CFIRA Presses for Clear Rules and Safe Harbor for Equity Ads Under JOBS Act
Cincinnati, OH -October 5, 2012 – The new rules that will open the door for public advertisements of certain securities under the new JOBS Act should be easy to follow and consistent, a leading crowdfund investing advocate has urged the Securities and Exchange Commission.
The Jumpstart Our Business Startups Act, which amends nearly 80-year-old federal securities law to make it easier for businesses to raise capital for new jobs, became law on April 5, 2012. It requires the SEC to adopt rules to put the law into effect.
The SEC has the daunting tasking of creating rules that will enable companies to advertise to the public certain unregistered securities like stock that may be purchased only by “accredited investors” under securities laws. This is a radical change from existing law. The hook under the JOBS Act is that the broker/dealer handling a sale of securities that was advertised to the public under the new law take “reasonable steps to verify” that the purchaser is an accredited investor.
The Crowdfund Intermediary Regulatory Advocates (CFIRA), representing a broad range of constituents seeking effective implementation of the JOBS Act, submitted comments to the SEC on October 5, 2012 urging the SEC to implement rules that would include clear examples, and “safe harbors” exceptions, for equity offers made via general advertising to accredited investors. In its letter to the SEC, which can be viewed below, CFIRA founding members Kim Wales, Scott Purcell, Charles Sidman and Luan Cox pointed out “we encourage leniency from an onerous process which may yield prohibitive cost and limited time constraints in order not to trigger unintended consequences of a constricted marketplace.”
CFIRA urges that the SEC incorporate safe harbors into the regulations for general solicitations — that is general advertising directed to accredited investors — for the following reasons:
1. Without safe harbor provisions, issuers will not know the requirements to satisfy the “reasonable steps” standard.
2. Without safe harbor provisions, deserving businesses may find difficulty in raising capital as envisioned under the JOBS Act.
Rule 506c Comment Letter Final
Feature Image by Crestock.com.