New York (HedgeCo.Net) – This morning the SEC delivered a much awaited decision regarding how they interpret the portions of the JOBS Act that address the approval of advertising for securities sales to accredited investors.
In a 4 to 1 vote the SEC approved a motion to allow hedge funds, and other firms who created private offerings to advertise to whoever they want, but they will only be able to accept investments from accredited investors.
The JOBS Act became law in March 2012 made the initial recommendation to allow “general solicitation” for private issuers. The SEC was given time to evaluate how they could implement it.
During the comment section the SEC received over 200 comments, many of which opposed the proposal to to fear of a rush of fraudulent offerings. However, the proponents of the proposal stated that the changes would boost capital formation.
With the general understanding that the SEC would pass the proposal and allow advertising, the issue became how to ensure that hedge funds only take in investments from accredited investors.
Some of the details of the new rule are:
1. Hedge Funds aren’t forced to generally solicit. If you choose not to, there will be no changes for you.
2. If you want to generally solicit (advertise) you will need to file a “Form D” with the SEC at least 15 days before you start advertising.
3. The SEC is very interested in how advertising is being used by private issuers, and have made changes to Form D filings. Funds that make public solicitations will also need to file an amended Form D within 30 days of the offering’s termination.
Failure to follow these rules will likely result in a ban from creating additional securities for a year or more.
The lift on hedge funds advertising will go into effect in about two months, once the regulations have been printed and made public.
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