private offering

SEC Lifts 80 Year Ban on Private Offerings

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

 

 

JOBS Act and Direct Mail Marketing

The 2012 Jumpstart our Business Startups (JOBS) Act has instigated several vectors of change, most notably regarding crowdfunding. Another important change applies to the marketing of private placements, which heretofore were not allowed to be offered to the general public. The Act, following suitable rulemaking, will remove marketing prohibitions on private placements – you will be able to market your private securities to the general public as long as you only accept investments from accredited investors. We are waiting on the Securities and Exchange Commission to finalize these rule changes, which will probably kick in no sooner than 2013.

As you know from our previous blogs, an individual investor is “accredited” is he or she meets these two criteria:

  1. Income of at least $200,000 ($300,000 for married couples) over each of the past two years and a reasonable belief that this level of income will continue into the present year.
  2. Net worth of at least $1 million (individual or joint), not counting the value of your primary residence. If your primary residence is worth less than the balance on your mortgage, you must subtract the underwater amount from your net worth.

Assuming you meet these two requirements, you may participate in a private placement by filling out a questionnaire attesting to your financial status.

Very interesting, you say, but how does this affect my direct marketing strategy? Well, if you are mailing to investors that you believe to be accredited, what happens if you make a mistake and send an offer to someone who is not accredited? When the new law is implemented, you will be safe. At that time, you will have more reason to send out your mail campaign to the leads on your accredited investor lists – the kind we sell at Sales Leads.tv. You certainly don’t want to waste money or sully your reputation by marketing to non-accredited investors, but if by mistake you do, you will no longer be in jeopardy.

Under the forthcoming new rules, if you are an investment manager or hedge fund manager, you will be able to deploy a targeted direct mail campaign to accredited investors without worry. One thing you will want to avoid at all costs is a general direct mailing that is not made up exclusively of accredited investors – you will become the laughing stock of your industry. That’s why our accredited investor lists are so highly valued by direct mail marketers and telemarketers. Our lists are produced using two separate independent surveys and seldom contain mistakes, but the JOBS Act will eventually take you off the hook if an occasional mistake occurs. And, since you are marketing via the mail instead of by phone, you don’t have to worry about those pesky Do Not Call regulations. We invite direct mail marketers to inquire about our accredited investor lists – you will find them to be of the highest quality and very reasonably priced.