The U.S. Securities and Exchange Commission Removes 80 Year Old Ban on Advertising for Private Offerings
Great news for companies and investors! After 80 years the SEC has finally lifted the ban on publicizing shares in private offerings. This ban has made it extremely difficult for people without a black book to raise money. Companies and their representatives have had to rely on verbal communication only, as any advertising could lead to a violation of Reg D. Now after almost a century the SEC has finally lifted the ban in a 4-1 vote. The new rule will take effect 60 days after the SEC publishes it in the Federal Register.
The SEC Lifted the Advertising Ban in Response to Pressure from Congress.
When Congress passed the JOBS Act they asked the SEC to lift this ban as well. The lack of being able to advertise caused most investors to miss the opportunity to invest in a private offering, simply because they wouldn’t hear about it until it was closed and had been announced. Now companies will be able to more broadly advertise. They still need to note that the offering is for Accredited Investors.
Now a Private Placement Memorandum can be advertised on YouTube, Facebook, Twitter, and other forms of social media along with Press Releases and a company website.
Companies should still exercise caution in their advertisements to make sure they do not violate anything in Reg D, Rule 505, or Rule 506 and risk blowing their “safe harbor” protections under the Act. It is recommended that all advertisements be ran by an attorney to ensure they do not open a company up for unexpected risk.
It is also rumored that the SEC will consider it a “best practice” to advertise on Dealbreaker. While this has not been an official request, following an SEC best practice is always a good idea. Companies can contact Dealbreaker and purchase ad space on their site.
The Private Offering Market, through Reg D, is $900 billion per year! This is $857 billion more than the money raised through initial public offerings.
With companies using private placement memorandums to raise billions of dollars investors have been eager to participate. By lifting this ban the less “connected” investors will have access to invest in private offerings early on. This new ruling will indeed be beneficial for both companies and investors, with time telling how much additional capital is raised through the advertisement of private offerings.
By lifting the ban the SEC has effectively made private offerings as close as you can get to going public, without all of the pesky registration requirements. If you are in the business of promoting private placements your job just got easier. Remember to continue targeting Accredited Investors to stay in compliance. You can always get an updated list from AccreditedInvestorLeads.com
