Participating in private offerings under the Jumpstart Our Business Startups Act (JOBS Act) and the new Rule 506(c) of Regulation D is beneficial for both investors and businesses. If you’re looking to sell or purchase private securities that have been generally solicited, it’s important to adhere to the new provisions listed in Title II of the JOBS Act and Rule 506(c) of Reg D, which outlines how businesses and investors are expected to execute private offerings through general solicitation. Issuers, in particular, are responsible for taking reasonable steps to obtain accreditation verification before concluding transactions with investors, as failing to do so can result in severe consequences such as having to return all money to investors and losing the ability to rely on Reg D offering exemptions for future capital raises.
Advantages for Businesses
In 2013, businesses in the United States gained the freedom to participate in general solicitation while capital raising. It was one of the greatest develops in capital markets in many decades. Title II of the JOBS Act abolished the long-lasting ban on companies’ ability to publicly solicit for investment capital. To entrepreneurs and growing companies, these provisions allow for a greater chance of overall success, as they significantly reduce the fundraising constraints businesses previously faced. Companies can now inform investors of new private offerings through social media and crowdfunding sites, which was previously against the Securities Act of 1933 and other securities laws.
Pros for Investors
Title II of the JOBS Act benefits investors, as well as startups and small businesses. Through general solicitation, accredited investors gain access to a variety of new investment opportunities they wouldn’t have had previously. Public solicitation of investors was, up until recently, against the provisions of the Securities Act. While these regulations were in place to protect purchasers from fraud, they also inadvertently hindered prospects for investors. The removal of the general solicitation ban allows both investors and businesses to prosper in today’s marketplace.
Third-Party Review Services
Because such offerings and sales involving private securities must take place between an issuer and purchasers that have been verified as being “accredited investors,” business owners are required to take “reasonable steps” to ensure that their investor are actually accredited investors. Choosing a third-party reviewer is one of the few ways issuers may safely obtain such verification. Not any third-party reviewer will do. The issuer must have a reasonable basis to believe that the third-party reviewer is properly conducting the verifications, and many third-party reviewers are not legally compliant. To determine if investors are accredited, the reviews should be performed by licensed attorneys, or certified public accounts or registered investment advisers or broker-dealers. Reliable third-party review companies, however, can be a life-saver in the capital raising process as they can offer quick and accurate service, providing verifications to issuers and investors in just a couple of business days.
Don’t take chances on a third-party reviewer that might not be legally compliant. Go to https://VerifyInvestor.com to quickly and cost-effectively verify the accredited investor status of a potential investor. VerifyInvestor.com only uses licensed attorneys to conduct verification reviews.
Verifyinvestor.com
