United States: Proposed SEC Rule To Permit Advertising In Connection With Private Placements

Summary of Comments and Status

The Jumpstart Our Business Startups (JOBS) Act requires the SEC to change its rules so that advertising will be permitted in certain private placements. This change has the potential to significantly alter the manner in which money is raised for start ups, operating businesses and private funds. The SEC proposed these changes to Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933 on Aug. 29, 2012.

The comment period for the proposal ended on Oct. 5, 2012. However, the SEC continues to receive comment letters and has continued to hold meetings to discuss the proposal. For the reasons discussed below, action on the final rule change is not expected until after confirmation of Chairman Shapiro's replacement.

This article:

• outlines the proposed rule change;
• summarizes the comments the SEC has received on the proposal;
• discusses several areas of concern relating to the proposed rule change; and
• explains some of the alternative ways of proceeding available to the SEC.

To read the Executive Summary and access the white paper on the proposed SEC rule changes, please use this link.

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.