Aug 07, 2013
An article titled "SEC JOBS Act Rulemaking Creates Opportunities and Potential Burdens for Hedge Funds Contemplating General Solicitation and Advertising" by Shearman & Sterling partner Nathan Greene (New York-Investment Funds) was published in The Hedge Fund Law Report on July 18, 2013.
When the JOBS Act was signed by President Obama in 2012, it directed that one of its most transformational provisions – the relaxation of decades-long limits on public offerings of unregistered securities – not go into effect until the SEC set rules to implement the changes. After more than a year of delay, the agency’s implementing rules are now here. But the SEC at the same time proposed a raft of controversial additions to the new rules, ensuring that the politically charged debate around the JOBS Act – in which consumer advocates and certain lobbies (such as that for the mutual fund industry) vigorously oppose the law and its opportunities for private funds while many business groups push for it – will continue.
This article describes the above-referenced JOBS Act rulemaking in more detail, highlights important regulatory implications and considerations for hedge fund managers (including in connection with the Investment Advisers Act, Investment Company Act, CFTC Rules and Regulation S) and reviews a number of factors that may be relevant to verify accredited investor status. The article also describes new “bad actor rules” that foreclose reliance on Regulation D in the case of securities offerings involving felons and other “bad actors.”