SEC Rules

Sometimes new regulations create the need for market leaders to adjust, so that efficiencies for all can continue.  One such example is a set of rules set by the Securities and Exchange Commission for “generally solicited” offerings.  The rules – or really the market interpretation of the rules – have created so much confusion that the Angel Capital Association decided to develop a certification program for part of the angel market, angels who invest through angel groups, so that angels and entrepreneurs can actually do generally solicited deals.

When Congress passed the JOBS Act in 2012 they allowed for the very first time the ability for entrepreneurs to raise equity capital by advertising rather than through existing relationships in private.  Fearing fraud, Congress also required that companies take “reasonable steps to verify” that investors in these deals are accredited investors and asked the SEC to set the detailed rules.  The SEC’s rules said that copies of income or wealth documents or certifications by accountants and lawyers would work, as would a complicated set of methods that look at the facts and circumstances of the deal.

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