"Today's narrow proposal"

In all the excitement over the SEC release on lifting the ban on general solicitation in Rule 506 offerings, I wonder if we're overlooking a roadmap SEC Chair Mary Schapiro may have delivered at the open SEC meeting approving the proposed rules.

In prepared remarks, Schapiro called the proposed rules - hugely significant to entrepreneurs and the angel investing community - a "narrow proposal."


"Narrow" is a startling choice of adjective.

Schapiro appears to be looking past what the JOBS Act has mandated on general solicitation and anticipating subsequent, broad reform of 506, the accredited investor definition, and exempt offerings in general.

Here's a passage from her remarks where Schapiro signals that more fundamental changes are coming:

" . . . I recognize that there are very real concerns about the potential impact of lifting the ban on general solicitation. Indeed, some of those concerns were noted in several of the letters submitted as part of our pre-rulemaking JOBS Act comment process. I appreciate the many thoughtful letters suggesting both specific and broad reforms to Rule 506 offerings and Regulation D more generally.

"While I believe it will be incredibly important for the Commission to take a thorough look at the private placement market in the future, I think at this point it is appropriate that we undertake this more narrow mandate that Congress placed upon us through the JOBS Act."

Among the initiatives on the horizon, Schapiro lists:

  • finalizing the "bad actor" rules for 506 that were proposed last year;
  • completion of a GAO study about the accredited investor definition, due next summer;
  • changing the net worth test of the accredited investor definition, in 2014;
  • undertaking an entire review of the accredited investor definition, as it relates to natural persons (angels); and
  • any other "needed reforms" in light of "significant challenges for investor protection" in private offering and secondary trading markets that have been brought about by the JOBS Act (including, it would seem, the lifting of the ban on general solicitation).

Schapiro's view of the "narrow" rules now in play seem a bit ambivalent; she seems to say both that the lifting of the general solicitation ban is something the Commission is being forced by Congress to do, as well as something the Commission was going to get around to doing anyway. But her remarks are clear that there is an agenda ahead.

Photo: Brian Snelson / Flickr.

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