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United States Representative Steve Chabot of Ohio first introduced the Helping Angels Lead Our Startups Act (the “HALOS Act”) on February 9, 2016.  Less than a month later, on March 2, 2016 the House Committee on Financial Services reported the bill out of committee meaning it will be sent to either the full House or Senate for consideration.

The HALOS Act would require the SEC to revise section 502(c) of Regulation D to carve-out certain types of communications made during “startup pitch shows” from the prohibition on general solicitation.


Startup companies searching for early investment capital frequently present at “pitch” or “demo” days sponsored by various groups such as venture capital firms or trade associations.  These events aim to help startups grow while controlling costs by offering networks of contacts, mentors, and of course, capital.  Although these events are more frequently geared towards providing startups with publicity for their ideas, it almost goes without saying that the companies present are interested, if not actively seeking, financing.  Specifically mentioning this intent, or disclosing details about proposed financing rounds, however, may be deemed a general solicitation under the securities laws and disqualify the issuer from certain exemptions from registration found in the Regulation D safeharbor.

HALOS Act Proposed Changes to Regulation D Section 502(c) (17 C.F.R. § 230.502(c))

In order to facilitate pitch days and avoid the potential to sour an otherwise available exemption (such as 506(b)), the HALOS Act provides an additional carve-out from the prohibition on general solicitation under Regulation D (the other two are Rules 504(b)(1) and 506(c)) if four conditions are satisfied.

  1. The event is sponsored by certain enumerated groups, such as nonprofits, universities, “angel investor groups”, venture forums, venture capital associations, and trade associations.
  2. Advertising for the event does not reference any specific securities offerings.
  3. The event sponsor does not: (a) make investment recommendations or advice, (b) engage actively in any investment negotiations between an issuer and investor attendees, (c) only charges administrative fees in connection with admission to the event, and (d) does not receive compensation with respect to the event that would require it to register as a broker or dealer under the Securities and Exchange Act of 1934.
  4. During the event the issuer or event sponsor disseminates only the following limited information regarding a specific offering of securities: (a) that the issuer is in the process of offering securities or planning to do so; (b) the type and amount of securities being offered; (c) the amount of securities already subscribed for; and (d) the intended use of proceeds of the offering.

Additionally, the HALOS Act defines the term “angel investor group” listed above in requirement #1, as a group composed of accredited investors interested in investing personal capital in early-stage companies that hold regular meetings, have defined processes for making investment decisions–either individually or as a group–and are not associated or affiliated with brokers, dealers or investment advisors.

If the HALOS Act eventually becomes law, it will further erode the prohibition on general solicitation in the context of private placements that began with section 201(a) of the JOBS Act of 2012.

The text of the HALOS Act bill can be read here.