From Forbes:
In a move that should create a boom in deal flow and investment activity for early stage companies, the SEC amended its rules this week to permit general solicitation of private security offerings. Industry watchers believe the new criteria could open the gates for vast amounts of additional funding. The existing “Reg D” program exemption has already been responsible for more than $1.3 trillion in funding in 2012, and more than 37,000 Regulation D offerings have been executed since 2009.
What exactly happened in Washington, D.C. this week, and what will it mean? I asked my good friend Dr. Richard Swart to share his thoughts on this news.
Disclosures: I have no business relationship with Swart, but worked with him on the Alan Hall Grow America venture prior to his current roles as a director of entrepreneurial research for The University of California, Berkeley and as a community relations lead for Goldman Sachs 10K Small Business.
Here’s what Swart told me about how this week’s news will influence early stage entrepreneurs:
In summary, in compliance with the mandate of the JOBS Act of 2012, the SEC has enacted rules that now permit general solicitation of private security offerings. They also created a new type of securities offering – something that has not occurred in U.S. Government in decades.
The SEC has amended Regulation D of Rule 506 of the Securities Act of 1933. Rule 506 is the most commonly used exception to the requirement for a full SEC registration (a process that is time consuming, onerous and highly expensive for early stage companies to fulfill). The 506 exemption has allowed private placement memorandums that companies could use to privately solicit investments from accredited investors (individuals with $1 million net worth not including their residence, or $200K a year in individual income).
When this week’s regulation formally enters the federal register in the coming 4-6 weeks the amended ”Reg D” will allow for a new class of 506(c) offerings. These are still private offerings, Swart explains, but here is the clincher: They can now be advertised in print, social media, websites, radio, and any other form of public communication....MORE
