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Friday, July 11, 2014

HALOS Act

A new bill proposed by Senator Murphy, titled the “HALOS Act”, or “Helping Angels Lead our Startups Act” was recently released.   This bill seeks to clarify when a company is in engaging in a 506(c) “general solicitation” offering.  As you might recall, Section 506(c) was created by the JOBS Act and allows a company to use general solicitation if it undertakes certain additional investor verification procedures to ensure that investors meet the accredited investor standard.  The HALOS Act is an attempt to preserve the spirit of the JOBS Act and alleviate this burden from demo days and other standard start-up events.  

Specifically, the proposed bill would clarify the definition of general solicitation as not applying to a presentation, communication or event:

(1) sponsored by (A) the United States or any territory thereof, by the District of Columbia, by any State, by a political subdivision of any State or territory, or by any agency  or public instrumentality of any of the foregoing; (B) a college, university, or other institution of higher education; (C) a nonprofit organization; (D) an angel investor group; (E) a venture forum, venture capital association, or trade association; or (F) any other group, person or entity as the Securities and Exchange Commission may determine by rule;

(2) where any advertising for the event does not reference any specific offering of securities by the issuer;

(3) the sponsor of which—(A) does not make investment recommendations or provide investment advice to event attendees; (B) does not engage in an active role in any investment negotiations between the issuer and investors attending the event; and (C) does not charge event attendees any fees other than administrative fees; and

(4) where no specific information regarding an offering of securities by the issuer is communicated or distributed by or on behalf of the issuer, other than–(A) that the issuer is in the process of offering securities or planning to offer securities; (B) the type and amount of securities being offered; (C) the amount of securities being offered that have already been subscribed for; and (D) the intended use of proceeds of the offering.


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