According to the SEC’s Division of Corporate Finance deputy director Lona Nallengara, a short deadline for rulemaking resulted in its proposal to eliminate the ban on general solicitation and advertising for private placements only tackling the elements ordered by the Jumpstart Our Business Startups Act’s Title II provisions. Nallengara said that the proposal looks at the issues that the Commission considers important to deal with now, and that other issues, such as whether the definition of “accredited investor” needs to be revised and there should be a wider examination of Regulation D offerings and related provisions are likely to be addressed later.
Per the JOBS Act’s Title II, the regulator has put out a proposal that lets issuers generally solicit investors or advertise offerings under Rule 144A and Reg D Rule 506 of the 1933 Securities Act for offerings that are only sold to qualified institutional buyers or accredited investors. However, contrary to what some expected, the Commission didn’t propose a series of steps or a method that Rule 506 issuers can use to verify that purchasers are accredited buyers. Rather, the proposal mandates that issuers take steps that are objectively reasonable to make sure accreditation status is based only on the particular circumstances and facts of the transaction.
Nallengara, who spoke on a CorporateCounsel.net JOBS ACT panel, acknowledged that there are differences of opinion on how strict the verification method for making share that buyers are accredited should be. Issuers don’t want the requirements to be too much of a burden while investors and state regulators want tough safeguards to make sure that only sophisticated investors are buying. He said the SEC is open to comments on the proposed rule’s verification portion. However, he wouldn’t give more concrete details about when the Commission plans to adopt a final rule per Title II (but the comment period, which is 30-days long, places the rulemaking for the proposal on a “faster track.”)
Also addressing the same panel, SEC’s Division of Trading and Markets deputy director Jim Burns said the JOBS Act’s next deadline is December 31, 2012, which is when the SEC has to adopt rules to set up a new regulatory framework for crowdfunding. Per Title III, crowdfunders and intermediaries must set up comprehensive disclosure requirements. Also, crowdfunding can only happen through registered funding portals and broker-dealers.
As for JOBS Act Title IV, Nallengara stated that Corp Fin has rulemaking teams working on this even though there is no deadline at this time. Per the title, under Regulation A for offerings that are exempt there would be a new offering cap of $50 million. Up for debate by staff, reportedly, is how much Reg A needs to be amended.
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Scope of SEC’s General Solicitation Proposal Constrained by Short Deadline, Official Says,, Bloomberg/BNA, September 6, 2012
More Blog Posts:
SEC Acts to Put into Effect Provision of JOBS Act that Allows General Advertising and Solicitation in Securities Offerings, Stockbroker Fraud Blog, September 4, 2012
Will the JOBS ACT Will Expand Private Offerings But Hurt Public Markets?, Institutional Investor Securities Blog, July 6, 2012
Dire Predictions For Wall Street Reforms: Not Complete Until 2013, Even Longer to Implement, Half May Not Survive, Stockbroker Fraud Blog, May 12, 2012