In a letter to the SEC, three US Senators urged the Commission to adopt
reasonable regulations at the agency’s August 22 Open Meeting implementing the elimination
of the general solicitation ban in Regulation D mandated by the Jumpstart Our
Business Startups (JOBS) Act. Senators Pat Toomey (F-PA), John Thune (R-SD) and
Kay Bailey Hutchinson (R-TX) said that the regulations should provide
businesses with reasonable steps that they can take to verify that investors are
accredited so that they can raise additional capital and grow their businesses.
The Senators emphasized that a common sense approach to the regulations
implanting these provisions of the JOBS Act will avoid inadvertently preventing
businesses from making use of general solicitation as intended by Congress and
will best achieve the purpose of the JOBS Act, which modifies the exemption
provided under Regulation D to eliminate the ban on general solicitation so
long as all purchasers of the securities are accredited investors.
The Senators said that the SEC is slated to hold an Open Meeting on
August 22 to consider regulations eliminating the general solicitation
prohibition under Regulation D and Rule 144A under the Securities Act as
required by Section 201(a) of the JOBS Act. According to the Senators, the
general solicitation prohibition currently prevents small businesses from
attracting capital from accredited investors nationwide because it allows then
to raise capital only from investors with whom they have a pre-existing
relationship. According to the Senators, the legislative intent of Section
201(a) was to remove the general solicitation prohibition to allow businesses
to attract capital from accredited investors nationwide. In fact, they noted
that earlier this year the SEC’s Advisory Committee on Small and Emerging
Companies came to a similar conclusion in recommending that the Commission take
immediate action to relax or modify the restrictions on general solicitation
and general advertising.