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News January 9, 2012 Issue

SEC Advisory Committee Recommends Relaxation of Private Offering Restrictions

Momentum for change is building.

In November, Congress held hearings that would lift the long-standing ban on general solicitation in private offerings for small businesses. Pursuant to Chairman Mary Schapiro’s direction, the SEC’s Division of Corporation Finance has been reviewing current private offering restrictions and whether or not to relax those restrictions.

Now, in its first official recommendation to the SEC, the SEC’s Advisory Committee on Small and Emerging Companies (Committee) said the SEC should take "immediate action to relax or modify the restrictions on general solicitation and general advertising to permit general solicitation and general advertising in private offerings of securities under Rule 506 where securities are sold only to accredited investors."

The January 6 recommendation noted that in the Committee’s view, the private offering restrictions on general solicitation and general advertising prevent smaller public and private companies from gaining sufficient access to capital and materially limit their ability to raise capital through private offerings.

In her testimony before Congress in November, Division of Corporation Finance director Meredith Cross said the staff is preparing a concept release to solicit public input on reducing the regulatory burdens associated with small business capital formation in a way that is consistent with investor protection.

Stay tuned for more on this issue.