Under current rules, companies looking to sell securities to
raise capital must either register the offering or rely on an
exemption. Most registration exemptions, however, prohibit
companies from engaging in general solicitation or general
advertising in connection with the offering.
The proposal, part of the rulemaking required under the JOBS Act enacted earlier this year, would
amend Rule 506 of Regulation
D, which governs private placements, to permit companies to
use general solicitation and general advertising to offer
securities provided that the purchasers are accredited investors
and the issuer takes reasonable steps to verify that the
purchasers are accredited investors. Meanwhile, Rule 144A, which
provides an exemption for resales of certain restricted securities
to qualified institutional buyers, would be amended to provide that
securities sold pursuant to the rule may be offered to persons
other than QIBs, provided that the securities are sold only to
persons that the seller and any person acting on the seller's
behalf reasonably believe are QIBs.
According to the SEC Chairman Mary
Schapiro, the proposed rules "fulfill
Congress's clear directive that issuers be given the ability to
communicate freely to attract capital, while obligating them to
take steps to ensure that this ability is not used to sell
securities to those who are not qualified to participate in such
The proposed rules are the latest in the SEC's moves
to implement rules consistent with the JOBS Act. As we've previously discussed, the
Act's provisions respecting emerging growth companies apply to
foreign private issuers and, thus, the changes would
potentially affect Canadian companies looking to raise
capital in the U.S. Meanwhile, the CSA and OSC continue to
review exemptions concerning private placements
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In Ontario Securities Commission v. Tiffin, the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the Securities Act, as it relates to promissory notes. The defendant in the case was charged with trading in securities without being registered and while prohibited, and without filing a prospectus.
The OSC has issued a press release advising stakeholders that Ontario securities law may apply to any use of distributed ledger technologies, such as blockchain, as part of financial products or service offerings.
The use of electronic signatures is becoming increasingly commonplace in commercial transactions, as individuals and businesses capitalize on the administrative efficiency afforded by today’s digital world.
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