A Nebraska securities official who was the
President of the NASAA during the time Congress considered and passed the JOBS Act,
from 2011 to 2012, said he was stunned and dismayed that the SEC would propose
preempting the authority of states to register and review Regulation A-Plus
offerings as part of the rules proposed
to implement Title IV of the JOBS Act. In a letter to the SEC Jack
Herstein, past NASAA chief and currently Assistant Director of the Department
of Banking and Finance, averred that Congress plainly did not intend for states
to be preempted from registering or reviewing Regulation A-Plus offerings when
it enacted Title IV. To the contrary; Congress intended the SEC and the states
to be partners in the effort.
Indeed, he continued, the Commission’s
decision to propose preempting states under Title IV of the Act by deeming
every investor and every offeree in Regulation A-Plus offerings as qualified
purchasers is so far removed from both the intentions of Congress and the
realities of this new marketplace that it is almost breathtaking.
Citing legislative history, he concluded
that Congress carefully and extensively considered whether or not the new
exemption established under Title IV of the JOBS Act should preempt state
authority. After weighing the perceived merits of preempting state law and the
risk to investors that could arise from such action, Congress affirmatively
judged that states should not be preempted from review of offerings under the
exemption, citing both the high-risk nature of these offerings and the
essential function that state review plays in discouraging fraud.
The official added that the preemption of
state authority is simply unnecessary. The states understand the need for a
modern, efficient, coordinated review process that minimizes the regulatory
burden to small business issuers. This is exactly they are engaged in the
process of adopting such a new, innovative multi-state review protocol. He said
it was disingenuous for the Commission to justify its decision to preempt the
states based on criticisms of an “old” Regulation A review process, while
barely acknowledging that those criticisms have been addressed by the new protocol.