More than 170 companies took advantage of relaxed advertising rules for private investment opportunities in the first moth such rules were effective. According to SEC records, a number of different types of companies from energy funds, to hedge funds, from brand new start-ups to growth companies are taking advantage of the newly relaxed rules.
Many more issuers are watching carefully from the sidelines. According to executives of several issuers, no one really wants to be first, but everyone wants get in on it. There is also a potential rift between independent broker dealers, who are often hired to raise equity for private offerings, and the issuers, who may, down the road, use the rule change to solicit investors directly, cutting out the cost of the BD which is often as high as 10%.
The opportunity to advertise was born out the JOBS of 2012, which created three distinct pockets of opportunities for issuers. The changes include the new Crowdfunding rules, an increase in the size of offerings under Regulation A, and lifting the ban on advertising (general solicitation) for Regulation D exempt offerings. The latter is likely to be the most heavily used.
The caveat on Regulation D is that issuers must verify that an investor is accredited under the rules prior to accepting any money. Under the old rules, an issuer could simply rely on an investor’s say-so. Accredited investors are those with incomes greater than $200,000 a year or a net worth of $1,000,000 excluding their personal residence.
The new SEC regulations allow issuers to rely on a third party, like InvestorNumber.com to verify investors on their behalf. This allows issuers to make one determination one time, to trust the third party service, or many determinations, over and over again as to each investor. Such services are charging fees as low as $79 per investor (InvestorNumber.com) up to $200 per investor (other companies).
Many more issuers are watching carefully from the sidelines. According to executives of several issuers, no one really wants to be first, but everyone wants get in on it. There is also a potential rift between independent broker dealers, who are often hired to raise equity for private offerings, and the issuers, who may, down the road, use the rule change to solicit investors directly, cutting out the cost of the BD which is often as high as 10%.
The opportunity to advertise was born out the JOBS of 2012, which created three distinct pockets of opportunities for issuers. The changes include the new Crowdfunding rules, an increase in the size of offerings under Regulation A, and lifting the ban on advertising (general solicitation) for Regulation D exempt offerings. The latter is likely to be the most heavily used.
The caveat on Regulation D is that issuers must verify that an investor is accredited under the rules prior to accepting any money. Under the old rules, an issuer could simply rely on an investor’s say-so. Accredited investors are those with incomes greater than $200,000 a year or a net worth of $1,000,000 excluding their personal residence.
The new SEC regulations allow issuers to rely on a third party, like InvestorNumber.com to verify investors on their behalf. This allows issuers to make one determination one time, to trust the third party service, or many determinations, over and over again as to each investor. Such services are charging fees as low as $79 per investor (InvestorNumber.com) up to $200 per investor (other companies).