Public Advertising of Private Investment Offerings: The Operation and Issues in Post-JOBS Act Regulation D
Bruce Dravis
Posted Sunday, September 15, 2013

In the evolution of the securities markets since the adoption of the Securities Act (the “Act”) 80 years ago, Regulation D has played an important role in creating a well-understood set of rules relating to the offering of securities in transactions that are not subject to registration under the Act. In fact, the private placement offering market rivals in size the market for securities registered under the Act, which suggests that the private placement market under the pre-JOBS Act rules was not hampered in any meaningful way. This article discusses the operation of the proposed revisions to Regulation D to permit general solicitations in private placements, in the context of the historic concerns that gave rise to the prohibition on general solicitation under Regulation D. For small companies seeking to find start-up capital, the ability to advertise may be useful, both for entrepreneurs and investors. However, it would be naïve to expect that the demi-monde of fraudulent stock promoters will not abuse the ability to fish in the broader pond of potential victims created by the ability to conduct general solicitations. If the amount of fraud overwhelms the benefits of general solicitation, the SEC will have the authority to make additional revisions to stem the abuses.