On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act” or the “Act”) was signed into law, creating a new regulatory on-ramp for emerging growth companies going public. The JOBS Act also includes provisions that require the Securities and Exchange Commission (the “SEC”) to undertake various initiatives, including rulemaking and studies touching on capital formation, disclosure and registration requirements. Title II of the Act affects offerings by issuers pursuant to Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), as well as resales under Rule 144A of the Securities Act. In particular, the Act directs the SEC to amend its rules to:
- Repeal the ban on general solicitation and general advertising for offerings under Rule 506 of Regulation D when sales are only to accredited investors;
- Revise Rule 144A to provide that securities sold under Rule 144A may be offered to persons other than qualified institutional buyers (“QIBs”), including by use of general solicitation or general advertising, provided that securities are only sold to persons reasonably believed to be QIBs; and
- Amend Section 4 of the Securities Act such that offers and sales exempt under Rule 506 shall not be deemed public offerings under the federal securities laws as a result of general advertising or general solicitation.
For Private Funds, Regulation D as we know it is still in effect for the next 90 days as the JOBS Act directs the SEC to make the relevant rule changes to Rule 506 and Rule 144A within 90 days, but it does not modify the current text of those rules. In addition, Funds should continue to follow applicable terms of SEC interpretative guidance. Senior members of the SEC staff participated in discussion of the JOBS Act yesterday that provided further guidance on this subject, and the SEC is still currently seeking public comments on SEC regulatory initiatives under the JOBS Act.
Pillsbury and KPMG, along with the California Hedge Fund Association, will be sponsoring a program on the JOBS Act and the new world of “general solicitation” for Funds in June.