Category: Rule 506

Rule 506: On December 4, 2013, the SEC updated its Compliance and Disclosure Interpretations (“C&DI’s”) including new guidance on the rules disqualifying bad actors from participating in Rule 506 offerings…

Aug272013

The SEC has Issued Proposed Rules Amending Regulation D, Form D and Rule 156 – Part II

July 10, 2013, the same day the SEC adopted final rules eliminating the prohibition against general solicitation and advertising in Rules 506 and 144A offerings as required by Title II of the JOBS Act, and adopted new rules disqualifying felons and other bad actors from participating in Rule 506 offerings as required by Section 926 of the Dodd-Frank Act, the SEC issued proposed rules further amending Regulation D, Form D and Rule 156.  On August 19, 2013, I published a blog detailing the proposed rule changes

Aug202013

The SEC has Issued Proposed Rules Amending Regulation D, Form D and Rule 156 – Part I

On July 10, 2013, the same day the SEC adopted final rules eliminating the prohibition against general solicitation and advertising in Rules 506 and 144A offerings as required by Title II of the JOBS Act, and adopted new rules disqualifying felons and other bad actors from participating in Rule 506 offerings as required by Section 926 of the Dodd-Frank Act, the SEC issued proposed rules further amending Regulation D, Form D and Rule 156. 

Summary of Proposed Rule Changes

The proposed amendments will (i) require

Aug072013

An Overview of Exemptions for Hedge Fund Advisors: Exemptions for Advisors to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers – Part III

As the rules that will allow general solicitation and advertising for Rule 506(c) and 144A offerings near effectiveness, our firm has noticed a spike in inquiries related to small hedge funds and feeder funds.  The JOBS Act is not the only recent congressional act to change the landscape of hedge funds; the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) made significant changes as well.

In particular, the Dodd-Frank Act eliminated the oft relied upon exemption from registration for private hedge fund advisors for those advisors with fewer than 15 clients.  While eliminating the private advisor exemption, Dodd-Frank created three new exemptions, which are the operable hedge fund advisor exemptions today.  These exemptions are for:

                (1) Advisors

Jul312013

SEC has Finalized Rules Disqualifying Felons and Other “Bad Actors” from Rule 506 Offerings

On July 10, 2013, the same day the SEC has adopted final rules eliminating the prohibition against general solicitation and advertising in Rules 506 and 144A offerings as required by Title II of the JOBS Act, the SEC adopted new rules disqualifying felons and other bad actors from participating in Rule 506 offerings as required by Section 926 of the Dodd-Frank Act.

Background

The Dodd-Frank Act required the SEC to implement rules which disqualify certain Rule 506 offerings based on the individuals involved in the

Jul162013

New SEC Rules Have Eliminated the Prohibition Against General Solicitation and Advertising in Rules 506 and 144A Offerings

In a historic 4-1 vote on July 10, 2013, the SEC has adopted final rules eliminating the prohibition against general solicitation and advertising in Rules 506 and 144A offerings as required by Title II of the JOBS Act.  On the same day, the SEC adopted amendments to Rule 506 to disqualify “felons and bad actors” from participating in Rule 506 offerings.  This blog discusses the rules eliminating the prohibition against general solicitation and advertising.  A separate blog will discuss the felon and bad actor disqualifications.

The SEC has also adopted modifications to Form D to require Issuers to specify if they are conducting an offering that permits general solicitation and advertising and to change the required time of filing the Form D for

May162013

An Overview of Exemptions for Hedge Fund Advisers: Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers – Part I

As I have blogged about in the past, the JOBS Act will have a significant impact on hedge funds, and in particular smaller hedge funds. As the delayed rule changes become imminent, our firm has noticed a spike in inquiries related to small hedge funds and feeder funds. The JOBS Act is not the only recent congressional act to change the landscape of hedge funds; the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) made a significant impact as well.

In particular, the Dodd-Frank Act eliminated the oft-relied upon exemption from registration for private hedge fund advisers for those advisers with fewer than 15 clients. While eliminating the private adviser exemption, the Dodd-Frank created three new exemptions, which are the operable hedge fund adviser exemptions today. These exemptions are for:

(1) Advisers solely to venture capital funds;

(2) Advisers solely to private funds with less than $150 million in assets under management in the U.S.; and

(3) Certain

Mar122013

SEC Issues Guidance Regarding The Exemption From Broker-Dealer Registration In Title II Of The JOBS Act

Background

Title II of the JOBS Act, requires the SEC to amend Rule 506 of Regulation D to permit general solicitation and advertising in offerings under Rule 506, provided that all purchasers of the securities are accredited investors and such accredited status is reasonably verified by the Issuer.

In addition, Title II creates a limited exemption to the broker dealer registration requirements for certain intermediaries that facilitate these Rule 506 offerings.  In particular, new Section 4(b) to the Securities Act of 1933, has added a new exemption to the broker dealer registration requirements for:

(A) a person that  maintains a platform or mechanism that permits the offer, sale, purchase, or negotiation of or with respect to securities, permits general solicitations, general advertisements, or similar related activities by issuers of such securities, whether online, in person, or through any other means

(B) that person or any person associated with that person co-invests in such securities; or

(C) that person or any

Mar112013

NASDAQ To Acquire Sharepost And Create The NASDAQ Private Exchange

NASDAQ acquires Sharepost

On Wednesday March 6, 2013, NASDAQ surprised the small cap and investment community when it announced it is acquiring Sharepost’s private company market place (PCMP) exchange and rebranding it the Nasdaq Private Exchange.

In December, 2011, I wrote a few blogs on PCMPs.  A PCMP is a trading platform, such as SharePost or SecondMarket that provides a market place for illiquid restricted securities, such as private company securities, 144 stock, debt instruments, warrants, and the like or alternative assets.  It is on a PCMP that pre-IPO Facebook, Groupon and LInkedin received their trading start.  Following the IPO of these large entities, and in particular Facebook, traffic and use of PCMP sites declines, but NASDAQ clearly believes the decline is temporary, and I agree.

Private Company Market Places

Each PCMP offers a fully automated back office, documentation, escrow, transfer and settlement support. Users open trading accounts, like they would with any other broker dealer.  The PCMP provider collects

Feb272013

Implementation Of The Elimination Of The Prohibition Against Advertising For Private Accredited Investor Offerings And The Crowdfunding Act, Continues To Be Delayed

The annual “SEC Speaks” conference, in which Securities and Exchange Commission (SEC) representatives review the agency’s efforts over the past year and preview the year to come, was held on February 22-23, 2013.

During the conference the SEC laid out the numerous items on its agenda for the year to come and beyond.  The list included the careful implementation of the various titles of the JOBS Act, including Title II and Title III.

Title II of the JOBS Act provides that the SEC will amend Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under, to eliminate the prohibition on general solicitation and general advertising in a Rule 506 offering, so long as all purchasers in such offering are accredited investors.  Although on August 29, 2012 the SEC published proposed rules implementing Title II, those rules have been met with numerous comments and opposition and it is entirely unclear how the SEC shall proceed. 

Dec052012

New FINRA Rule 5123 Takes Effect Requiring Notice of Private Placements by Member Firms

The Financial Industry Regulatory Authority has adopted new Rule 5123 requiring members to file notice of their participation in private placements.  The Rule took effect on December 3rd 2012.  The new rule does not contain a definition of “private placements” and accordingly is presumed to cover all private placements including those involving general solicitation and advertising under the new Rule 506(c) created by the JOBS Act.

Rule 5123 requires member firms to file a copy of the private placement memorandum, term sheet or other disclosure document with FINRA, for all offering in which they sell securities, within 15 calendar days of the first sale.

FINRA enacted the rule in an effort to further police the private placement market and to ensure that members participating in these private offerings conduct sufficient due diligence on the securities and its issuer

In filings with the SEC, FINRA expressed its position that Rule 5123 is consistent with the JOBS Act in