In September 2013, the SEC's Office of Investor Education and Advocacy issued an alert for investors relating to the SEC's new general solicitation rules. In addition, a second bulletin provides details on the definition of "accredited investor." These documents are available on the SEC's website at the following links:
http://www.sec.gov/investor/alerts/ia_solicitation.pdf
http://www.sec.gov/investor/alerts/ib_accreditedinvestors.pdf
The general solicitation alert reminds investors that private placements often involve a variety of risks, including that the relevant offering documents do not typically contain the same amount of information relating to an issuer and the offering as is the case for a registered offering. In addition, if an issuer does not take steps to verify an investor's accredited investor status, it could be a warning sign that something isn't quite kosher about the offering.
The SEC's "accredited investor" bulletin is designed to help individuals determine whether they are in fact accredited investors. The bulletin includes a few examples as to how the "net worth" test may be (or may not be) satisfied in different scenarios.
These bulletins reflect the SEC's continuing efforts to ensure that market participants do not utilize the new rules in an inappropriate manner, and that private placement investors understand the risks of their investments.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved
