Compliance Bits and Pieces – Private Fund Advertising Edition

Last week’s release of the SEC’s game plan for allowing advertising for the private placement of securities will cause a big shift in what the public is able to see. As stated in the release of the proposed rule, the private market is nearly as big as the public capital markets. In 2011, $895 billion was raised through Rule 506 private placements while only a bit more, $984 billion was raised in registered offerings. This trend has been true for several years for Regulation D fund raising. Here is a round up of commentary on the proposed rule:

Proposed Rule Regarding General Solicitation and Advertising by Mary L. Schapiro in the Harvard Law School Forum on Corporate Governance and Financial Regulation

I believe that the proposed rules fulfill Congress’s clear directive that issuers be given the ability to communicate freely to attract the capital they need, while obligating them to take steps to ensure that this ability is not used to sell securities to those who are not qualified to participate in such offerings.

Increasing the Vulnerability of Investors by Luis A. Aguilar in the Harvard Law School Forum on Corporate Governance and Financial Regulation

I cannot support the proposal, because it presents a framework that is not balanced and that fails to address the acknowledged increased vulnerability of investors. In fact, there is no consideration of any of the commenters’ proposals that would have decreased investor vulnerability.

Sen. Levin Urges SEC to Enhance Investor Protections in Proposed Rules Implementing JOBS Act Ending of General Solicitation in Jim Hamilton’s World of Securities Regulation

Senator Carl Levin (D-MI), Chair of the Senate Investigations Subcommittee, urged the SEC to improve the investor protection aspects of proposed regulations implementing the elimination of the ban on general solicitation in Regulation D effected by the Jumpstart Our Business Startups (JOBS) Act. In his statement, the Senator specifically asked the SEC to require those who advertise private deals to take steps to ensure that investors have the information and expertise to make these risky investments. The Commission should also require that the content of the advertising satisfies some minimum standard, such as those that mutual funds are currently subject to. The proposed regulations do neither, said Chairman Levin, adding that they undermine investors protections, put at risk the investments of ordinary citizens, and ignore years of experience and law.

New SEC Rules Practically Require Hedge Funds To Advertise On DealbreakerBy

The day when you can advertise your hedge fund on Dealbreaker creeps ever closer, so claim your spot now because they are going fast.* The SEC has shown some justifiable skepticism about implementing the JOBS Act, and at least SEC-ster thinks that it’s been dragging its feet on the hedge fund advertising rules, but still, it has to be said, when the SEC was told to let you advertise your hedge fund, they really let you advertise your hedge fund. Soon you will be able to:

  • say whatever you want about your hedge fund, and
  • not say whatever you don’t want to say about it, as long as
  • you take reasonable steps to actually sell it only to accredited investors.

To generally solicit, or not to generally solicit? by William Carleton

A lot was at stake. I had said the rules could prove disastrous to angel investing, should the SEC specify methods of “verification” of accredited status that were too onerous for companies, or too invasive of investors’ privacy.

But disaster didn’t happen.

Hedge Fund Advertising is right around the corner… FINALLY! in HedgeCo.Net

We can now also offer hedge funds the ability to advertise their fund to our large user base. We can target different types of investors (ie: family offices, high net worth, etc.), we can target investors looking for certain styles of funds, assets under management, sharpe ratio, etc. These types of tools and others we have created specifically for hedge funds will be very powerful for firms who are looking to grow their AUM going forward. Also, as a result of owning not only HedgeCo.Net but also owning several other well trafficked hedge fund websites and having established relationships with hedge fund publications both online and offline, we have created the first Hedge Fund Advertising Network.