The Jumpstart Our Business Startups Act (JOBS Act), passed in 2012, repealed a long-standing prohibition on general solicitation and advertising of securities under Rule 506 of Regulation D, which regulates private securities offerings. The SEC finalized a rule doing that in 2013 but at the same time voted to propose rules that could mitigate the risk to ordinary investors from Rule 506 offerings, such as making the pre-filing of Form D required and imposing meaningful penalties on issuers who fail to file a Form D. The Private Placement Improvement Act (H.R. 4852) would essentially prohibit the SEC from moving forward with that proposed rule.

William Beatty, division director at Washington Securities and past president of the North American Securities Administrators Association, Inc., said, “H.R. 4852 threatens to eliminate the few investor protection components the SEC has either adopted or proposed adopting in connection with Rule 506.” Raymond Keating, chief economist with the Small Business & Entrepreneurship Council, says, “The separate rule proposal would impose a number of new regulatory requirements on small companies seeking to utilize amended Rule 506.”

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