NASAA's JOBS Act Rulemaking Comment Letter

Thanks to Kyle Hulten for the heads up that the North American Securities Administrators Association (NASAA) now has a comment letter into the SEC on rulemaking under the JOBS Act.

On the make or break issue of how to handle "verification" of accredited investor status - the trade-off, if you will, that issuers must make in order to avail themselves of general solicitation in Rule 506 offerings - the NASAA letter suggests it may be most practical for issuers to outsource the job to broker-dealers. This echoes a proposal made by SecondMarket General Counsel Annemarie Tierney in an earlier comment letter.

The NASAA letter echoes the SecondMarket letter in another respect: it countenances the idea that verification of the accredited investor net worth test may be satisfied by virtue of an investor making a significant investment. The idea is that if an investor has $xxx,xxx available to put into a private company - the example number the NASAA letter floats is actually $1 million - she must necessarily be accredited, and no tax returns, brokerage statements or other documentation need be requested.

I take the NASAA's raising of this latter point as a sign that the SEC's proposed rules will very likely have such a "deemed accredited" number. NASAA seems most concerned that the threshold not be set too low, almost as if they acknowledge the concept has traction.

Other concerns raised in the NASAA letter: the need for rules to discipline the angel group and incubator online platforms that were handed a federal broker-dealer safe harbor in Title II of the JOBS Act; requiring that an issuer file a Form D prior to engaging in general solicitation; and imposing substantive content standards for Rule 506 advertising.

The letter also touches on equity crowdfunding and Regulation A. NASAA's views on crowdfunding deserve (ongoing) attention but I don't have the opportunity to get into that this morning.

In most respects I don't find the NASAA comment letter to be as detailed or well argued as the letter from the securities administrator of the State of Ohio. Perhaps this is a reflection of a reality that NASAA can only hit broad themes that are supported by all or most of its members.