Members of the Securities and Exchange Commission’s Investor Advisory Committee are cautioning that it is imperative that the SEC not ignore its rulemaking obligations that it was tasked under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act even as it seeks to implement the new capital formation statute. The Jumpstart Our Business Startups Act was enacted in April.
The investor advisory committee, which is a new group at the SEC that was created under Dodd-Frank to provide the Commission advise about regulatory priorities, disclosure requirements, and investor protections, held their inaugural meeting on June 12. The committee takes the place of a prior one that was disbanded in 2010.
The JOBS Act
The JOBS Act is focused on helping smaller businesses gain access to capital. Per the statute’s Title II, the SEC has to allow general advertising and solicitation for private placement sales and offers under 1933 Securities Act Rule 144A and Regulation D Rule 506 as long as the buyers are accredited investors. The SEC’s Division of Corporation Finance associate director and chief counsel Thomas Kim has said that staff members are in the process of trying to determine how to practically implement the requirements so that investor protection isn’t compromised even as issuers are given some flexibility. Also, seeing as status or assets have resulted in a number of “prongs” for determining which entities or individuals are “accredited investors,” Kim noted that it was “reasonable” that issuers would take different steps to confirm accreditation depending on the accredited investor’s category.
Kim also spoke about how the crowdfunding rulewriting deadline of 270 days, which the SEC was given (under Title III of the JOBS Act) to come up with a registration exemption for crowdfunding, which involves “crowds” of investors sourcing small fund amounts, would be challenging to meet. A regulatory framework currently exists for the Title II modification to Rules 144A and Rules 506. However, the SEC would have to essentially make up from “whole cloth” a regulatory structure that incorporates disclosure requirements, funding portals, and other aspects from a completely new category of exempt offerings.
“An intense battle is being fought in Congress over Dodd-Frank efforts to ‘re-regulate’ the securities industry after the debacle caused by the ‘deregulation’ of that industry over the previous decade,” said Shepherd Smith Edwards and Kantas Founder and Stockbroker Fraud Attorney William Shepherd. Many believe such changes, if any, are months if not years away. Meanwhile, legislation to lower the bar in the issuance of new securities is sailing through at breakneck speed – proof positive as to who our representatives represent.”
SEC Must Not Forsake Dodd-Frank For JOBS Act, Investor Panel Members Say, Bloomberg/BNA, June 20, 2012
JOBS Act (PDF)
More Blog Posts:
SEC Chairman Schapiro Says Jumpstart Our Business Startups Act Needs Better Investor Protections, Institutional Investor Securities Blog, March 21, 2012
Advisory Performance Fee Rule Limit Adjusted by the SEC, Stockbroker Fraud Blog, July 30, 2011
Dire Predictions For Wall Street Reforms: Not Complete Until 2013, Even Longer to Implement, Half May Not Survive, Stockbroker Fraud Blog, May 12, 2012
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