TARP Subcommittee Blasts SEC Over JOBS Act Delays

Washington, DC — November 30, 2012 – In a scathing letter, Rep. Patrick McHenry  (R-NC) , Chair of the House Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, accused the departing chair of the SEC of allowing third-party evaluations of her legacy to delay implementation of general solicitation rules that would boost investments in the US under the Jumpstart Our Business Startups Act (JOBS Act). The JOBS Act required such rules last July 2012.

Rep. Patrick McHenry (R-NC)

Rep. McHenry’s subcommittee is overseeing the implementation of the JOBS Act, which among other things, permits general advertising of securities to accredited investors and would permit equity crowdfunding.  The SEC must implement regulations under the act. Mary Schapiro announced she was stepping down as chair of the Securities and Exchange Commission on December 14, 2012.

Rep. McHenry’s letter reveals internal SEC emails disclosed to the TARP Subcommittee suggesting that Ms. Schapiro delayed immediately implementing rules to lift a ban on broader-based advertising for private placements in part because of concerns over her legacy.  On August 7, 2012, an email by Barbara Roper of the Consumer Federation of America declared the CFA’s strong objections to interim final rules that would allow general solicitation of private placements under the JOBS Act. Ms. Roper added that the CFA and aligned groups would be “quite aggressive in voicing our concerns.” Afterwards, Ms. Schaprio advised her colleagues that she would support proceeding with proposed rules in lieu of interim final rules for general solicitation.

Mary Schapiro, courtesy Securities and Exchange Commission

In an email to the SEC’s director of the Division of Corporation Finance, Ms. Schapiro said she had “2 worries” about the interim final rules.  “One is that if these guys (FCA, et al) feel this strongly, it seems like we should give them a comment period. Its not really asking for much … The other is that I don’t want to be tagged with an Anti-Investor legacy.”

“I am furious,” SEC Commissioner Daniel Gallagher responded to the SEC chair on her decision to go with proposed rules. “I spent hours working on how to accommodate your desire for a study within an interim final rule, and we did so — just to find out now that you have changed your mind again.”

The SEC adopted proposed rules for general solicitation under Section 201 on August 29, 2012. The comment period for the rules closed on October 5, 2012. Rep. McHenry urged the SEC to act promptly on implementing the rules for general solicitation. “The Subcommittee sincerely hopes that now, having provided exhaustive opportunity for pre-finalization notice and comment, the Commission will comply with the JOBS Act’s directive and implement this vital reform. . . Investor protection is a goal we all share, but continued second-guessing, and the accompanying delays in the process, is simply unacceptable.”

Additional press coverage can be viewed here:

SEC Chief Schapiro Delayed Rules over Legacy Concerns, The Wall Street Journal, December 1, 2012.

Emails Suggest SEC’s Schapiro delayed JOBS Act rule amid concerns about legacy, Chicago Tribune, December 1, 2012.

Feature photo courtesy of House Republican Conference Photostream on under Creative Commons License. Photograph may not be used for commercial purpose.

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