Ignoring Changes to Regulation D

compliance and ignore this sign
While many embraced lifting the ban on general solicitation and advertising, most despised the additional mess that the SEC added in. Fortunately, you can probably ignore much of that mess. At least for a few months.

We knew that the SEC was going to require that firms selling public private-placements were going to have to take some reasonable steps to confirm that the purchasers were actually accredited investors. Congress wrote that into the JOBS Act. (Although I suspect they would have written it differently if they knew the end result.)

Based on the July 10 SEC meeting, 506(c) and 506(d) go into effect on September 23. The dreaded changes to Form D and Rule 156 do not. Those are only proposed rules.

SEC Chairman Mary Jo White made this obvious in a recent letter response to Congressman McHenry.

It’s clear that funds can use the public private-placement regime under Rule 506(c) on September 23, 2013. The current rules on filing the Form D are in place. There will be no requirement to file the advertisements with the SEC. There will be no required legends on the advertisements.

For now.

The changes to Form D and the advertising legends are merely in a proposed rule. The SEC may abandon its concerns and not issue a final rule. (unlikely) The SEC may make significant changes to the rule. (possibly)

Chairman White makes it clear that there will need to be some transitional guidance for offerings that commence before the effective date of the final rule. So you can ignore the proposals.

But the proposed rule is clearly a signal that the SEC wants to do something more for private placements. I would guess that some form of the rule will be adopted before the end of the year. The mutual fund industry will be furious that their product advertisements are weighed down with disclaimers, while cowboy hedge funds are all over the place and grabbing bigger fees.

There are signs ahead. But we can ignore them for now.


Ignore This Sign, 2004
Marietta, Georgia, USA
Hacking the City, by Brad Downey

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