November 2013 Bar Bulletin
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November 2013 Bar Bulletin

Changes to Classic Securities Regulations: Lifting the Ban on General Solicitation

By Gavin Johnson


For as long as you and I have been alive, companies could not use general solicitations to raise money from investors. However, as of September 23, startups and other companies are now able to use general solicitation to sell their securities to investors under the new Rule 506(c) of Regulation D.

That's right, issuers can now advertise to the public that they are seeking to raise capital for their companies. But, as we all know, changes to rules do not come without additional hurdles.

First things first, let's explore what constitutes general solicitation under the securities regulations.

"General Solicitation"

The regulations do not define "general solicitation." Instead, they offer a non-exhaustive list of what would be considered general solicitation. General solicitation includes, but is not limited to:

  • Any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio; and
  • Any seminar or meeting whose attendees have been invited by any general solicitation of general advertising.

If a company is pitching for money at an event whose attendees have been invited by any general solicitation or advertising, it has generally solicited its offering.

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