General solicitation and general advertising for Rule 506 private securities offerings—mandated by Title II of the JOBS Act and suppposed to have been in effect as of last July—is facing further delays, which shouldn’t surprise anyone. Included in the testimony today of SEC Commissioner Elisse B. Walter before the House Subcommittee on Oversight and Investigations, Committee on Financial Services, regarding implementation of Title II, were thoughts regarding possibly making ‘accredited investor’ status more stingent (which I have blogged about previously) as well as not making any promises regarding when final rules will be issued by the SEC. In her written statement, she acknowledged that Title II rulemaking was required to be completed within 90 days of the JOBS Act’s enactment and noted that public comment on the proposed rule was sharply divided:
Sixty-one commenters, including the majority of professional and trade associations/organizations, law firms and legal associations that submitted letters, expressed general support for the proposal, with many stating generally that the elimination of the prohibition on general solicitation or general advertising would facilitate capital formation. In addition, several supporters recommended that the proposed framework for verifying accredited investor status be supplemented in the final rule by including a non-exclusive list of specific verification methods that could be relied upon by issuers seeking greater certainty that they are satisfying the verification requirement. Eighty-one commenters expressed general opposition to the Commission’s proposal, including the Investor Advisory Committee formed by the Commission as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, all of the investor organizations, and all but one of the federal and state officials who submitted letters. Some of these commenters stated that the proposed rules, if adopted, would result in an increase in fraudulent securities offerings, with a number recommending that the Commission consider additional safeguards, such as those recommended in certain pre-proposing release comment letters. Currently, staff in the Divisions of Corporation Finance and Risk, Strategy, and Financial Innovation are developing recommendations for the Commission’s consideration as to how best to move forward with implementation of Title II.
She concluded by stating that it is a priority for the SEC to finalize Title II rules.