Monday, April 9, 2012

JOBS Act becomes law

On April 5, President Obama signed into law the Jumpstart Our Business Startups Act (the "JOBS Act").  The JOBS Act represents the most significant change to the law governing securities offerings since the Securities Act of 1933.  I'm sure I will be blogging about the JOBS Act quite a bit in the coming months as the SEC rolls out its new rules implementing the JOBS Act, but I thought I'd mention an aspect of the law I found most interesting today.

Many private offerings will soon no longer be private!  Let me explain.  Most private offerings of securities rely upon Rule 506 for its exemption from the registration requirements of the Securities Act.  Usually, Rule 506 offerings are made exclusively to accredited investors (investors with high incomes, high net worths, or both).  Rule 506 currently prohibits general solicitation (such as advertisements on television, radio, newspaper, etc.) to publicize the offering.  The JOBS Act requires the SEC to adopt rules permitting general solicitation connection with 506 offerings on so long as all of the purchasers of securities in the offering are accredited investors.  Hence, companies seeking capital will soon be able to publicly offer securities in a "private" offering!  These are interesting times to be a securities lawyer.

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