Policy Articles

The JOBS Act and Public Shareholder Communications

The AIC urges the SEC to simplify the verification of investor status and provide further assurances on what constitutes “general solicitation” to allow for normal business reporting without unwarranted scrutiny.

While we applaud the SEC for removing from its regulatory agenda a rule proposal that would have imposed additional burdens on private funds and other issuers offering securities in reliance on Regulation D, we believe more needs to be done. For example, the guidance that the SEC provided on the verification requirement in Rule 506(c) under the Securities Act of 1933 has not allowed the benefits contemplated by the JOBS Act (which directed the SEC to amend Regulation D to permit general solicitations and general advertising in offerings made under Rule 506) to be fully realized by investors. The AIC will engage with the SEC to explore ways in which the means for verification of an investor’s status as an accredited investor can be made less burdensome.

In addition, we believe the SEC’s providing greater certainty concerning the application of the “general solicitation” prohibition in Rule 506 to public company business communications to equity and debt holders and others would be desirable. For example, in order to avoid any chilling of the free flow of such information, the SEC could adopt a safe harbor that would clarify that communications containing routine factual business information by a fund sponsor concerning fund investment results, portfolio company transactions, the status of fund raising, or the sponsor’s business plans would not constitute a general solicitation.