The rule would be a partial fulfillment of the JOBS Act mandate that is designed to help small businesses get the funding they need, even if they can’t obtain it from more traditional sources. It still requires investors to be accredited, but the ban on open solicitations for private placements would be lifted.
 
Opponents to the interim rule urged the SEC to stick with its normal procedure and not give in to the pressure to get some type of rule—regardless of complete vetting for investor protections—out there too quickly.
 
A deadline of July 4 for eliminating the ban had already passed by. But putting a rule out with no public commentary period also opened the rule up for legal challenges. Rule 506 allows solicitors for private company investments to attract unlimited funding from accredited investors.
 
Opponents to general solicitation say that doing away with the advertising restrictions currently in effect would require other protections, such as a more concrete way of verifying that an investor is accredited.
 
Hedge funds and other issuers say that the JOBS Act retained enough protections for investors and that the current rule is outdated and inhibits markets.

This Website Is For Financial Professionals Only

Why Join Advisors4Advisors from Advisors4Advisors