[Editor’s Note: The following update is authored by Goodwin Procter LLP]
At an open meeting, the United States Securities and Exchange Commission (“SEC”) voted to adopt a previously proposed rule that will lift the ban on general solicitation in certain types of private securities offerings, including many offerings of interests in venture capital, private equity, real estate, hedge and other types of private investment funds (the “New Rule”).
For many private fund managers, the New Rule will substantially increase the scope of permitted fundraising activities. Even for those fund managers that do not intend to conduct a general solicitation in connection with their fundraising activities, the New Rule may reduce the risks associated with inadvertent “foot faults” under prior rules. It is expected that the New Rule will materially change the fundraising landscape for the private fund industry, and particularly will facilitate use of the Internet and traditional press as means to communicate information about offerings of fund interests.
The SEC also voted to (i) adopt rules that prohibit private placements by certain “bad actors” and (ii) propose for public comment a variety of rules (the “Additional Rules”) that would seek to limit opportunities for abuse of the New Rule and enhance the ability of SEC staff to monitor activities pursuant to, and compliance with, the New Rule.
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