Many rounds of capital raising by startups take advantage of Regulation D's exemption from registration under the Securities Acts. However, one of the conditions to qualifying as a Regulation D offering is that the issuer (the company raising capital) avoids any "general solicitation" as a part of their capital raising. This ban on "general solicitation" drastically reduces the potential sources of capital which a startup can reach. This article highlights a recent proposal by a member of Congress to remove the ban on general solicitation from Regulation D's exemption, explains the arguments for and against doing so, and also opines on the proposed method of doing away with the ban.
- Summary by FizzLaw Team
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Rep. McCarthy (R-CA) introduces legislation to eliminate ban on general solicitation for private placements.