Header graphic for print
MoFo Jumpstarter For jumpstarts, upstarts and start-ups

A Little History

Posted in Rule 506 Rulemaking

Many comment letters relating to the SEC’s proposed rules relaxing the ban on general solicitation suggest that the JOBS Act mandate was not well thought through and that relaxing the ban on general solicitation requires careful thought.  While it is true that any change that would affect investor protections should require careful thought, it seems like writers of these comment letters have neglected their history.  Discussion related to relaxing the ban on general solicitation has been ongoing since the early 1990s.  Various speeches and statements by SEC Staff members over the years have commented on, and acknowledged, the need to revisit private placement exemptions in light of changes in communications patterns.  The legal community also has given close consideration to these questions going as far back as the late 1990s and early 2000s.  In 2001, the American Bar Association’s Committee on the Federal Regulation of Securities submitted a comment letter to the SEC that suggested relaxation of the ban on general solicitation.  At around the same time, the ABA Task Force for the Review of the Federal Securities Laws also proposed that a private offering would qualify for an exemption from registration based on the eligibility of the purchasers of the securities and the restrictions on resales, and not on the number of offerees.  The Advisory Committee on Smaller Public Companies, formed in 2004, advocated a relaxation of the ban on general solicitation.  Is it possible that over a decade of consideration, and discussion of proposals, would not be considered careful consideration?