More on Free Speech & the JOBS Act

Follow up to Staurday's post: looks like Jonathan Massey's and Laurence Tribe's petition was denied.

This page from the US Supreme Court's website indicates that a few more briefs were filed, but the Court made a decision last month to not hear the case.

Here's an interesting excerpt from one of those additional briefs, filed by the Cato Institute:

"[T]here is an emerging consensus that . . . general solicitation bans have outlived their usefulness, if they ever were useful. . . .

"As the House of Representatives has noted, 'This prohibition on general solicitation and advertising has been interpreted to mean that potential investors must have an existing relationship with the company before they can be notified that unregistered securities are available for purchase. Requiring potential investors to have an existing relationship with the company significantly limits the pool of potential investors and severely hampers the ability of small companies to raise capital and create jobs.'

"Members of Congress of both parties have acknowledged that the general solicitation ban is undermining the goals of transparency and efficiency in capital markets, by limiting the ability of startup entrepreneurs to communicate truthful information about their products to investors and the public. They have recognized that the ban is thwarting the beneficial use of new technologies such as social networking to help entrepreneurs gain the access to capital they need to keep their businesses growing. . . .

"On Nov. 3, 2011, these legislators joined in a successful bipartisan vote to pass H.R. 2940, the 'Access to Capital for Job Creators Act,' which would repeal the SEC’s general solicitation ban and modernize the securities laws to reflect the existence of the Internet and electronic communications. . . .

"The House’s overwhelming recommendation that the ban on general solicitation be repealed undercuts the argument that such bans promote important government interests or that such interests cannot be achieved in less speech restrictive ways. . . ."

The brief appears to have been filed on March 5, before the JOBS Act passed. Of course we now know that the lifting on the ban on general solicitation and general advertising is a key feature of the JOBS Act, now law, awaiting SEC rules before taking effect.

In one sense, the First Amendment arguments about general solicitation and general advertising are moot, given the Rule 506 reform mandated by Title II of the JOBS Act. However, I think these arguments may be ones to revisit, if and as the equity crowdfunding exemption gets mired in the ban on the exchange of open information that Congress has imposed in Title III of the JOBS Act.

Supreme court

Photo of US Supreme Court building from the Library of Congress / Flickr.


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