The SEC proposed regulations eliminating the prohibition on general solicitation in offerings conducted under Rule 506 of Regulation D so long as all of the purchasers are accredited investors. The proposal implements Section 201 of the Jumpstart Our Business Startups (JOBS) Act, which removes the restriction on general solicitation for private offerings in an effort to assist companies on attracting investors and raising capital. The SEC proposes to require issuers that use general solicitation to take reasonable steps to verify that all of the purchasers are accredited investors. The vote was 4-1, with Commissioner Aquilar in dissent.
Senator Levin thanked the SEC for deciding to follow its normal procedure and open up the rule for public comment before its implementation. Existing investor protections have been in place for decades, he emphasized, and Congress unwisely passed legislation weakening those protections which, in his view, is compounded by the proposed regulations.
The vote to propose the regulations occurred against the backdrop of a letter to Chairman Schapiro from Rep. Patrick McHenry (R-NC), Chair of the TARP and Financial Services Subcommittee, noting that the SEC’s decision to propose a rule eliminating the Regulation D ban on general solicitation as directed by Section 201 of the JOBS Act, rather than adopt an interim final rule, means that the Commission is unlikely to finalize the rule until next year. By ``kicking the can down the road,’’ noted Chairman McHenry, the SEC is abdicating its responsibility under the law and ignoring the will of Congress and the President. Chairman McHenry has set a hearing for September 13 to examine the SEC’s implementation of the JOBS Act, including the failure to implement Section 201 by the Act’s statutory deadline and by the deadline committed to in earlier congressional testimony.