More than a year after President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law, the Securities and Exchange Commission has finally lifted the ban on general solicitation, which allows companies to market private placements broadly.
Until now, companies have had to advertise offerings behind online registration walls and go through broker-dealers to reach new accredited investors. Once the rule goes into effect in mid-September, they will be allowed to market private placements anywhere, including on social media. But they can still only sell to accredited investors. Issuers will be responsible for verifying that their investors are accredited.
Under current regulations (which will remain in effect), investors must reach certain levels of income or net worth to qualify. In its final rule, the SEC included a list, rendered in the chart below, of some of the ways issuers can comply with the commission’s requirement that such companies must verify an investor’s status.