July 10th, 2013
Take off those tap shoes, startups: SEC allows general solicitation
Sometimes, the law does catch up with modern behavior. I wasn’t around when prohibition was repealed. But the romanticized historical view seems to be that there were an awful lot of people drinking illegally at the time. And so trying to legislate morality didn’t work that well.
Today, we get to experience the startup version of the end of prohibition. The rules that have prevented startups from publicly announcing they were raising money at events like demo days–general solicitation—have been allowed by the SEC. Even though many startups have likely been tap-dancing around the issue.
The Proposing Release follows the Commission’s adoption of rule amendments to implement Section 201 of the JOBS Act by removing the prohibition on general solicitation in certain exempt offerings (the “General Solicitation Rule”).
The Proposing Release is intended to address some of the concerns that many commenters have raised regarding general solicitation, including concerns regarding an increase in fraudulent activity, as well as to improve the Commission’s ability to evaluate the development of market practices in Rule 506 offerings.