State regulators are calling on the Securities and Exchange Commission (SEC) to start over on a proposed rule to authorize advertising for private placements.
Two months ago, the SEC put forth the proposed rule on private-placement advertising as part of regulations to implement the JOBS Act. Supporters of the bill contend it is designed to ease financial regulations on start-up companies, as well as help spur economic growth. Critics, however, say the SEC’s proposed rule is too vague and ultimately would be a disservice to investors.
“Lifting the advertising ban on these highly risky, illiquid offerings without requiring appropriate safeguards will create chaos in the market and expose investors to an even greater risk of fraud and abuse,” said Heath Abshure, Arkansas’ securities commissioner and president of the North American Securities Administrators Association (NASAA), in an Oct. 9 story by Investment News.
According to Barbara Roper, director of investor protection at the Consumer Federation of America, the SEC is rushing to advance the proposal in order to meet a congressional deadline.
Meanwhile, NASAA wants the SEC to redo the rule to ensure that an investor is accredited before purchasing shares in a private placement. It also wants to require the filing of Form D before ads are launched.