By a vote of 4 to 1, the Securities and Exchange Commission put in place today a rule allowing general solicitation in “private” securities offerings. Under intense industry pressure, the Commissioners supporting the rule opted to leave out crucial investor-protection measures.
Americans for Financial Reform issued this statement:
“Without real built-in investor-protection standards, we are seriously concerned that this rule will open the door to mass marketing of hedge funds and other risky and often illiquid ‘private’ securities in a market where abuses are common and SEC oversight is very limited. Fraud and abuse are not good for investors; they’re not good for capital markets, either.
“The Commission also separately proposed some modest new protections for Regulation D offerings. Protections such as these, and more, should have been included in the initial proposal and rule. Further, the crucial matter of revising the ‘accredited investor’ definition was not included even in the proposal; instead, there is only a request for comment on the question. Failing to update the accredited investor definition could leave many vulnerable retirees and others unprotected. We urge the SEC to take these additional actions swiftly. Unfortunately, todays actions do not reassure us that these needed investor protection measures will be put in place any time soon.
“We are also troubled by an apparent double standard in how the Commission carries out its economic-analysis obligations. Based on today’s action, the SEC seems willing to let such questions slide when it is dealing with a proposal sought by industry rather than by investors.”