SEC Extends Comment Period for Section 506 Reg D Advertising Rules
Washington, DC – The Securities and Exchange Commission extended the public comment period for proposed, new rules that would govern how businesses can advertise equity offerings to accredited investors under Rule 506 Regulation D.
On July 10, 2013, the SEC issued rules that would lift the ban against general solicitations for Rule 506 Regulation D offering as mandated by Title II of the Jumpstart Our Business Startups Act. The new rules lifted the ban effective September 23, 2013; however, the SEC also proposed for public comment additional rules that would regulate general advertising for Rule 506 offerings.
The comment period for the new rules closed on September 23, 2013, but on September 27, 2013, the SEC said it will reopen the public comment period.
Rule 506 exempts business from registering their securities with the SEC if they are offering and selling their equity only to “accredited investors” under Rule 501 of Regulation D. On July 10, 2013, the SEC also proposed, new additional rules for public comment that would add restrictions to general solicitations. The SEC’s new proposals would:
1. Require the filing of a Form D no later than 15 days in advance of a general solicitation followed by a closing Form D amendment 20 days after the Rule 506 offering. The Crowdfund Intermediary Regulatory Advocates (CFIRA) commented to the SEC that the proposal is ”inconsistent with the principles of the JOBS Act for general solicitation and advertising.”
2. Require the placement of a legend — that is, a disclaimer that the advertising is offering a private placement of securities — with any advertising. CFIRA noted that such a proposal would make it impossible to use services such as Twitter to make an offering.
3. Require issuers to submit any written general solicitation materials to the SEC no later than the day they launch their campaign.
The SEC has reopened the public comment period for at least an additional thirty days from the date it is published in the Federal Register. ”The Commission believes that providing the public additional time to consider thoroughly the matters addressed by the release and comments submitted to date and to submit comprehensive responses would benefit the Commission in its consideration of final rules,” the SEC Commissioners stated in a release.
The SEC noted that the “proposed amendments have generated a large amount of public interest.” Indeed they have. A summary review by members of the Crowdfund Intermediary Regulatory Advocates indicates that approximately 339 comments oppose the new rules, and only 9 are in favor.
Comments may be posted at: http://www.sec.gov/rules/proposed.shtml
Article by A. Brian Dengler. Mr. Dengler is a digital technology attorney, adjunct college professor at Kent State University and a member of CFIRA.