NASAA Statement on SEC Decision Allowing Private Placement Advertising

WASHINGTON (July 10, 2013) – The following is a statement by A. Heath Abshure, president of the North American Securities Administrators Association (NASAA) and Arkansas Securities Commissioner on the Securities and Exchange Commission’s (SEC) adoption of amendments to eliminate the prohibition against general solicitation and general advertising in certain securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act.

“State securities regulators are disappointed that lifting the ban on general solicitation and advertising of highly speculative and sometimes fraudulent private placement offerings investments before approving safeguards needlessly puts investors in harm’s way. The decision to lift the ban without simultaneous adoption of appropriate limits, guidance and investor protections for the most common product leading to enforcement actions by state securities regulators underscores the prospect that , investors and issuers alike will be exposed to an indeterminate gap in protection. We therefore strongly urge the SEC to move as expeditiously as possible to adopt the proposed amendments to Regulation D and Form D.

“Efforts to spur successful capital formation must reflect a balanced regulatory approach that minimizes unnecessary costs and burdens on small businesses while protecting investors from fraud and abuse. NASAA offered recommendations to improve protections for investors with little burden to small companies who seek capital, and many of our recommendations are reflected in the amendments proposed today involving changes to Form D. For example, the proposing release includes a recommendation offered by NASAA and six Senators to require the pre-filing of Form D for private offerings where general solicitation or advertising is used. This would greatly bolster our efforts to protect investors, and this change should have been adopted along with today’s rule lifting the ban on general solicitation.

“We appreciate that the Commission acted on the Dodd-Frank Act’s common-sense call to disqualify private placement offerings involving criminals and other ‘bad actors’ but are disappointed that the rule adopted by the Commission today is not retroactive and will allow certain bad actors to continue to raise money through the Rule 506 exemption. We take comfort, however, in that fact that the SEC now requires disclosure of pre-existing disqualifying events, such as criminal convictions, court injunctions and federal or state orders.”

For More Information:
Bob Webster | Director of Communications
202-737-0900

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