General Solicitation of Accredited Investors Allowed – But BewareAdded by Hawley Troxell in Business Law, News on September 23, 2013
Effective today, the SEC has lifted the ban on general solicitation of accredited investors in private offerings, meeting the requirements of Rule 506. For a good summary of the new rule, click here. To rely on this rule, issuers must take “reasonable steps to verify” accredited investor status – failure to comply with this critical portion of the new rule has dire consequences. Generally, if your offering fails to comply with Regulation D, you may still fall within the statutory exemption for private offerings provided in Section 4(a)(2) of the Securities Act of 1933. But if you generally solicit investors under the new rule and fail to take reasonable steps to verify their accredited investor status, you will not be able to rely on Section 4(a)(2)! For assistance with private offerings or the new rule, contact one of our Business Group or call 208.344.6000.
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