The SEC’s final regulations implementing the JOBS Act  and allowing advertising in the raising of capital went into effect last week on September 23, 2013. This is a significant change in the laws relating to the raising of capital and is one that has been discussed and written about extensively. Prior to last week all raising of capital by real estate investors or small business owners needed to consist of private methods whereby the person raising capital could only talk to persons whom they knew or had a prior relationship with. They could not make a “solicitation” for investment from anyone else without having to go and do an extensive and costly public SEC Offering.

Under the new rules in effect last week, those raising capital may now make public solicitations to anyone and may make presentations at meetings or seminars, on websites, or through social media and they don’t have to work with people they know or have a prior existing relationship with.

In order to comply with the new rule, known as Rule 506 (c), those raising capital must create offering memorandum and legal documents in accordance with the new rules and must make a notice filing to the SEC to claim compliance with the new law. Additionally, the new advertising rules will only allow those raising  capital to accept funds from accredited investors. Accredited investors are those who have $1M net worth (excluding equity in residence) or $200K annual income single or $300K income married. The person raising capital must take steps to verify an accredited investors status and can’t just rely on the investor stating that they are accredited. While some offerings do allow for up to 35 unaccredited investors, the rule allowing for unaccredited investors cannot be applied when advertising has been used in the offering and as a result is not available under the new rule.