SEC Proposes to Liberalize Solicitation and Advertising in Private Placements

On August 29, 2012, the U.S. Securities and Exchange Commission proposed rule changes to liberalize the use of solicitation and advertising in private placements of securities. The Proposal was made pursuant to the JOBS Act, which was signed into law on April 5, 2012. Section 201(a) of the JOBS Act directs the Commission to change two of its “safe harbor” rules for private placements. Both changes have the same effect – they eliminate restrictions on how securities are offered, as long as the resulting sales meet the requirements of the safe harbor. In particular, they eliminate the longstanding requirement that there be no “general solicitation or general advertising” in connection with private placements under the safe harbor rules. This memorandum describes the Proposal and some of its implications for private placement practices.