General Solicitation.
As we discussed in our previous blog series on exempt offerings (available here), absence of general solicitation is a condition to be met in most exempt offerings, with limited exceptions, such as offering under Rule 506(c). This is important because, to qualify for an exemption from registration, an issuer must meet all the requirements of the exemption. General solicitation includes, without limitation, any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio,[1] as well as other uses of publicly available media, such as unrestricted Web sites.[2] In the C&DIs, the SEC answers questions relating to general solicitation.
- Question 256.16. This question asks whether product advertising would be considered general solicitation. The SEC explains that Rule 502(c), which prohibits general solicitation in certain exempt offerings, does not bar product advertising, as long as such advertising does not involve the solicitation of an offer to buy a security.[3]
- Question 256.23. This question asks whether the use of an unrestricted, publicly available website to offer or sell securities would constitute a general solicitation. The SEC confirms that it does, if the website contains an offer of securities.[4]
- Question 256.24–.25. This question asks what information an issuer can widely disseminate about itself without engaging in general solicitation. The SEC explains that information not involving an offer of securities, e.g., factual business information that does not condition the public mind or arouse public interest in a securities offering (such as information about the issuer, its business, financial condition, products, services, etc.), may be disseminated widely, provided the information is not presented in a manner as to constitute an offer of the issuer’s securities.[5]
- Question 256.33. This question asks whether a demo day or venture fair necessarily constitutes a general solicitation. The SEC says that it would be a facts and circumstances determination, dependent on whether the occasion involves an offer of a security and whether attendance is limited to persons with whom the issuer or the organizer of the event has a pre-existing, substantive relationship or have been contacted through an informal, personal network.[6]
- Question 260.11. This question seeks to find out whether an issuer that commenced an offering in reliance on Rule 506(c) (which permits general solicitation) may subsequently rely on Rule 506(b) (which does not permit general solicitation) for the offering, if the issuer did not engage in any form of general solicitation in connection with the offering. The SEC answers in the affirmative, provided that all the conditions of Rule 506(b) have been satisfied. Additionally, the SEC advises the issuer to amend its Form D notice accordingly.[7]
This post was a part of a multi-part series on the SEC’s guidance to clarify details about when registration with the SEC is not needed in the SEC’s latest C&DIs regarding exempt offerings. In our next post, we will look at some of the questions and answers relating to the intrastate exemption.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
About the Author
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C., which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or <a ” ” target=”_blank” href=”http://www.rshawnmcbridelaw.com”>www.mcbrideattorneys.com.
[1] 17 C.F.R. § 230.502(c).
[2] 65 Fed. Reg. 25,843, 25,851–52 (May 4, 2000).
[3] SEC, Securities Act Rules: Questions and Answers of General Applicability (Aug. 6, 2015).
[4] Id.
[5] Id.
[6] Id.
[7] Id.