Imagine seeing Donald Trump on TV saying, “Invest in my new casino – give me $10,000 and you get 10,000 stock shares!” This is the promise of the new SEC Reg D 506 exemption proposal close to being introduced and this is how it affects you!
By David Drake
Securities & Exchanges Commission (SEC) Chairman Mary Schapiro supported the proposal to remove the solicitation ban of Regulation D, exemption 506 last Wednesday Aug. 29 in Washington DC. “I recognize that there are very real concerns about the potential impact of lifting the ban on general solicitation,” SEC Chairman Mary Schapiro said. “While I’m prepared to bring forward today’s narrow proposal, I look forward to the continued examination of this critically important market.”
The SEC has not allowed general solicitation of private offerings since its creation in 1933. The Jumpstart Our Business Startup Act (JOBS Act), which was signed into law April 5, 2012 by President Obama, outlines that the ban on solicitation under this fundraising exemption is to be lifted. The proposal submitted by the SEC, albeit after the 90-day deadline which expired July 4, now has 30 days for public comments to be made. At that point, if no major changes need to be made, it will be converted into applicable law.
As proposed, the SEC recommendations are gargantuan in financial media terms. Trump will be able to go on TV and offer stock for cash in his next casino. This is something that has never been allowed in a private offering. The caveat is that the investor must be accredited. This means having $200,000 in annual salary for the last two years and and an expected income of that amount for the following year The amount is $300,000 for married couples of $1 million in net worth, excluding the couple’s personal home but including the family’s vacation home. We won’t discuss the intricacies of what this means to SEC and FINRA.
As you can see, this proposal means that you will be able to solicit via TV, conferences or online to raise cash for stock. You will be able to market online to raise money from people willing to invest. You would not be limited to having broker dealers finding the investors, but you could now mass market your business and reach a larger investor pool more quickly and for less outlay.
This is a paradigm shift of enormous magnitude. TV and internet advertising will explode from fundraising entities like we have never seen. We will witness an upheaval and a flood of media opportunities. Corporate strategy will be in the center of these services. European firms will flock to the US market faster than before, and we will see a corporate rush of amazing strength. This is the biggest potential impact of the JOBS Act.
Will we see Trump on TV soon prompting his washing detergent or casino stock for cash? You bet you will.
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