Friday, July 12, 2013

SEC Now Allows Startups to Advertise their Fundraising

On July 10, 2013, the Securities and Exchange Commission voted to allow the general solicitation of investments by companies. This means that startups can now advertise their investment fundraising program.


There are some additional restrictions in place. The SEC stated that "the submission of written general solicitation materials to the Commission no later than the date of first use of such materials."

This decision follows the SEC’s adoption of rule amendments to implement Section 201 of the JOBS Act by removing the prohibition on general solicitation in certain exempt offerings.


However, the SEC was quick to point out that "the General Solicitation Rule adopted today fails to address the risks to investors arising from the faulty process followed in implementing Section 201 of the JOBS Act."

Positive Effects

These changes could do two things for startups. The rulings could spawn the growth of existing startups, and even bail out some startups that are short o cash. In addition, more startups may be created, knowing that the ease of obtaining capital will be greater. This should create more jobs, and might even bail out the economy.

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