UK: SEC Final Rules On General Solicitation And General Advertising In Rule 506 And Rule 144A Offerings

Last Updated: 4 October 2013
Article by David Guin and Harvey Knight

On 23 September 2013 the US Securities Exchange Commission ('SEC')'s amended Rule 506 of Regulation D and Rule 144A under the US Securities Act 1933 to permit general solicitation and general advertising in transactions, became effective.

The Jumpstart Our Business Startups Act 2012 required the SEC to amend its Rule 506 to permit general solicitation and general advertising in certain securities offerings, so long as all purchasers of the securities are accredited investors with any issuer relying on Rule 506 required to take reasonable steps to verify that the purchasers of the securities were accredited investors.

The SEC provided the following factors for an issuer to consider when determining the reasonableness of the steps the issuer takes to verify that a purchaser is an accredited investor:

  • the nature of the purchaser and the type of accredited investor the purchaser claims to be;
  • the amount and type of information that the issuer has about the purchaser; and
  • the nature of the offering.

The SEC further stated that these factors are interconnected and the information gained by examining all of these factors would assist an issuer in assessing the reasonable likelihood that a purchaser is an accredited investor. The SEC noted in its adopting release that "if an issuer has actual knowledge that the purchaser is an accredited investor, then the issuer will not have to take any steps at all." However, it is still important for issuers to retain adequate records that document the steps taken to verify that a purchaser is an accredited investor.

Acknowledging concerns that verification of natural persons' accredited investor status poses greater difficulties for issuers compared to other types of investors, the SEC also included four specific non-exclusive, non-mandatory methods of verifying accredited investor status for natural persons. If such methods are used, they are deemed to satisfy the verification requirements. These methods include:

  • verification based on net income (i.e. reviewing copies of any IRS form that reports the potential investor's income for the two most recent years and obtaining a written representation from such potential investor that he or she reasonably expects to reach the required income level to qualify as an accredited investor in the current year);
  • verification based on net worth (i.e. reviewing bank statements, brokerage statements, certificates of deposit, tax assessments and/or credit reports from a national consumer reporting agency and obtaining a written representation that the potential investor has disclosed all liabilities necessary to make a determination of net worth);
  • third party verification (i.e. obtaining a written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a certified public accountant that they have taken reasonable steps within the past three months to verify the potential investor's accredited investor status and that such potential investor is an accredited investor); and
  • verification by means of existing relationship (i.e. obtaining a certification from the potential investor if such potential investor invested in an issuer's Rule 506(b) offering as an accredited investor before 23 September 2013 and remains an investor in the issuer).

SEC Rule 144A was amended to permit securities to be offered to persons other than qualified institutional buyers (QIBs), provided that such securities are sold only to persons that the seller (and any person acting on behalf of the seller) reasonably believe are QIBs.

Thus, an underwriter or placement agent in a Rule 144A transaction may offer to sell securities utilizing general solicitation or general advertising as long as such securities are ultimately sold only to QIBs.

In addition, the SEC has proposed, but has not yet adopted, the following amendments to offer additional investor protection safeguards and information in connection with general solicitation and general advertising:

  • Issuers relying on Rule 506(c) would be required to:
    • file a Form D no later than 15 days before first engaging in general solicitation and/or general advertising;
    • file a closing amendment to Form D within 30 days after the offering has been completed or abandoned;
    • disclose additional information, including, but not limited to, the types of general solicitation and/or general advertising to be used and the methods to be used to verify the accredited investor status of purchasers.
  • Additionally, under the proposed amendments, an issuer that has failed to file any required Form D reports in the past five years would be disqualified from using any provision of Rule 506 for a future offering. The disqualification would run for one year from the date all required Form D filings were made.
  • Proposed Rule 509 would require prescribed legends in any written materials used for general solicitation and/or general advertising in a Rule 506(c) offering. Furthermore, a proposed Rule 510T would require issuers to submit any general solicitation and/or general advertising materials to the SEC no later than the date of first use of the materials. These submitted general solicitation and/or general advertising materials would not be available to the public and would expire two years after their effective date.
  • Under the proposed amendments, Rule 156 would also apply to the sales literature of all private funds. Currently, Rule 156 provides guidance on the types of information that could be misleading in sales literature used by registered investment companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Harvey Knight
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.