The Securities and Exchange Commission (SEC) has long adhered to a policy that preregistration offers to potential investors may improperly prime the market for a securities offering.1 The view that such offers are illicit is rooted in the mechanics of Section 5 of the Securities Act of 1933 (Securities Act) because that provision prohibits offers of securities prior to the time a registration statement covering the offering is filed with the SEC.2 The SEC’s anti-gun jumping policy was also applied in private placements on the theory that offerees were required to meet the same standards as purchasers in order for such placements to be exempt from registration. Furthermore, if a private placement were generally advertised, it could no longer be classified as a private placement but instead would become a public offering.
Although the SEC’s gun jumping doctrine became more and more difficult to maintain in an Internet environment, the SEC endeavored to do so. The Jumpstart Our Business Startups (JOBS) Act passed on April 5, 2012, required the SEC to re-think its policies on advertising in securities offerings and adopt rules reflecting such changes in certain private placements.3 The SEC was ordered to pass rules implementing this provision of the JOBS Act in 90 days, but such haste was not feasible in view of some controversies about the substance of the mandated changes, the requirements of the Administrative Procedure Act for notice and comment, and the complexity of making these changes because of their connection to other SEC rules.
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