Two SEC Commissioners Argue for More Investor Protections Before Ban on General Solicitation is Lifted

By Cydney Posner

According to an article from Reuters, two SEC commissioners, Luis Aguilar and Elisse Walter, have advocated that "more safeguards for investors should be considered before a rule lifting the ban on general advertising for private offerings is adopted, with one [Aguilar] going so far as to call for a complete re-write of the proposal." Walter commented that: "I think everyone can agree that removing the ban on general solicitation, essentially allowing public offers in private security transactions, is a fundamental change in the securities market…. We must be vigilant about the potential consequences, particularly unintended consequences of a significant change like this, and consider ways to mitigate potential harms to the investors while preserving the rule's intended benefits." The proposed rules, mandated by the JOBS Act,  were released for public comment in August, and have been widely criticized by consumer and investor advocacy organizations, as well as state securities regulators, "saying it would open the floodgates for fraud. They said the draft failed to even contemplate some of the basic protections they had proposed to the SEC prior to its release, such as amending the definition of ‘accredited investor' to make sure unsophisticated people are not captured and tweaking the filing rules so the commission can collect data on solicitation practices to help it police the marketplace."  Walter contended that those protections should be considered as part of the rulemaking process.

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