Companies sometimes need to raise private financing during the course of the IPO process. The JOBS Act makes this easier. As directed by the JOBS Act, yesterday the SEC proposed rule amendments to eliminate:
- in private placements conducted pursuant to Rule 506 under Regulation D, the prohibition on general solicitation and general advertising, provided that all purchasers are "accredited investors" (as defined in Regulation D); and
- in private placements conducted pursuant to Rule 144A, the prohibition on general solicitation, general advertising, and making offers to investors who are not "qualified institutional buyers" (as defined in Rule 144A), provided that securities are sold only to persons that the company (and any person acting on its behalf) reasonably believes are qualified institutional buyers.
The JOBS Act does not limit these changes to placements by emerging growth companies. The revised rules, once effective, will be available to all companies.