Wednesday, August 29, 2012

The JOBS Act and Private Placements [UPDATE]

By Tim Husson, PhD

Both the New York Times and the Wall Street Journal are reporting that the SEC has proposed removing the restriction on general solicitation of hedge funds and other private placement investments as required by the JOBS Act of 2012. Last week we blogged about the implications of this action, and at that time there was concern that the SEC would impose further restrictions that would dampen the effects of the law. It now appears that the SEC will not impose any additional regulations.

The types of investments covered by this action still can only be sold to wealthy (or 'accredited') investors. Some had hoped that the SEC would clarify rules related to how this restriction will be enforced, since the provision only requires that such investments take "reasonable steps" to prevent selling to unaccredited investors.  The current proposal does not suggest any universal validation procedures but directs issuers "to consider the facts and circumstances of the transaction."

A fact sheet related to the proposal is available here, and the SEC offers a dedicated website for news related to the JOBS Act.

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