Wall Street Journal Reports Delay in Adoption of General Solicitation Rules

By Cydney Posner

The Wall Street Journal is reporting that the SEC plans to delay adoption of new rules that would eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 of Reg D and Rule 144A. (See my email of July 3, 2012.) Elimination of the ban was mandated by the JOBS Act. The vote has long been scheduled for August 22, and, as of now, remains on the SEC agenda for that open meeting, perhaps now only as a proposal.

Although the SEC had not floated any proposal, the plan had been to adopt the rules on August 22 (as interim final rules?) and solicit public comment at the same time. However, in testimony before Congress, SEC Chair Mary Schapiro indicated that the SEC now plans to solicit public comment on a proposal before issuing final rules. According to the article, the final rules could still be in place as early as this fall. The reason given by the SEC for the delay was that "implementing rules too hastily could expose the agency to court challenges." The result is just a bit ironic given that the Chamber of Commerce, which instilled in the SEC its fear of just such court challenges, applauded adoption of the JOBS Act.

The article reports that "[i]nvestor advocates and state securities regulators this past week urged the SEC to take a slower approach to repealing the ban and to consider imposing restrictions on fund advertising, arguing that unfettered marketing of unregistered securities increases the potential for fraud. They noted that the agency has missed other deadlines, such as in the 2010 Dodd-Frank financial overhaul." According to the article, Republican lawmakers accused the SEC of abdicating its responsibility and "ignoring the will of Congress and the President." Hearings on the matter are planned.

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