Securities Law & Corporate Counsel Blog

On June 28, 2012 SEC Chairman Mary Shapiro appeared before a House subcommittee to testify about the agency's implementation of the Jumpstart Our Business Startups Act (JOBS Act). Title II of that legislation requires the SEC to implement ground-shifting rule changes that will permit general solicitation and general advertising under Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933. While removing the general solicitation ban, the legislation does specifically require issuers to take reasonable steps to verify that purchasers of the securities are accredited investors or qualified institutional buyers, as applicable, using methods that will be determined by further SEC rulemaking.  The Act also specifically called for the Commission to make the rule changes within 90 days of the bill's April 5, 2012 enactment. Chairman Shapiro testified that the Commission's staff had "moved aggressively to implement the provisions of the JOBS Act," including: (1) the formation of rule writing teams, (2) establishing e-mail boxes on the Commission's website for comments even in advance of the issuance of proposed rules, and (3) conducting meetings with interested member of the public. In no surprise to followers of the legislation, Shapiro did state however that the 90 day deadline set by the legislation would not be met by the agency:  "the 90 day deadline d[id] not provide a realistic timeframe for the drafting of the new rules [related to general solicitation], the preparation of an accompanying economic analysis, the proper review by the Commission, and an opportunity for public input." Shapiro did not give any specific dates as to when the proposed rulemaking relating to lifting the general solicitation ban would be issued, stating only "it is my belief that the Commission will be in a position to act on a staff proposal in the very near future." For additional information about the JOBS Act, or any other securities law concern, please contact us at (619) 298-2880.