Senate Passes Legislation To Raise the 500 Shareholder Threshold for SEC Registration and To Relax General Solicitation Prohibition in Reg D Offerings

Yesterday, by a vote of 73 to 26, the U.S. Senate passed the Jumpstart Our Business Startups Act, which was approved by the U.S. House of Representatives on March 8, 2012, but voted to amend the so-called “crowdfunding” section of the House-passed bill (as amended, the “JOBS Act”). Because of the crowdfunding amendment, the JOBS Act will now return to the House (a House vote is expected early next week) and ultimately, once the House and Senate reach agreement on a single version, will need to be signed into law by President Obama. If enacted, the JOBS Act would, among other things, (i) raise the equity holder threshold in Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) that triggers public company reporting and (ii) relax the general solicitation and general advertising prohibition for offerings made pursuant to Rule 506 of Regulation D of the Securities Act of 1933 (the “Securities Act”). These amendments, both of which address issues that have been the focus of recent congressional and regulatory attention, would introduce significant and beneficial changes to the regulations governing the offering processes for private funds.