Investment Management

Archive for April 2012

Posted on Tuesday, April 24 2012 at 11:49 pm by

The JOBS Act: What to Expect from the Not-So-Private Private Placement Regulations

One of the most significant provisions of the Jumpstart Our Business Startups Act (the “JOBS Act”), which was signed into law by President Obama on April 5, 2012, is the removal of the prohibition on general solicitation and advertising for securities offerings made pursuant to Rule 506 of Regulation D under the Securities Act of 1933 (“Rule 506 Offerings”) – so long as sales are made only to accredited investors.

This loosening of the most fundamental restriction on Rule 506 Offerings, which effectively takes the “private” out of “private placement”, is expected by many to have a much greater impact on small business capital formation than the headline-grabbing crowdfunding provisions of the JOBS Act. This is because the crowdfunding provisions only allow for relatively small offerings and impose a fairly complex and potentially burdensome regulatory scheme. The elimination of advertising prohibitions for Rule 506 Offerings, on the other hand, is a simple change with immediate impact because it will allow for Rule 506 Offerings to be broadcast to an unlimited number of investors for an unlimited amount of money so long as sales are made only to accredited investors.

….to read the rest of this article, please select this link.

Posted on Wednesday, April 18 2012 at 11:47 pm by

SEC Solicits Comments on JOBS Act Rulemaking Ahead of Publishing Proposed Rules

The SEC has posted an invitation for interested parties to provide preliminary comments regarding the rulemaking it must conduct in connection with the JOBS Act. While it is not common practice for the SEC to solicit public comments before it has actually promulgated proposed rules, it is not unprecedented either—it employed the same process in connection with its substantial rulemaking responsibilities under the Dodd-Frank Act. Interested parties will also have an opportunity to comment on JOBS Act rules during the formal comment period after publication of proposed regulations in the Federal Register. The preliminary comments can be submitted electronically here.

Please contact us if you would like assistance in submitting comments.

Posted on Friday, April 6 2012 at 9:00 am by

Implications of the JOBS Act

The Jumpstart Our Business Startups Act (the “JOBS Act”), which ushers in a series of reforms designed to facilitate capital formation by startups and other small or emerging enterprises by easing securities law compliance requirements, was signed into law by President Obama on April 5, 2012. The principal reforms of the JOBS Act range from expanding the allowable publicity for certain private placements, to simplifying initial public offerings for “emerging growth companies”, to reducing some of the ongoing compliance obligations for emerging growth companies during the early stage of status as a public company. We recently described the key practical implications of the JOBS Act’s principal reform in our Legal Alert dated April 5, 2012, which can be found here.

While the JOBS Act appears to have been targeted at operating companies, it nevertheless has significant potential implications for privately offered investment funds. One of the most significant provisions of the JOBS Act for privately offered funds (and all private securities offerings) is the removal of the prohibition on general solicitation and advertising for securities offerings made pursuant to Rule 506 of Regulation D under the Securities Act of 1933 (commonly referred to as a “Reg D Offering”) – so long as sales are made only to accredited investors. This loosening of the most fundamental restriction on Rule 506 Offerings effectively takes the “private” out of “private placement”, and is expected by many to have a significant impact on small business capital formation. We recently discussed the implications of the removal of this prohibition in our Legal Alert dated April 24, 2012, which can be found here.

Although it is currently unclear how the SEC will chose to amend its regulations to implement the changes to Rule 506 required by the JOBS Act, allowing general solicitation and advertising would significantly impact how hedge funds and other private investment vehicles are offered, since it potentially allows these funds to publicly broadcast their securities offerings to an unlimited pool of potential accredited investors. The JOBS Act requires that the SEC implement such rule changes with 90 days, but delays in this timeline due to a rulemaking backlog at the SEC is expected.

Kilpatrick Townsend will continue to provide further updates regarding the JOBS Act as more information becomes available.

Posted on Thursday, April 5 2012 at 11:36 pm by

New JOBS Act Facilitates Private and Public Capital Formation

The President is expected to sign into law this week the new Jumpstart Our Business Startups (JOBS) Act, which ushers in a series of reforms to facilitate capital formation by startups and other small or emerging enterprises by easing securities law compliance requirements. The principal reforms range from expanding sales techniques for certain private placements, to simplifying initial public offerings for “emerging growth companies”, to reducing some of the ongoing compliance obligations for emerging growth companies during the early stage of status as a public company.

Although a few provisions of the JOBS Act are self-effectuating from its effective date, the JOBS Act requires substantial rulemaking by the Securities and Exchange Commission (“SEC”) for full implementation of its reforms. Given the substantial SEC rulemaking backlog (much of which relates to required actions under the Dodd-Frank Act), the rulemaking timelines in the JOBS Act will be extremely difficult to meet.

This Legal Alert discusses the key practical implications of the JOBS Act’s principal reforms, assuming implementation by the contemplated SEC rulemaking.

….to read the rest of this article, please select this link.