Late in the afternoon on Wednesday, July 3, the Securities and Exchange Commission (SEC) gave public notice of an SEC meeting to be held on Wednesday, July 10, to adopt several significant changes to Rule 506, the most frequently used private placement provision. The changes include
- permitting advertised private placements where all purchasers are accredited investors; and
- prohibiting persons with certain securities law violations from using this rule.
The provisions relating to advertised private placements are required by the JOBS Act and were proposed by the SEC on Aug. 29, 2012. This proposal generated a great deal of controversy. For additional information on the proposals and the comments received, see our previous alerts:
- Advertised Private Placements: Will the SEC Adopt An Interim Rule or Re-Propose the Rule? (May 28, 2013)
- Advertised Private Placements: Update on Status – New SEC Chairman Will Get the Ball Rolling Again (March 26, 2013)
- Proposed SEC Rule to Permit Advertising in Connection with Private Placements (December 12, 2012)
- Updated Comments on Rule 506 Changes: Preview of New SEC Provisions Permitting Advertised Private Placements (August 21, 2012)
The “bad actor” provisions are required by Section 926 of Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and were proposed by the SEC on May 25, 2011. Several investor advocates and state securities regulators have urged the SEC to adopt these types of provisions before adopting the JOBS Act changes. These “bad actor” provisions also raise a number of issues concerning both the scope and implementation of the new disqualification sections.
It can be expected that Chairman White has the votes to adopt these items, and the timing of the notice late in the day before a major national holiday and popular summer vacation weekend will likely reduce the amount of lobbying before the vote.
Commissioner Aguilar had publicly argued that these JOBS Act provisions needed to be proposed a second time, rather than adopted. As a result, he may not support the approach suggested by the notice.
The SEC’s notice also refers to unspecified changes to be made to Form D to make it easier for the SEC to track market practices in the use of the new provisions. This item may indicate that the changes to be adopted are closer to the August 2012 proposal than to the changes recommended by several investor advocates, including the SEC’s Investor Advisory Committee.