NASAA Statement on Reforms Needed to Protect Investors in Regulation D Rule 506 Offerings

Crawford: “NASAA strongly supports the adoption of a disqualification provision to prevent recidivists from conducting private securities offerings under Regulation D.”

WASHINGTON (April 19, 2010) – The following is a statement from Texas Securities Commissioner and North American Securities Administrators Association (NASAA) President Denise Voigt Crawford outlining the position of state securities regulators concerning the reforms being considered by the Senate regarding the regulation of private placement offerings made under the Securities and Exchange Commission’s Regulation D Rule 506.

“State securities regulators urge the Senate to protect investors by amending the Banking Committee’s recently approved reform package to stop securities law violators from conducting private securities offerings under the SEC’s Regulation D Rule 506 provisions.

“The bill’s current language offers an unworkable regulatory review process, which, contrary to those who have mischaracterized our position on Reg D Rule 5O6 offerings, has not been called for by NASAA. Such a process would impede capital formation in the United States, especially in the small business community and would add little to protect investors.

“Rather, we believe the legislation should instead reinstitute the authority of states to use their so-called ‘bad boy’ provisions to disqualify recidivist securities violators who are now legally allowed to conduct private securities offerings under Regulation D Rule 506.

“NASAA strongly supports the adoption of a disqualification provision to prevent recidivists from conducting private securities offerings under Regulation D. This would provide much needed investor protection and would not be detrimental to legitimate issuers, including small business issuers, who are using Rule 506 almost exclusively for Regulation D offerings to raise capital.

“NASAA also believes that having the authority to request and obtain a copy of the private placement memorandum when there is reason to believe that investors might be defrauded would restore an important law enforcement tool that was lost in 1996.”

For more information:
Bob Webster, Director of Communications
202-737-0900

2010 Headlines, Newsroom