The False Promise of Publicly Offered Private Placements

This article addresses Congress's promise that an exemption for private placements publicly offered to accredited investors, as mandated by Title II of the Jumpstart Our Business Startups Act (JOBS Act), would provide greater access to capital for our nation's businesses. Based on an extensive survey of Form D data for the eighteen month period following promulgation of the Securities and Exchange Commission's new Rule 506(c), the author concludes that only a relative paucity of issuers have taken advantage of Congress's beneficence. The author also discusses what he has identified as the primary factors that explain issuers' reluctance to rely on the Rule 506(c) exemption, as well as survey data obtained from securities lawyers whose practices include representation of private placement issuers. The article concludes that while Rule 506(c) might be hailed as the ultimate platform for accredited investor crowdfunding, it has yet to achieve its promise