Several Congressmen and an SEC Commissioner have independently urged the SEC to move forward with adopting proposed rules that impose additional requirements on public solicitations of Rule 506 offerings. At the same time that the SEC finalized its initial rulemaking on the subject last September, it proposed additional rules that would require filing Form D prior to any general solicitation and would impose advertising restrictions, among other things. We discussed that action and the proposed rules in two earlier posts.
Rule 506 was adopted as a safe harbor under Section 4(2) of the Securities Act of 1933, which provides that securities sold “by an issuer not involving any public offering” are exempt from registration under the Act. However, under Title II of the JOBS Act, passed in 2012, Congress required the SEC to adopt a rule allowing for the use of public solicitation in those offerings under conditions to be prescribed by the SEC. The initial rule adopted last September – requiring enhanced verification of accredited investor status – was the Commission’s first small step on the issue.
The comment period on the simultaneous rule proposal imposing additional requirements expired on November 4, 2013, but the Commission has taken no further action to date. On December 5, 2013, however, SEC Commissioner Luis Aguilar, speaking at a Consumer Federation of America conference, forcefully called upon the rest of the Commission to move forward in adopting the strengthened rules. “Every day that these proposals are not adopted is another day that investors face great harm. I’m frustrated because investors are going to be damaged” said Commissioner Aguilar. “Unfortunately, it’s been almost five months since those proposals have been issued for comment.”