In certain types of private placements of securities, a condition to complying with the relevant exemption from Securities Act registration is that the issuer, as well as those acting on its behalf, must not use "general solicitation" or "general advertising" to market the securities. In August 2015, the SEC issued a "no action" letter and released new interpretative guidance relating to what constitutes general solicitation or general advertising.
Among other things, the new guidance clarifies the SEC's position on the following:
- The use of an unrestricted, publicly available website to offer or sell securities constitutes a general solicitation;
- Factual business information that does not condition the public mind or arouse public interest in a securities offering is not an offer and may be disseminated widely without violating the prohibition on general solicitation. "Factual business information" typically is limited to information about the issuer, its business, financial condition, products, services or advertisement of such products or services, provided the information is not presented in such a manner as to constitute an offer of the issuer's securities. Factual business information generally does not include predictions, projections, forecasts or opinions with respect to valuation of a security;
- The existence of a pre-existing, substantive relationship is one means, but not the exclusive means, of demonstrating the absence of a general solicitation. Accordingly, an issuer (or a person acting on its behalf) may make offers of securities to persons with whom it has such a relationship without violating the prohibition on general solicitation. A "substantive" relationship is one in which the issuer (or a person acting on its behalf) has sufficient information to evaluate, and does, in fact, evaluate a prospective offeree's financial circumstances and sophistication in determining his or her status as an accredited or sophisticated investor.
The SEC's compliance and disclosure interpretations relating to general solicitation and general advertising are available at: https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm#256.23
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