Summary of the Proposed Amendments to Form ADV and Investment Advisers Act Rules

On May 20, 2015, the SEC issued proposed amendments to Form ADV and the Investment Advisers Act rules. In the release, the SEC proposed amendments to Form ADV that would require advisers to disclose additional information, such as information about separately managed account business, and allow private fund adviser entities operating a single advisory business to file one Form ADV. The release also contains proposed amendments to the Advisers Act books and records rule. [Read more…]

SEC Proposes New Form D Filing Requirements

On July 10, 2013, the same day it announced the adoption of rules permitting general solicitation under certain conditions and disqualifying “bad actors,” the Securities and Exchange Commission issued proposed new rules entitled “Amendments to Regulation D, Form D and Rule 156 under the Securities Act.” The proposal dramatically increases the Form D filing requirements for Rule 506 offerings and increases the consequences for failing to file Form D or filing Form D late.

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SEC Implements the “Bad Actor” Disqualification Provisions of Dodd-Frank

Previously, I summarized the Securities and Exchange Commission’s implementing regulations of Title II of the JOBS Act, lifting the ban on general solicitation for offerings exempt under Rule 506 of Regulation D, which were finalized on July 10, 2013.  At the same meeting, the SEC also finalized regulations which implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the SEC to exclude certain felons and other “bad actors” from reliance on Rule 506.

Release No. 33-9414, entitled “Disqualification of Felons and Other ‘Bad Actors’ from Rule 506 Offerings,” is the final version of the rule and can be found here. “Bad actor” (or “bad boy”) disqualification provisions disqualify securities offerings from reliance on an exemption from registration if the issuer or other key persons (such as underwriters, placement agents, or directors, officers, or significant shareholders of the issuer) have been convicted of, or are subject to court or administrative sanctions for, securities fraud or other violations of specified laws. While such provisions can be found elsewhere in federal and state securities regulations, Rule 506 did not previously include any. [Read more…]

The SEC Finally Lifts the Ban on General Solicitation

On July 10, 2013, the Securities and Exchange Commission finally issued its regulations lifting the ban on general solicitation pursuant to Title II of the Jumpstart Our Business Startups Act (“JOBS Act”). The lifting of the ban will take effect in about 60 days from now.

Release No. 33-9415, entitled “Eliminating the Prohibition Against General Solicitation and General Advertising in Rule 506 and Rule 144A Offerings,” is the final rule adopting amendments to Rule 506 and Rule 144A pursuant to Title II of the JOBS Act. The amendment to Rule 506 permits an issuer to engage in general solicitation or general advertising in offering and selling securities in reliance on the exemption in Rule 506 as long as all purchasers are accredited investors and the issuer takes reasonable steps to verify that status. Form D will be revised to require an issuer to check a box to indicate whether it is relying on the provision that permits general solicitation or general advertising in a Rule 506 offering (which will now be called Rule 506(c)) or the issuer is relying on the traditional Rule 506 exemption which still prohibits general solicitation (now called Rule 506(b)). The amendment to Rule 144A provides that securities may be offered pursuant to Rule 144A to persons other than qualified institutional buyers as long as the securities are sold only to persons that the seller reasonably believes are qualified institutional buyers. The text of the release, which includes the final rule, can be found here. [Read more…]

SEC Enforcement Division’s Asset Management Unit’s Chief Anticipates Increase in Private Equity Enforcement

Bruce Karpati, the Chief of the SEC Enforcement Division’s Asset Management Unit, held a Q&A session entitled “Private Equity Enforcement Concerns” at the Private Equity International Conference held in New York on January 23, 2013. He addressed private equity firm activities of concern, how the SEC is tracking those activities, and ways firms can avoid getting into trouble. [Read more…]