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The JOBS Act: Looking Back At Views Previously Expressed By The New Sec Chair On General Solicitation

William Carleton, Contributing Editor, VCExperts


Does anybody know when the SEC will again move on general solicitation?

I went back and looked at the statement then Commissioner, now Chair, Elisse Walter issued when the proposed rules were released in August. Here's an annotated version.

Troublesome stuff in there, including the explosive idea that implementing the lifting of the ban on general solicitation is a good time to revisit the accredited investor definition (not sure the Commission has latitude to revisit the net worth prong, not yet, but maybe it does to revisit the income thresholds)!

I think Walter is saying the following should be part of any rule to implement the JOBS Act-mandated lifting of the ban on general solicitation in Rule 506 offerings where all investors must be verified as accredited (the "noisy" 506, as Joe Bartlett says, or "506(c)" in the nomenclature of the August 2012 proposed rules):

  • Filing a Form D should be a condition of the exemption;
  • The filing should be made in advance of sales; and
  • The Form D should gather additional (unspecified) information.

Under 506 today - which of course does not permit general solicitation - there is no pre-sale filing requirement. If pre-sale Form D notice filings are going to be required, hopefully this will only apply to Rule 506 offerings that involve general solicitation.

Don't know how to weigh Walter's reference to the accredited investor definition. Hopefully that is an idle remark and not a fight we'll have to go through to get the lifting of the ban on general solicitation implemented.

Here's another thought about dealing with the delay: the Congress could mandate that the rules proposed by the SEC back in August should immediately be deemed interim final rules. pending further rulemaking, whenever the agency got around to it. Or the SEC itself of its own volition could take the same action.

I think Gary Jay Brooks was right when he said the other day in the comments - albeit in a different context - that regulatory limbo isn't good. Gary's comment in part:

"I see no framework. I see people worried and confused. It's so elegant for the government to leave us entrepreneurs with a pile of shit policy and nobody to pickup the ball and run with a vision."

Photo: Erik Fitzpatrick/Flickr.


William Carleton

Bill is a member of McNaul Ebel Nawrot & Helgren PLLC, a Seattle law firm. He blogs every day at http://wac6.com.