After repeated complaints, Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro decided to back away from issuing on Wednesday an interim rule on general solicitation and advertising of private offerings under the JOBS Act and instead will put the rule out for public comment.
The agency was barraged with complaints from groups like the North American Securities Administrators Association (NASAA) and Americans for Financial Reform (AFR) that the securities regulator was circumventing its traditional practice of putting rules out for public comment before issuing them.
The rule in question would eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act, as mandated by Section 201(a) of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in April.
While the SEC has been under increasing pressure from House Republicans to push the JOBS Act rulemakings through, NASAA President Jack Herstein told Schapiro in an Aug. 15 letter that while “We realize the JOBS Act contains a 90-day limit for the changes to Rule 506, we note that many of the rulemakings required by the Dodd-Frank Act are long overdue. We encourage the commission to prioritize investor-protection rules ahead of the exemptions in the JOBS Act, and we urge you to resist the pressure to act hastily, especially where ill-considered changes could have such devastating impacts on investors.”
SEC spokesman John Nester said that Schapiro “believes it is important for the general solicitation rule to be proposed for public comment, as is our typical practice in rulemaking.” This transparent process, he said, “will provide the opportunity for feedback from companies, investors and market participants who may be impacted by the final rule.” In addition, Nester said, “failure to provide this opportunity for comment could subject the rule to challenge that could delay the implementation of the statutory mandate.”