Walter says SEC puts priority on lifting Reg D ad ban

Republicans express frustration with slow pace, missed deadline

Apr 18, 2013 @ 9:24 am

Reg D, SEC
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Elisse Walter (Bloomberg)

Securities and Exchange Commission member Elisse Walter told lawmakers yesterday that a rule that would allow advertising for sales of private-placement investments is a priority for the regulator.

Ms. Walter tried to assure impatient Republican legislators that the agency will move ahead soon to finish the regulation and others contained in a bill that was approved with overwhelming bipartisan majorities and signed into law more than a year ago.

“I am committed to finalizing these rules and working with my colleagues to do so expeditiously,” Ms. Walter said at a hearing of the House Financial Services Subcommittee on Oversight and Investigations.

The chairman of the panel, Rep. Patrick McHenry, R-N.C., and other Republicans expressed frustration that the agency missed the original deadline for the advertising rule last July and then decided to circulate a proposed rule in August rather than moving straight to an interim final rule.

The provision is one of several in the Jumpstart Our Business Startups Act, which eases securities registration for small companies and was signed into law April 5, 2012.

The advertising rule proposal has drawn more than 250 comment letters, many from investor advocates who worry that the proposal lacks adequate investor protections. Supporters of lifting the advertising ban said it would help entrepreneurs raise capital. The nonregistered, or Regulation D, securities could be sold only to accredited investors.

It's unclear when the SEC will issue a final rule. New Chairman Mary Jo White has been in office for about a week, but during her confirmation hearing last month, she assured Senate Banking Committee members that the agency would make JOBS Act rule making a priority.

Mr. McHenry pressed Ms. Walter on internal e-mails obtained by the committee that showed that SEC staff had recommended that the agency circulate an interim final rule last year. But then-SEC Chairman Mary Schapiro indicated that the worries over potential investor harm justified going through a rule proposal and comment process.

The North American Securities Administrators Association and the Consumer Federation of America, as well as the SEC's Investor Advisory Committee, have urged the SEC to modify the proposal to strengthen investor protections.

“It is clear the chairman prioritized special-interest groups over the law,” Mr. McHenry said.

He also questioned whether the SEC can still enforce an advertising ban now that the statutory requirement for a rule has long passed. The rule has to be finalized before advertising can begin, according to Ms. Walter.

She told legislators that she wants to promulgate the rule but that proposing a rule and reviewing comments helps ensure that investors are not harmed.

“I agree with lifting the ban,” Ms. Walter said. “It is important that we look at those investor protections, as well.”

Her words did not quell Republican anger about the SEC missing the JOBS Act deadlines.

“We've seen no action on this, and I feel that is unacceptable,” said Rep. Randy Hultgren, R-Ill. He asserted that the SEC is intentionally dragging its feet.

“I have never engaged in any delaying tactics,” Ms. Walter said.

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