Changes to Private Offering and Bad Actor Rules Effective September 23, 2013

Securities Law Update

On July 10, 2013, the Securities and Exchange Commission (the “SEC”):

  • Approved final rules (the “General Solicitation Rules”)1 eliminating the prohibition against general solicitation and general advertising in connection with certain private offers and sales of securities in which sales are made exclusively to accredited investors, conducted in reliance on Rule 506 of Regulation D under the Securities Act of 1933 (the “Securities Act”) and allowing general solicitation in connection with securities offerings conducted under Rule 144A under the Securities Act;
  • Approved final rules (the “Bad Actor Rules”)2 disqualifying securities offerings from relying on Rule 506 if they involve certain felons or other “bad actors”; and
  • Proposed rules (the “Proposed Rules”)3 requiring issuers making offerings under amended Rule 506 to make additional Form D filings, add certain legends to marketing materials, submit marketing materials to the SEC and amending Form D to add further information about such offerings.

The General Solicitation Rules and Bad Actor Rules were published in the Federal Register on July 24, 2013 and will become effective September 23, 2013. Until that date, the SEC’s existing regime regulating Rule 506 and 144A offerings remains unchanged. The Proposed Rules will be open for public comment until September 23, 2013.

For a full overview of the General Solicitation Rules, Bad Actor Rules and Proposed Rules please see our previous Sidley Update available here.

1 78 FR 44771, available here.

Previous Sidley Updates on this topic can be found here:

SEC Takes Step toward Fulfilling Congressional Mandate to Eliminate Ban on General Solicitation in Connection with Certain Unregistered Securities Offerings

Congress Liberalizes Securities Offering Regulation

U.S. Congress Enacts JOBS Act, Increasing 499 Investor Limit for Private Funds to 1,999 and Eliminating Prohibition Against General Solicitation in Connection with Certain Private Offerings

2 78 FR 44730, available here. The previous Sidley Update on this topic can be found at SEC Proposes New Rule 506(c) under the Securities Act of 1933 to Implement “Bad Actor” Disqualifications under Section 926 of Dodd-Frank

3 78 FR 44806, available here.

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