Cartel Blue Inc (CRTL)

[knight247]

http://blogs.wsj.com/cfo/2013/07/10/sec-opens-private-funding-floodgates/

Mark Young has been trying for a year to raise money to start a real estate investment fund in California. He’s had little luck.

Big investors and venture capital firms shy away from first-time funds with less than $10 million in assets, he said, and he didn’t want to pay thousands of dollars to hire a solicitor to approach other accredited investors.

“Because I don’t have friends and family who are wealthy, I’ve been stifled,” Mr. Young said.

Not anymore. Mr. Young says he intends to advertise on social media and buy lists of accredited investors to phone directly to participate in his offering.

And he can thanks to Wednesday’s 4-1 vote by the Securities and Exchange Commission to lift an 80-year-old ban on publicizing shares in private offerings — one of the biggest methods for companies to raise capital. The new rule will take effect 60 days after the SEC publishes it in the Federal Register and companies will still have to verify that they are only selling shares to qualified investors.

Congress told the SEC to lift the ban when they passed the Jumpstart Our Business Startups Act in April of last year. Previously, companies seeking to raise private funds have only been able to advertise to wealthy investors who have net worth of more than $1 million or annual income of at least $200,000, or qualified buyers who manage at least $100 million in securities, for the past two years. So most investors never heard about a deal until it was completed and announced.


Reuters
The headquarters of the U.S. Securities and Exchange Commission (SEC) are seen in Washington.The end of the ban will let companies advertise more broadly to the general public, by issuing press releases or tapping social networks, for example.

The market for unregistered securities (including offerings made under Rule 506 and Regulation D) is already $900 billion, dwarfing the $43 billion companies raised last year through initial public stock offerings However, SEC Commissioner Luis Aguilar blasted the yes-votes by his fellow commissioners as “reckless,” and said the new rules will make it easier for more investors to get duped by potential frauds. The SEC also voted to propose additional protections for investors.

Nevertheless, R. Cromwell Coulson, president and chief executive of OTC Markets Group Inc., predicts lifting the ban will fundamentally change the way capital will be raised.

The ban could level the playing field for entrepreneurs who don’t have an easy time building relationships with angel investors and venture capitalists. He expects early advertising from companies to come in the form of press releases saying they have hired an investment bank to raise funds, and include risk warnings.

“Smaller companies are saying, ‘This is going to make it a lot easier for me,’” Mr. Coulson said.