Private Offerings: Practical Implications of the SEC’s New and Proposed Rules

On July 10, 2013, the SEC adopted rule changes that permit general solicitation and general advertising in private securities offerings made in reliance on Rule 506 or Rule 144A under the Securities Act. The new rules implement Section 201(a) of the JOBS Act and are intended to facilitate capital formation. While the extent to which offering participants will take advantage of the new flexibility remains to be seen, some changes in practice with respect to offerings made pursuant to Rule 144A or Rule 506(c) seem likely. The SEC also proposed a series of additional rule changes that would, if adopted, impose significant new requirements on Rule 506 offerings, particularly those that are conducted with general solicitation. We expect the proposed rules to draw extensive comments, including concerns about their potential chilling effect on issuers’ use of general solicitation in private offerings and resulting frustration of the JOBS Act’s intended facilitation of capital formation. In the attached memorandum, we address the likely practical implications of the new rules as well as a number of issues that they raise relating to offering structure, other exemptions and concurrent or proximate offerings. We also highlight what we believe to be some of the most significant potential implications of the proposed rules.