The Securities and Exchange Commission, or SEC, has proposed
new rules under the JOBS Act that would make it easier for companies to raise
capital through advertisements directed at the public.  This change will allow companies to sell
securities for the purpose of raising money, and informing the public of the
securities offering through various modes of advertisement and solicitation.


Generally, a company that wishes to sell securities to the
public must either register with the SEC or obtain a registration
exemption.  Rule 506 is one type of
registration exemption that prohibits companies from advertising the securities
offering to the public through the internet, newspapers, radio, television and
magazines - basically, solicitation of any kind was not permitted.


In passing the JOBS Act earlier this year, the federal
government sought to help jumpstart the economy by taking various measures to
encourage job creation and commercial investment.  One of the ways the government hoped to
achieve these related goals was by relaxing some of the restrictions companies
face when they decide to seek outside investment to help raise money,
particularly if they do not register with the SEC.


EB-5 program-related investments are among the securities
that will be affected by the proposed rules. 
The EB-5 program encourages foreign investment in commercial enterprises
by offering immigrant entrepreneurs the opportunity to obtain a green card if their
$500,000 or $1,000,000 commercial investment leads to the creation or
preservation of 10 permanent full-time jobs within two years.


The EB-5 program
allows additional capital to be raised for a given project as needed, but the
enterprises are required to comply with the rules described above governing the
sale of securities.  Those rules were
somewhat onerous and could adversely impact the ability of an investment team
to raise money if more funding was needed to continue.


But if the proposed SEC rule changes are approved,
commercial enterprises that have been established or are being developed
through the EB-5 program and are facing funding shortfalls will be able to
advertise investment opportunities to the public in a variety of ways, even if
the EB-5 enterprise is not registered with the SEC.


However, the new rules also impose certain requirements on
the company selling securities to the public. 
The company must take reasonable steps to ensure that the persons
purchasing securities being offered are qualified and meet the requirements of
the SEC.  The SEC will also need some
specific information about the proposed investor such as their identity, the
amount being invested, and how the investor was made aware of the opportunity
to invest in the company.


EB-5 program investment projects and Regional Centers will
have to comply with these proposed new requirements, but it is a small price to
pay for the added flexibility they will have to seek additional investments
when they need more funding.