May 2012

By Steven Felsenstein 

The hallways are abuzz with EB-5 Program conference attendees excited about the prospect of finally being able to conduct public campaigns for their projects by advertising, discussing projects in media interviews, undertaking internet marketing campaigns and website postings, and by sponsoring seminars and other broad-based capital raising meetings once the U.S. Securities and Exchange Commission (the “SEC”) adopts rules to implement an expansive new law.[1]  Securities lawyers and conference speakers are explaining that the Jumpstart Our Business Startups Act (the “JOBS Act”) removes the longstanding prohibitions against general solicitation and advertising in private offerings made pursuant to Rule 506 of Regulation D under the Securities Act, but only if all purchasers in these offerings are accredited investors, and the issuer takes reasonable steps to verify using methods to be determined by the SEC that all investors are accredited.[2]  Careful lawyers and lecturers remind conference attendees that these securities law changes authorized by the JOBS Act are not yet in effect.  They also note that the new provisions do not obviate the need for a well-written, adequate disclosure document commonly referred to as a private placement memorandum or PPM.[3]  The changes in the law, however, will not reduce the risks of poorly implemented offerings.
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