The Hedge Fund Association asked the SEC to adopt a more definitive safe harbor standard within the proposed regulations implementing Dodd-Frank provisions ending the ban on genereal solicitation in Regulaiton D offerings. In a letter to the SEC, the group said that a safe harbor would help private issuers manage the process of verifying an investor’s accreditation. Adding such a safe harbor to the proposed rule would be more in line with the original intent of the JOBS Act, said the group, which was to help increase jobs in the U.S. by simplifying the process for private companies to raise money from investors. Leaving the rule open without any such safe harbor may, in fact, serve to hinder the original intent of the law by creating administrative burdens and uncertainties for private issuers who intend to comply with the new rule but are not positive whether they have done so due to the lack of a definitive safe harbor.
The Hedge Fund Association suggested the following safe harbor language to the SEC.
"If an issuer (or its investor relations administrator) receives a signed subscription/investment agreement (whether received physically or electronically) from an investor, where the investor unequivocally affirms that he is an accredited investor (with a detailed description of the reason why included in the same document), this fact pattern alone will serve to meet a "safe harbor" whereby the Commission would agree that the issuer has met its initial burden of taking "reasonable steps" to verify whether an investor is accredited under this rule."