growing businesses. Often acting as an outside general counsel, he provides practical solutions to legal issues by working with company management to understand and implement their business strategy. He regularly assists companies in connection with the structuring and documentation of private securities offerings. 4501 Highwoods Parkway, Suite 210 Glen Allen, Virginia 23060 804.322.1902 Phone 804.346.5954 Fax wmichael@goodmanallen.com www.goodmanallen.com Exchange Commission (SEC) rules have prohibited companies seeking to raise capital in a private securities offering from conducting any sort of advertising or "general solicitation" to obtain investors. In April 2012, however, Congress attempted to make it easier for companies to find investors and raise capital by passing the JOBS Act. solicitation and general advertising for securities offerings relying on Rule 506 of Regulation D (a commonly used exemption). After a 15-month period, the SEC issued a final rule in July 2013 containing the changes to Regulation D2 The rule changes became effective on September 23, 2013. announcements and publish information concerning the offering in various outlets (including newspapers, journals, magazines and web sites). email potential investors, utilize social media to attract investors and engage in other activity that previously would have constituted "general solicitation." using Rule 506(c)? 506(c) requires (among other things) that all investors must be "accredited investors" investors are accredited investors. must be undertaken? and each offering to determine the types of reasonable steps necessary to verify that investors are accredited. According to the release, companies should consider: (1) the type of accredited investor that the purchaser claims to be; (2) the amount and type of information that the issuer has about the purchaser; and (3) the nature of the offering, such as the manner in which the purchaser was solicited, and the terms of the offering. For example, if a purchaser is an indi- vidual, was solicited via an advertisement or a cold call, and the minimum invest- ment amount is $25,000, the company would likely be required to take greater steps to verify the investor's status. On the other hand, if the minimum investment amount is $1,000,000, the company could take fewer steps to verify the investor's status. Note that the company has the burden of proving that it took reasonable steps. Accordingly, the company should retain all documentation and verification that it received. Now Permitted for Companies Conducting Private Securities Offerings |