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The JOBS Act: How Are People Using The New Accredited Crowdfunding Rule?

William Carleton, Contributing Editor, VC Experts


Ruth Simon and Angus Loten of the WSJ had a couple of really interesting articles last week, by way of tracking just how people are using the new accredited crowdfunding rule:

  • Fundraising Rules Murky Despite JOBS Act; and
  • Filings Show Some Firms Do Plan Ads.

By "accredited crowdfunding rule," I mean of course Rule 506(c), the new rule that lets issuers engage in general solicitation and general advertising, as long as all purchasers are accredited, the issuer takes reasonable steps to ensure each purchaser is accredited, and the issuer otherwise satisfies the applicable requirements of Reg D.

This is a BIG regulatory change. Recall how everyone always used to say, don't talk to reporters about your offering! Don't tweet it, don't blog about it! That's the old rule, which remains in place, renumbered now as Rule 506(b).

Well, the upshot of the Simon/Loten WSJ pieces, is, arguably, the maxims that follow from the old rule are still, as a practical matter, still in place. Don't talk to reporters about your offering! Don't tweet it, don't blog about it!

That's because the conditions of the new rule are not trivial. And also because of uncertainty about proposed rules that would make compliance with 506(c) even harder.

The Simon/Loten articles do, however, speak to examples of folks who are using 506(c). And the pieces relay some WSJ data/analysis on how much money has been raised under 506(c) so far.

"Among companies that have filed with the SEC, those that disclosed their fundraising goals say they intend to raise more than $25 billion, according to The Wall Street Journal's analysis. Since the new measure was implemented, firms that claimed the exemption and have since netted their first investor have raised a total of $1 billion, the analysis shows."

Thanks to Catherine Mott for pointing me to the Simon/Loten articles.

Image: Poster Boy/Flickr.


William Carleton

Bill is a member of McNaul Ebel Nawrot & Helgren PLLC, a Seattle law firm. He blogs every day at http://wac6.com.