Solicitation Rule Changes – Part II

The most difficult type of accredited investor to verify is the natural person who meets the income or asset requirements. As discussed in a prior post, an accredited investor includes a person who has a net worth that exceeds $1,000,000.00 (without taking into account the value of a primary residence), or an individual who made $200,000.00 in the prior two years, or joint income with a spouse exceeding $300,000.00 in the prior two year, with a reasonably expectation of making […]

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Solicitation Rule Changes – Part I

As noted in a prior post, general solicitation of investors for private investment has historically been prohibited under SEC rules. This has meant that a party seeking investment could not solicit the public to find investors through such means as websites, radio or television ads, articles in trade publications or magazines, and so on. Accordingly, parties seeking investment have always had to maintain a careful watch over how they look for, and find, investors.

In 2012, Congress passed, and […]

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SEC Rules Providing Safe Harbor for Private Placements: General Condition of Information Disclosure, Solicitation Prohibition

A second general condition in the SEC rules allowing a safe harbor for a private placement is the mandatory provision of certain information described in the rules. The information includes audited financial statements and additional non-financial information. All of the investors must receive the same information.

Although the rules are changing on this particular issue, general solicitation of investors is currently prohibited. If the issuer and investor have a prior relationship, this is generally not a problem. If investors are approached […]

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SEC Rules Providing Safe Harbor for Private Placements: General Condition of Integration

Under the SEC rules that provide a safe harbor for certain private placements, if specific requirements are met, the offering is a private placement and exempt from registration requirements. The rules provide general conditions that must be met.

The first is integration. The rules provides that sales more than six months before the start of the exempt offering, and six months after the completion of the offering will not be counted as a part of the offering at issue. This generally […]

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Private Placements for Equity Investment

Private placements are offerings of securities by a company which are private, and not generally available to the public. Such offerings are generally not subject to registration under federal securities law. The Securities and Exchange Commission (SEC) has attempted to provide guidance one what qualifies as a private placement. The SEC has adopted a series of rules which, if made in complied with the rules, provides a safe harbor for such offerings.

The posts on private placements over the next […]

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