WASHINGTON (April 8, 2014) – The North American Securities Administrators Association (NASAA) today renewed its call on the Securities and Exchange Commission (SEC) to substantially revise its proposed Regulation A rulemaking to remove language preempting state authority over certain small business offerings.
Andrea Seidt, NASAA President and Ohio Securities Commissioner, pointed to the significant advancements the state securities regulators have achieved in instituting a coordinated review program for Regulation A offerings. This program will minimize costs for issuers and make the registration process more efficient while maintaining important investor protections.
During NASAA’s Public Policy Conference here today, Seidt announced that nearly all U.S. NASAA members have officially signed a Memorandum of Understanding demonstrating their agreement to participate in NASAA’s new Coordinated Review Program for Regulation A Offerings. This new program will help streamline state registration of Regulation A offerings. The program includes strict review and comment timeframes to be adhered to by participating states, generally no more than 21 business days from start to finish for an offering with no application deficiencies.
Seidt also explained that NASAA objects to the provisions in the SEC’s Regulation A proposal that would preempt state review of most Regulation A stating that, “This is one of the most significant challenges NASAA members have ever faced — the potential preemption of state regulatory authority, not by elected members of Congress, but by a federal agency.”
Seidt noted that the Jumpstart Our Business Startups (JOBS) Act of 2012, maintained, except in limited circumstances, the authority of states to review Regulation A offerings before they are sold to the public. Yet, in its proposed rule implementing Title IV of the Act, the SEC has proposed the circumvention of Congressional intent.
“The Commission’s proposal seeks to transform Regulation A offerings into covered securities, which by law are not subject to state review,” Seidt said. “It has done so by proposing to define a ‘qualified purchaser’ as anyone who is offered a security issued under Regulation A. In essence, the Commission wants to erase the word ‘qualified’ from the law. The practical effect of the agency’s proposed definition on most Regulation A offerings would be exemption from state regulatory review. This end-run to preemption contravenes what Congress set out to do in passing the JOBS Act and sets a dangerous precedent.”
In a March 24 comment letter, NASAA urged the SEC to substantially revise its proposed Regulation A rulemaking to, among other things, craft rules for the implementation of Title IV of the JOBS Act that will promote responsible capital formation, protect investors, and preserve the authority of the states to review and register these offerings.
“We share the goal of the JOBS Act to make the Regulation A exemption more attractive to issuers and investors alike. And we believe that streamlined coordinated state review is a very positive step toward fulfilling Congressional intent,” Seidt said.
For additional information and perspective, visit NASAA’s Regulation A Resource Center.
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Bob Webster | Director of Communications