In a letter to SEC Chair Mary Jo White, consumer groups
and former SEC Commissioner Steven M.H. Wallman urged the Commission to
re-propose the regulation implementing the JOBS Act provision eliminating the
ban on general solicitation so that the recommendations of the SEC Investor
Advisory Committee can be incorporated into the final regulation. The groups
believe that the re-proposal of a rule that includes the IAC recommendations
for appropriate investor protections and that complies with the Commission’s guidelines
for economic analysis is the best way to assure that any final rule adopted in
this area can be speedily adopted, is legally defensible and enjoys the broad
support of the issuer and investor communities. In addition to former Commissioner
Wallman, the letter was signed by Barbara Roper, Director of Investor
Protection at the Consumer Federation of America.
Title II of the JOBS Act allows private
issuers to market their securities through general solicitations and
advertising under exemptions to the registration requirements of the Securities
Act. The JOBS Act required the SEC to revise its rules to remove the prohibition
against general solicitations and advertising in these exemptions within 90
days of its enactment. The deadline for the SEC to revise Rules 506 and 144A
was July 4, 2012. The SEC proposed regulations on August 29, 2012, but has not
yet adopted the regulations.
The
consumer groups and former Commissioner Wallman believe that the Investor
Advisory Committee has issued reasonable proposals that will enhance investor
confidence in this market without unduly impeding legitimate offerings.
Moreover, given the volume of comment the Commission has already received on
these issues, the consumer groups and
Commissioner Wallman believe that the SEC staff should be able to quickly craft
a rule proposal that can move very expeditiously, possibly with the minimum comment period, through the notice and comment process to
final adoption.
The letter notes that the recommendations of
the IAC include provisions designed to ensure that the Commission receives the
information necessary to provide effective oversight of the Rule 506 offering
market, that these private offerings are sold only to those who are
appropriately qualified to make such investments, that any performance claims
made in such offerings are based on reliable standards, and that bad actors will not be allowed to participate in such
offerings.
Specifically, the IAC recommendations would require
all issuers intending to rely on the new JOBS Act general solicitation
exemption to file with the Commission either a new Form GS or a revised version
of Form D. They would also require that all solicitation material prepared or
disseminated by or on behalf of the issuer that is being disseminated to the
public through a general solicitation or advertising campaign in reliance on
the new exemption be furnished to the Commission.
The IAC also recommends the adoption of a
safe harbor providing clear and enforceable standards for verification, as
opposed to reasonable belief, of accredited investor status, including
standards to promote reliance on reliable third parties, such as
broker-dealers, banks, and licensed accountants.