SEC Votes to Amend Rules on Marketing by Funds
As of today, you have just 59 days left to submit comments to the SEC regarding a pretty major change to Rule 506 of the Securities Act, announced Wednesday. For the last 80 years, Rule 506 essentially functioned as an embargo on any advertising and marketing activities by private issuers – aka: hedge funds, venture capital funds and private equity funds. But with yesterday’s SEC vote (4 to 1) to amend Rule 506, these funds will have much greater latitude in marketing and communicating with potential accredited investors.
The SEC’s move yesterday comes as no surprise.
Just over a year ago our own Jen Prosek wrote a column for FINalternatives on how the Jumpstart Our Business Startups (JOBS) Act, which mandated the very change the SEC is looking to make with Rule 506, was a huge win for hedge funds in particular.
FORTUNE’s Dan Primack summed up the changes:
“In short, this means that all sorts of private issuers soon will be able to publicly discuss and advertise investment opportunities. They also can do things like publicize past performance, which previously had been prohibited.”
So does this mean we’ll start seeing hedge fund ads on bus shelters and commercials between re-runs of “How I Met Your Mother”? Not exactly. To better understand what exactly the amendment to Rule 506 means, I’d recommend checking out the Term Sheet’s helpful breakdown.
Any guesses as to which funds will be first out of the gate to market their funds under the amended Rule 506? 