On July 10, 2013, the SEC adopted final rules pursuant to Title II of the Jumpstart Our Business Startups Act of 2012 (JOBS Act) that lift the long-standing ban on general solicitation and advertising for private securities offerings under Rule 506 and Rule 144A.
Some highlights of the rules include:
• Under new Rule 506(c), an issuer may engage in general solicitation or advertising of an offering of its securities if the issuer takes reasonable steps to verify that the purchasers of the securities are accredited investors and all purchasers of the securities are accredited investors at the time of sale.
• For assessing whether an issuer has taken reasonable steps to ascertain the status of an accredited investor, the final rules apply the facts-and-circumstances approach originally set forth in the SEC’s proposed rules issued on August 19, 2012, but with one important modification: the final rules include a list of four specific non-exclusive and non-mandatory methods for verifying accredited investor status for purchasers who are natural persons.
• With its adoption of the Rule 506 and related Regulation D amendments pursuant to the JOBS Act, the SEC also adopted a long-awaited amendment to Rule 506 to prohibit the use of the safe harbor exemption by certain “bad actors” (violators of securities laws) pursuant to the Section 926 of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
• Simultaneous to its adoption of these significant amendments, the SEC proposed new rules and amendments to Regulation D designed to enable the SEC to better monitor the Rule 506 market and to address concerns that may arise in connection with the general solicitation and advertising of private offerings under Rule 506(c).

Investment Company Status Considerations for Cash Positioning in Wake of Bank Failures
Given this week’s headlines, many emerging companies may be asking themselves: “Why am I holding so much cash?” The Investment Company Act of 1940 (the 1940 Act) may be to blame. “But I don’t have any intention of being an investment company. Aren’t those mutual funds or…

Distressed Bank Update as of March 16, 2023
In the three days since federal authorities announced sweeping measures to protect depositors of Silicon Valley Bank (SVB) and Signature Bank and help prevent additional bank failures (as discussed in our update of March 12, 2023), the U.S. banking system appears to have stabilized, at least temporarily.…

Short-Term Cash Management Alternatives
In response to recent client questions regarding the various considerations and options for holding short-term funds, we have prepared a reference chart comparing certain key characteristics of demand deposits with government securities, money market funds, and other short-term cash management instruments. Please note that this information is…