SEC Has ‘Open Investigations’ of Rule 506(c) Offerings

Securities and Exchange Commission Chairwoman Mary Jo White says the agency is investigating whether some issuers of private placements properly vetted accredited investors.

In a recent Q& A discussion at the 43rd Annual Securities Regulation Institute, held in San Diego, White said that in relation to the SEC’s lifting of the ban on general solicitation under Rule 506(c) private offerings, “on the fraud/misconduct front,” the SEC has “some open investigations in several categories.”

One area, White said, is whether issuers have made reasonable efforts to determine whether who “they’re selling to are accredited investors.” Rule 506 allows private placement offerings to accredited investors without the SEC filing requirements of a public offering. Rule 506(c), enacted under the Jumpstart Our Business Startups (JOBS) Act, allows public advertising of certain offerings.

White said there are “some instances of fraud, but what we don’t see yet, and hope we don’t, is evidence of rampant fraud in that market, obviously something we have to stay very vigilant about.”