On July 10, 2013, the SEC adopted final rules as required by Title II of the JOBS Act, which directed the SEC to eliminate the ban on general solicitation and advertising for certain offerings conducted under 506(c) Regulatino D of The Securities Act of 1933, (the "Securities Act") provided the securities are sold only to accredited investors. Rule 506(c) will become effective in less than a month, on September 23, 2013. The rule fundamentally changes how private placements will be conducted, by allowing issuers to engage in general solicitation and advertising if specific requirements are met. The SEC has confirmed that the Rule 506(c) exemption will not be forgiving for issuers who engage in general solicitation but fail to comply with its requirements.Even one sale to a non-accredited investor will prevent the issuer from relying upon the exemption, making it a time bomb for issuers who fail to adopt proper compliance methods for their offerings. In connection with these amendments to Rule 506, the SEC approved amendments to Form D, adding a box check box requiring issuers to disclose if they are relying on Rule 506(c).As discussed below, the SEC also proposed significant amendments to Form D's requirements that include penalties for non-compliance. Failure to Comply With Form D's Filing Requirement In the past, issuers were strongly encouraged to file Forms D in connection with Regulation D offerings, but no penalties were prescribed for those that failed to do so. The proposed rules would disqualify issuers that neglect to file the form from using Rule 506 exemption in any new offering for a period of one year after the date that the required Form D filings are omitted. Prefiling of Form D The SEC also proposes that issuers using general solicitation and advertising in Rule 506 offerings be required to file an advance notice of sale 15 days before the offering is opened, and a final notice within 30 days after completion of the offering. Presently, issuers relying upon Rule 506 offerings are required to file a notice of sales on Form D no later than 15 calendar days after the first sale of securities. Informational Proposals The SEC's proposals require issuers to provide additional information in their Form D filing than before, including: -- identification of issuer's website; -- expanded information about the issuer; -- securities offered; -- types of investors in the offering; -- use of proceeds from the offering; -- information on types of general solicitation used; and -- methods used to verify accredited investor status of investors. The issuer should ensure that accredited Investors who purchased prior to September 23 should certify that he or she remains an accredited investor.The advantages offered by Rule 506(c) are significant for issuers who comply with its inflexible but adaptable rules for issuers who properly prepare for their offering by developing compliance strategies to ensure accredited investor status. The advantages offered by Rule 506(c) are significant for issuers who comply with its inflexible but adaptable rules for issuers who properly prepare for their offering by developing compliance strategies to ensure accredited investor status. For more information concerning the rules and regulations affecting the use of Rule 506(c) and the JOBS Act please contact Hamilton and Associates at info@securitieslawyer101.com. or visit http://www.securitieslawyer101.com/
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