Transactions

  • October 30, 2017 - Roberta Roller Rabbit has been sold to an investor group

    Avalon Net Worth has identified an investor group for the acquistion of Roberta Roller Rabbit... 

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  • March 31, 2017 - Atlantic Street Capital portfolio's company, Alex Apparel Group, Inc., have acquired Sally Lou Fashions

    Avalon Net Worth has identified a strategic target company for Atlantic Street Capital and its portfolio company, Alex Apparel Group, to aquire... 

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  • March 02, 2017 - ANW has advised on the sale of Jaclyn, Inc. (OTCMKTS:JCLY), to an affiliate of Golden Touch Imports, Inc.

    Jaclyn, Inc. (OTCMKTS:JCLY), a $175 million (revenues) multi-line fashion and accessory firm, has been sold to an affiliate of Golden Touch Imports, Inc. ... 

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  • February 27, 2017 - Molli Partners LLC has sold its four shoe brands to Teshoeque LLC

    Molli Partners LLC has completed a sale of it's major brands to Teshoeque LLC... 

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Noteworthy

  • October 17, 2017 - Global Private Wealth Dallas Forum on Macroeconomics

    At the 2017 GPW Dallas Forum our Co-CEO, Lynda Davey, spoke alongside other prominent industry executives regarding the current

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  • July 25, 2017 - Retail Summer School at Columbia Business School

    Richard Jaffe, a Managing Director at Avalon, along with Shoptalk, will host the 9th Annual Retail Summer School at

    Read More
  • May 10, 2017 - Retail’s Private Equity Legacy: Big Debt, Big Problems

    In an article published by WWD magazine our Co-CEO, Jack Hendler, shares his insight on Private Equity in the

    Read More
  • April 04, 2017 - Why Millennials and Mid-Market Firms Are a Fashion Match

    Apparel magazine published an article where our Co-CEO, Jack Hendler, discusses Milennials and Retail...    Read More...

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JOBS Act Update: SEC Releases Proposed Rules

Business Insider

After missing its initial deadline, earlier this week the SEC finally released its long-awaited proposed rules to eliminate the general solicitation and advertising ban.

Under the proposed rules, fund managers conducting Rule 506 offerings would be permitted to use general solicitation and general advertising to market the underlying securities, provided that: (1) the issuer takes reasonable steps to verify that the investors are accredited investors; and (2) all investors are accredited investors, because either (i) they come within one of the categories of persons who are accredited investors under existing Rule 501 or (ii) the issuer reasonably believes that they meet the categories at the time of the sale of the securities.

In determining the reasonableness of the steps that an issuer has taken to verify that a purchaser is an accredited investor, the proposing release somewhat vaguely explains that issuers are to consider the facts and circumstances of the transactions. This includes, among other things, the following factors:

The type of purchaser and the type of accredited investor that the purchaser claims to be.
The amount and type of information that the issuer has about the purchaser.
The nature of the offering, meaning:
The manner in which the purchaser was solicited to participate in the offering.
The terms of the offering, such as a minimum investment amount.
The SEC's proposing release rationalizes that adopting specific verification methods that an issuer might use "would be impractical and potentially ineffective in light of the numerous ways in which a purchaser can qualify as an accredited investor."

The SEC further notes that proposing such methods could be overly burdensome in some cases and ineffective in others. However, fund managers and other interested parties will likely find this approach lacking; there has been considerable speculation leading up to the proposed rules as to how the SEC would address the verification process, as well as the impact the change would have on investor certification practices, but the SEC appears to have effectively punted here.

This leaves issuers in a state of limbo regarding what constitutes "reasonable steps" to verify accredited investors. As such, until the SEC provides further clarification, managers relying on the new exemption are advised to err on the side of caution by requiring as much information from qualifying investors as the issuer can reasonably request. It will be interesting to see if the SEC provides any further guidance regarding verification methods in the final rules.

It also remains to be seen whether the SEC will restrict certain types of advertising with respect to issuers relying on the new exemption; it is likely that, as issuers begin to engage in general solicitation and general advertising activities, the rules and surrounding interpretations will be further refined in response to common practices.

Notably, the proposed rules would preserve the existing portions of Rule 506 as a separate available exemption, allowing issuers who elect to conduct Rule 506 offerings without the use of general solicitation and general advertising to avoid becoming subject to the new verification rules.

It is also important to note that fund managers cannot rely on the new rules yet; this week's released rules are proposed rules only and will not take effect until the SEC takes comments and releases final rules, which may differ materially from the proposed rules outlined above.

Please feel free to contact us if you have any questions regarding the status of the JOBS Act or its potential impact on hedge fund marketing activities.