Wednesday, May 22, 2013

Senators Thune and Toomey Urge SEC to Promptly Implement JOBS Act Elimination of Ban on General Solicitation

In a letter to SEC Chair Mary Jo White, Senators John Thune (R-SD) and Pat Toomey (R-PA) urged the SEC to promptly implement Section 201 of the JOBS Act, which ends the ban on general solicitation in private offerings. The Senators were encouraged by the commitment that Chairman White demonstrated during her Senate confirmation process to see that the Commission completes these important rulemakings. The Commission should act expeditiously, they said. The letter was also signed by Rep. Patrick McHenry  (D-NC), Chair of the House Oversight Subcommittee of the Financial Services Committee.

The overall purpose of the JOBS Act was to facilitate capital formation to help small businesses and entrepreneurs invest, expand and create jobs. As proponents of the JOBS Act, the Senators and Chairman McHenry believe that the regulation proposed by the Commission last August accomplishes this goal. The proposal properly implements Congress’ intent to remove the general solicitation ban in a consistent manner for all types of issuers conducting private offerings under Rule 506.

Paragraph (b) of Section 201 clearly effectuates this by providing that all issuers subject to other federal securities laws will be able to conduct private offerings pursuant to amended Rule 506. The proposed rule ensures that all purchasers of securities under Rule 506 are accredited investors, they noted, and follows Congress’ policy objectives to require that issuers take reasonable steps to verify that the purchasers are accredited investors. The Senators and Chairman McHenry emphasized that additional or more prescriptive requirements would overturn Congress’ intent and they strongly urged the Commission not to do so.