A Compilation of Important Insights from Leading Law Firm Memoranda on the Implications of the JOBS Act Rulemaking for Hedge Fund Managers

On July 10, 2013, as required under the JOBS Act, the SEC adopted final rules to relax long-standing restrictions on general solicitation and general advertising applicable to securities offered pursuant to Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933.  The rule changes are expected to become effective on September 23, 2013.  The SEC also adopted rule changes that disqualify felons and other bad actors from being able to rely on the Rule 506 safe harbor.  In addition, the SEC proposed amendments to Regulation D, Form D and Rule 156 that would significantly expand filing and other requirements with respect to Rule 506 offerings.  See “SEC JOBS Act Rulemaking Creates Opportunities and Potential Burdens for Hedge Funds Contemplating General Solicitation and Advertising,” Hedge Fund Law Report, Vol. 6, No. 28 (Jul. 18, 2013).  Since the SEC published its final and proposed JOBS Act rules, many of the leading law firms with hedge fund practices have issued memoranda describing the rules and their anticipated impact on hedge fund managers.  In an effort to assist our subscribers in understanding the range and diversity of informed opinion on this topic, the Hedge Fund Law Report has compiled and analyzed many such memoranda.  This article embodies our analysis.  In particular, this article provides a detailed summary of the final and proposed JOBS Act rules, then provides a compilation of noteworthy insights and practice points from the memoranda.  In the process, this article conveys the consensus view (and identifies differences of opinion) on questions including: Will more hedge fund issuers engage in general solicitation and advertising following adoption of the JOBS Act rules?  What are the primary hurdles in using Rule 506(c)?  What “speedbumps” are created by proposed Advance Form D?  Should private funds take advantage of the new advertising relief?  And what is the expected impact of the bad actor disqualification rule?  See also “Schulte, Cleary and MoFo Partners Discuss How the Final and Proposed JOBS Act Rules Will Impact Hedge Fund Managers and Their Funds,” Hedge Fund Law Report, Vol. 6, No. 29 (Jul. 25, 2013).

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