Advisory Committee Recommends Eliminating Private Placement Prohibitions on General Solicitation
The Advisory Committee on Small and Emerging Companies has recommended that the SEC â€œrelax or modifyâ€ the restrictions on general solicitation and advertising for private placements sold only to accredited investors. The Committee contends that the prohibitions on general solicitation and advertising â€œare not necessary in private offerings of securities whereby the securities are sold solely to accredited investors.â€ The Committee, comprised of private sector professionals and organized by the SEC in September 2011, was tasked with providing advice and recommendations with respect to companies with less than $250 Million in market capitalization.
OUR TAKE: Eliminating the general solicitation and advertising restrictions would end the requirement that firms have some sort of pre-existing relationship with potential investors. It is unclear whether the Committee intends its recommendations to apply to funds as well as operating companies. It is even less clear whether the SEC will heed the Committeeâ€™s recommendations.