Startups and Congressional intent

Believe it or not, Congress did change national policy last year with an eye toward helping startups.

The key policy changes were contained in Title II of the JOBS Act, which became law when President Obama signed the bill in April 2012.


One of the changes was to eliminate the ban on general solicitation in Rule 506 offerings, provided that all purchasers are verified to be accredited investors.

The law delegated implementation of this policy change to the SEC to accomplish by rulemaking. And that's now happened.

Another thing has happened, however: the SEC has of its own accord "supplemented" the policy choice made by Congress by a set of proposed rules that would add restrictions to Rule 506.

If you haven't yet seen this piece I wrote in TechCrunch from this past weekend, Let's Have General Solicitation as Congress Intended It, please check it out.

What's happening is hard for non-lawyers to understand. The big media soundbite is that suddenly it is okay for hedge funds to advertise. In some publications, that message is translated into "it is okay for startups and private companies to advertise.' These soundbites are true, but only half-true. Missing in the story is that new rules proposed by the SEC will make the lifting of the ban on general solicitation much less meaningful, perhaps a false promise.

Check out Let's Have General Solicitation as Congress Intended It, check out posts on this blog related to general solicitation and the JOBS Act, and check out Joe Wallin's writings on

Joe and I will try to get a resource site up to help people consider writing to the SEC and commenting on the proposed rules.

Photo: republicanconference / Flickr.

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