The JOBS Act: More On Where We Are With General Solicitation

William Carleton, Contributing Editor, VCExperts

Be sure to read Joe Bartlett's new post on VC Experts, QUIET 506 - A Study in Irony.

Joe's provocative take is that it almost doesn't matter whether the SEC moves on 506(c). (Translation for those who haven't memorized the shorthand references: it almost doesn't matter whether the SEC finalizes rules, as required under the JOBS Act, to permit startups to advertise for angel investors.)

I may be exaggerating Joe's view, but only slightly:

"The fact . . . is that the ban [on general solicitation and general advertising] has been, as a practical matter, history for a number of years by virtue of the Two-Step process. Quiet 506(b) is in fact a very noisy Rule 506 in the real world and platforms such as AngelList, Circle Up, and others are already taking advantage of the internet to raise capital for emerging growth companies … and have been for some time. The advent of the Title II Regs, in that sense, is anti-climactic. We are already there, courtesy of the internet, and the trick now is to adjust to the new reality in the legal sense of the word."

What is the "Two-Step process?" See Joe's post for the explanation. In a word, it's a process that SecondMarket and others follow in making deals accessible to accredited investors, a process designed to fit within the contours of SEC letter rulings.

Not that Joe is saying all new regulation will be superfluous.

New regulatory initiatives will matter and are coming; it's simply that the efforts of consequence will focus on broker-dealer and investment advisor-like activity, not the patterns of general solicitation, as such.

Joe alludes to renewed vitality among state securities regulators. I'd like to know more about what he knows on this subject.

Finally, Joe tells a great anecdote at the end of this post. It's a funny story and Joe spins it with the suitable distance of the ironist:

" … [A] knowledgeable observer and I were discussing the impact of this incoming tide [of crowdfunding platforms] and I remarked that the elite investors, in their own minds, would likely find sourcing deal flow online as 'undignified.' He laughed and responded that 10 or so years ago, the maxim was that looking for spouses through online dating services was undignified. Now, he claims, everyone over 30 uses these platforms."

William Carleton

Bill is a member of McNaul Ebel Nawrot & Helgren PLLC, a Seattle law firm. He blogs every day at