SEC passes rule allowing general solicitation – but don’t do it yet!

Today the SEC passed rules eliminating the ban on solicitation for certain accredited-only investments made pursuant to Section 506(c) of Regulation D. So does this mean you can start email bombing people to invest in your company? Or hire William Shatner to do a pitch on late-night tv? NO! At least not yet.
Despite some news reports to the contrary general solicitation is not legal right now. I can hear some of you ask “didn’t you just say the SEC passed the rule?” Yes, but just because the rule is passed that doesn’t mean it is currently effective. The rule isn’t effective until its effectiveness date which we hear (though this may change) will be 60 days from publication in the Federal Register.

What this means for you is that while you may be able to do some general solicitation in the near future you should hold off until the rule is actually in effect and you understand and feel comfortable you comply with its requirements (which includes making sure your communications are complete and not misleading). If you go ahead and start soliciting now you are “jumping the gun” and could find yourself in hot water with state and federal securities regulators, possibly leading to having to undo the deal or worse. Better to wait and make certain you legally in the clear.

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