Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, October 10, 2012

NASAA Urges SEC to Rethink Proposal to Eliminate Ban on Advertising in 506 Offerings

Yesterday the president of NASAA, Arkansas Securities Commissioner Heath Abshure, joined three investor advocates in sharply criticizing the SEC's proposed JOBS Act rulemaking that implements the elimination of the prohibition against general solicitation in Rule 506 and Rule 144A offerings.(Download 33-9354[1])

Abshure, along with representatives from AARP, the AFL-CIO, and the Consumer Federation Of America, called on the SEC to withdraw its proposal and craft a new rule that promotes capital formation without sacrificing investor protection. (The comment period on the rule expired last week.)

“People don’t seem to think so, but this is a drastic change to the face of securities regulation,” Abshure said. “Rule 506 offerings already are the most frequent financial product at the heart of state enforcement investigations and actions. Lifting the advertising ban on these highly risky, illiquid offerings, without requiring appropriate safeguards, will create chaos in the market and expose investors to an even greater risk of fraud and abuse. Without adequate investor protections to safeguard the integrity of the private placement marketplace, investors should and will flee from the market, leaving small businesses without an important source of capital.”

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