Ban on General Solicitation Lifted for Private Placement Offers to Accredited Investors
Last week the SEC voted to lift the ban on general solicitation for private placement offers to accredited investors. The ban remains in effect for non-accredited investors and the change won’t take effect for 60 days after publication in the Federal Register.
Currently, companies must rely on personal relationships and referrals to get the word out on their private placements. This, of course, limits the companies’ ability to find possible investors.
Using general solicitation – advertising, “pitch fests” and other similar techniques – runs afoul of SEC requirements and taints the private placement offering, causing problems with current investors and effectively preventing future rounds.
While lifting the ban is great news, there are limitations and additional burdens for companies using general solicitation.
First, it will be permitted only in private placement offers to accredited investors. Once general solicitation is utilized in an offering no non-accredited investors may invest.
Next, issuers will be required to file a Form D at least 15 days in advance of advertising and to update that Form D no more than 30 days after the offering is completed or abandoned.
And, finally, issuers using general solicitation will have to confirm (through documentation) that purchasers are, in fact, accredited. Currently the investors need only confirm this to the issuer in writing, without backup documentation (i.e., the honor system).
Unfortunately, there’s still no effective date for the other part of the JOBS Act beneficial to small startups – equity crowdfunding.
Yes, I’ve been out of touch for a while. I’ve been working on a big personal project since the holidays and took a break from writing this newsletter. Those of you who’ve read my newsletter for a while know that I enjoy outdoor activities – kayaking, mountain biking, hiking, hunting, etc. So, I took the plunge and purchased a house and a couple of acres on the Suwannee River in North Florida. It’s right in the heart of all of those activities.
Calling it a house when we first bought it was a bit of a stretch. It hadn’t been lived in for the better part of a decade. When we first went inside, it was like walking into a time warp. The interior looked like my grandmother’s house in 1970. Dark everything with red and green carpet, red curtains, and red and yellow patterned plastic covering fluorescent lights. A dishwasher that connected to the sink. Really.
We had to demolish the interior and start over. We removed more than a ton (2,000 lbs.) of debris from the house and the grounds. It’s been a lot of work. But, we can see the finish line for the interior.
So, I’ll have more time to write this newsletter on a regular basis. Though I’ve kept up with the Orlando entrepreneur scene, I’m looking forward to writing about my perspective again.
We’re looking for a family friendly name for the property. Please send me your suggestions by reply e-mail. If I pick yours (and you’re the first to submit the name), I’ll give you an honorable mention.
Talk to you in a couple of weeks.