission adopted amendments to Rule 506, including a new Rule 506(c) authorizing general solicitation, to accomplish this direction (Rel. 33-9415).
The JOBS Act and 1934 Act Registration.
In addition, Title V of the JOBS Act amended Section 12(g)(1)(A) of the 1934 Act to raise the thresholds at which an issuer will be required to register under section 12(g) of the 1934 Act. An issuer must register within 120 days after its first fiscal year in which the issuer has total assets in excess of $10 million and a class of equity securities (other than exempted securities) held of record by either (i) 2,000 persons, or (ii) 500 persons who are not accredited investors. For these purposes, the “held of record” definition in Section 12(g)(5) does not include securities held by persons who received the securities pursuant to an employee compensation plan in transactions exempt from the registration requirements under Section 5 of the Securities Act of 1933 (“the 1933 Act”), or securities sold in exempt crowdfunding offerings under Title III of the JOBS Act.
As a result, under amended Regulation D, an issuer may conduct a Rule 506 offering by public advertising long as all purchasers are accredited investors, and 1934 Act registration is not required until the issuer acquires 2,000 holders of record (excluding holders who acquired their shares under the Company’s employee benefit plans or in exempt crowdfunding offerings).