The JOBS Act offers incentives for foreign issuers seeking to go public and enter the U.S. capital markets without filing a Form S-1 or other registration statement under the Securities Act of 1933, as amended or registering a class of securities on Form 10 under the Exchange Act. Effective September 23, 2013, as required by the JOBS Act, the SEC lifted the ban on general solicitation and advertising in private placement offerings of securities made pursuant to Rule 506(c) of Regulation D.
The JOBS Act’s new Rule 506(c) allows issuers to use general solicitation and advertising to offer and sell securities under Rule 506, provided that (i) all purchasers of the securities are made to accredited investors and (ii) the issuer takes “reasonable steps” to verify that the purchasers are accredited investors.
Rule 506(c) makes is easier and quicker for foreign issuers to enter the U.S. securities markets. The new rule expands the pool of investors and enables issuers to obtain the shareholders required by the Financial Industry Regulatory Authority to obtain a stock ticker symbol. Foreign issuers are able to advertise their securities offering without filing a registration statement with the SEC, if desired. Alternatively issuers can register the resale of the shares sold in the in their private placement offering on Form F-1 or S-1. Rule 506(c) provides increased opportunities to foreign issuers and enables them to place private placement memorandums and advertisements on their websites and other media.
The JOBS Act also lifted the thresholds for mandatory registration under Section 12(g) of the Securities Act to issuers with either (i) 2,000 or more persons or (ii) 500 or more persons who are not accredited investors. In calculating the number of holders of record, companies may now exclude persons who received securities pursuant to employee compensation plans in transactions exempted from registration under the Securities Act.
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