Memories of my childhood listening to Sesame Street’s “I’m just a Bill..”, which describes the way a bill turns into law, has been running through my mind lately. In specific, I am watching with great interest HR 2940 – links below – but the gist of it is:
Section 4(2) of the Securities Act of 1933 (15 U.S.C. 77d(2))
is amended by adding before the period the following:
‘‘, whether or not such transactions involve general
solicitation or general advertising’’
Simply put, this allows Issuers in Regulation D offerings (most commonly Reg D 506 due to the preemption of State Blue Sky laws) to advertise their placements, as long as they comply with the requirements under Regulation D. Currently, no advertising or general solicitation is allowed for fear of the Issuer and its officers being sued by the SEC for “unregistered offerings of securities”.
The key factor is this: Is the quality of the investor the operative item or how the Issuer knows them the operative issue? Example: if Phil
Anschutz puts $1,000,000 in a private placement, does it really matter how YOU know Phil Anschutz – he’s clearly financially sophisticated and
wealthy enough to make the investment and fend for himself.
A real-life example: Perhaps a company is seeking a capital infusion, and has a link on their website that says “Investors” – which offers people a chance to receive offering information about the company. This is completely against current securities laws. Why? It is clearly “advertising”. No boiler room antics, no high-pressure sales tactics, just a “want some information?” button on a website is completely against the rules. Changing the simple verbiage above will allow companies to market these private offerings – and both get access to capital but even better access to critical due-diligence that can better develop their business – or even decide to abandon the idea entirely!
This is free market principals in action.
The illusion that government programs (SBA loans for one) make any real impact on small and startup business is a complete lie. Real companies are funded and founded by private capital, private money, and private resources, not bank loans or government programs. Breaking down the barriers to accessing larger capital pools of accredited investors is, in a word, exciting.
Here’s a link to the latest piece I could find on HR 2940 – sorry, it’s not a 900 page monstrosity either..
http://www.gpo.gov/fdsys/pkg/BILLS-112hr2940pcs/pdf/BILLS-112hr2940pcs.pdf