Archives for September 2013

General Solicitation -Title II- Where to now?

General Solicitation -Title II- Where to now?

On April 5th, 2012 President Obama signed into law The Jumpstart Our Business Startups Act, known as the JOBS Act, which for the first time in 80 years relaxed the investment securities offering rules, enacted during the Great Depression. Or did it fail to relax these rules? The first glance looks very exciting. However taking a deeper view of the new Title II rules might change the public’s perspective.
Much debate is going around deciding if the rules have actually been truly relaxed. The rules certainly have changed, but there is no consensus agreement that these new rules constitute a relaxation to the old rules. Let’s examine one aspect of the change.

In a Regulation D offering Rule 506(b), it is currently required that the issuer ensures no general solicitation i.e. it is a “non-public” offering or in other words, the general public need to be shielded from the financial investment in question. Knowledge of this investment needs to be spread privately among accredited investors i.e. people earning >$200,000 pa or >$300,000 pa when taken jointly OR an investor who has a self-worth of >$1, 0 million dollars excluding their primary residence. (There are other criteria which we won’t touch on now). The onus to prove these criteria belongs to the investors, not the issuer. In addition the owner can admit 35 non accredited but educated investors (making allowance for a family and close friend investing opportunity). These rules for this regulation still exist today when no advertising is undertaken. However, we all know that the chances of getting a larger range of investors come when we cast a wider net. Enter the new JOBS Act. [Read more…]