SEC eyes opening up private placements to more of the public

SEC eyes opening up private placements to more of the public
Commission considering making it easier for investors to get in on Reg D offerings
JUN 03, 2011
The Securities and Exchange Commission may consider changes to its offering rules that would make it easier to purchase non-public company shares, Chairman Mary Schapiro told a congressional committee today. The commission's staff is looking into whether the agency should revisit the current ban on public marketing of non-registered offerings as part of an overall review of securities-offering regulation, she told the House Oversight and Government Reform panel. Regulation D offerings, which are private placements, are exempt from SEC registration. Some of them have made headlines of late, most notably those of Medical Capital Holdings Inc. and Provident Royalties LLC. The commission has charged that offerings from those companies were fraudulent, and investors since have sued a number of broker-dealers that sold private placements from the two outfits. Changes in how public and private markets operate today, technology advances and the “acceleration in the pace of communications” justify a new look at the rules and whether the commission can do more to encourage capital formation, especially among small companies, she said. “Companies seeking access to capital should not be overburdened by unnecessary or superfluous regulations,” Ms. Schapiro said at the hearing focused on capital formation. The SEC is forming an advisory committee on small and emerging companies that will sift through recommendations from small firms, investor groups and the public on reducing the regulatory burden of securities offerings without endangering investor protections, she said. Any proposed changes would be issued for public comment before the commission votes. Ms. Schapiro would not offer a time frame for proposing rules, saying only: “It is front and center on our agenda.” In addition to considering changes in the ban on soliciting investors for non-registered offerings, the SEC staff has been asked to look into the restrictions on communications in initial public offerings, the thresholds that trigger public reporting and other regulatory questions that new capital raising strategies create, she said. The commission's review comes as the Financial Industry Regulatory Authority Inc. has proposed a 15% cap on commissions and fees for private placements and more disclosures about offering proceeds. The Finra cap, which now applies only to private placements issued by Finra's own broker-dealer members, has been met with some criticism from the securities industry. Ms. Schapiro said about 22% of the commission's enforcement cases during its fiscal 2010 year involved investor fraud from securities offerings.

Latest News

Why fixed income still belongs in your clients' portfolios
Why fixed income still belongs in your clients' portfolios

In an era of AI euphoria and market FOMO, getting back to basics with fixed income may be the most contrarian and most important move advisors can make.

Voya expands advisor managed accounts to add private market assets
Voya expands advisor managed accounts to add private market assets

Voya Financial adds private equity, credit and real estate options to its AMA program, building on support for looser federal investment rules in retirement accounts.

With executives leaving, Osaic’s Reid now in the spotlight
With executives leaving, Osaic’s Reid now in the spotlight

Shannon Reid, president of Osaic and the network’s number two executive, has plenty of challenges, industry executives said.

Investors sue crypto fund and platform, alleging $1.5 million never returned
Investors sue crypto fund and platform, alleging $1.5 million never returned

Auditors flagged the commingling. The COO allegedly knew. Investors kept getting the pitch

Wells Fargo nabs $1.7B RBC advisor team, loses two teams to LPL
Wells Fargo nabs $1.7B RBC advisor team, loses two teams to LPL

The advisors on the move include two brothers leading a family practice in Connecticut, and a husband-and-wife tandem working with business owners in the West Coast.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.