The JOBS Act: "Do No Harm"

William Carleton, Contributing Editor, VCExperts

Big day last Wednesday, July 10th.

Joe Wallin and I had over 500 people tune in or visit to replay our live blogging of the SEC Open Meeting where three big things happened:

  • final rules to lift the ban on general solicitation, in Rule 506 offerings where all purchasers are accredited, were approved;

  • the bad actor rules called for years ago by Dodd-Frank were approved; and

  • new rules to change Form D, what it contains, filing requirements, and incentives to actually follow through and file it in a timely were, were proposed.

There is a lot to digest. It is tempting to get immersed in the final general solicitation rules and tease out just how workable new Rule 506(c) will be (do NOT believe everything you read about it now being okay for startups to talk about their financings; the rules won't take effect until September, and even then, there are ways you can get out ahead of your communication plan and possibly blow your ability to use Rule 506 at all!). But I hope I have the discipline to keep reading and re-reading the proposed rules, the ones pertaining to changing Rule 506.

For the proposed rules, as drafted and published last week, would not only change Form D to accomodate the final rules establishing Rule 506(c) (the fork of Rule 506 that will soon permit general solicitation); they would also change rules that apply to the use of Form D in connection with claiming a Rule 506(b) exemption. Big picture: Form D, if the rules as proposed survive comments(!), will have teeth. Though the Commission is not proposing that filing of a Form D will again become a condition of the Rule 506 exemption (meaning, you would lose the exemption if you don't file it), it is proposing that you be penalized for failure to file, by not being eligible to claim a Rule 506 exemption for a year (measured from the time you finally get around to making the delinquent filing for the prior offering).

Much more to come, stay tuned! Joe and I are working on a joint post that tries to explain Rule 506(c) at a very basic level.

We both spent our afternoons fielding calls from journalists, but I have to single out this quote of Joe's that ran in Eric Markowitz's ban-lifting story on

'"Start-ups are going to talk to a reporter about their fundraise, it will hit the media–they won't have filed their form in advance–and then, apparently, they will be ineligible for 506 for one year," Joe Wallin, a start-up lawyer in Seattle, pointed out this morning as he live-blogged the hearings. He added, "The law could have been simplified. Instead, we get more law; more regulations; more complexity; more legal fees ... etc."'

Photo: Letha Colleen Myers/Flickr.

William Carleton

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