The North American Securities Administrators Association (NASAA) announced Tuesday that its members have voted to approve a streamlined multistate review protocol for small companies looking to raise capital.
The protocal would ease regulatory compliance costs for companies trying to raise funds under Title IV of the Jumpstart Our Business Startups Act, the state securities regulators say.
Under the new program, Regulation A filings would be made in one place and distributed electronically to all states, NASAA said. Lead examiners would be appointed as the primary point of contact for a filer, and each state would be given 10 business days for review.
Lead examiners alone will interact with issuers to resolve any deficiencies.
Andrea Seidt, NASAA president and Ohio securities commissioner, said in a statement that this approval “is an important first step toward creating a state-level filing and review program that eases regulatory hurdles for filers without sacrificing important investor protections.” NASAA looks “forward to implementing this program so that Regulation A will be an attractive and efficient option both for small businesses that need capital and the investors asked to provide it.”
NASAA spokesman Bob Webster says that now that the membership approved the coordinated review program, the next step calls for members to sign a memorandum of understanding (MOU) demonstrating their agreement to participate in the program. “We are in the process of fielding signed MOUs,” he said.
The new program was initiated in response to Title IV of the JOBS Act, which raised to $50 million from $5 million the amount of money that can be raised through offerings exempt from registration under Regulation A.
Congress directed the Securities and Exchange Commission to adopt a rule implementing this JOBS Act provision. But NASAA believes the SEC’s proposed rule runs contrary to congressional intent by seeking to transform Regulation A offerings into covered securities, which by law are not subject to state review.
“By doing so, the rule would eliminate state authority to review Regulation A offerings before they are sold to the public,” NASAA said.
Seidt noted in the statement that state securities regulators “have two core missions: protecting investors and helping small businesses access the capital they need to start their companies and grow much-needed jobs for the economy. We can’t fulfill either if the commission prohibits our review as it proposes to do.”
Massachusetts Commonwealth Secretary William Galvin, the state’s top securities regulator, released a statement that “the creation of a state-level filing and review program will address industry concerns but more importantly will not sacrifice investor protections. This should eliminate the SEC’s stated rationale for making this ill-advised pre-emption attempt.”
Secretary Galvin wrote to the SEC late last year expressing his outrage that the SEC would propose to pre-empt states in its rule proposal on Regulation A securities. The SEC had proposed the rule “based on its assertion that multistate review could result in additional costs for issuers,” Galvin said.
More information on NASAA’s coordinated review program and concerns about the SEC’s proposed Regulation A rule can be found at NASAA’s Regulation A Resource Center.
Check out 5 Big Regulatory Changes Coming in 2014 on ThinkAdvisor.