An 80-year-old ban that has prevented private companies from publicly advertising their efforts to raise funds will lift on Monday.
If you are an entrepreneur struggling to find investors, that may be very good news. But hold the champagne for now.
What this historic change in general solicitation law really means is that if you are an entrepreneur looking to raise money from investors, you might want to spend some quality time with a lawyer before you go shouting it from the rooftops.
That’s because the Securities and Exchange Commission is expected on Monday to release further guidance on how it will regulate the new law – guidance that may determine how much the change will ultimately end up benefiting entrepreneurs.
“The proposed rules are absolutely critical to determining whether this will be successful or not. They have the potential to dramatically reduce the ability of companies to take advantage of this,” says Rory Eakin, co-founder of CircleUp, an online portal that connects consumer-product entrepreneurs with accredited investors. If the SEC requires companies to file excessive amounts of paperwork, many entrepreneurs may choose to not take advantage of the rule change, says Eakin.