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In addition to legislative initiatives we've previously discussed, we
continue to see efforts to relax the general solicitation prohibition in
private offerings. For example, the SEC's Advisory
Committee on Small and Emerging Companies recently made a formal recommendation that the SEC take immediate action to permit
general solicitation and advertising in private offerings under Rule
506 where the securities are only sold to accredited investors. In
addition, the Managed
Funds Association, an organization of investment professionals in hedge
funds, funds of funds, and managed futures funds, has used the somewhat
uncommon process of submitting a petition for
rulemaking to the SEC, asking the SEC to eliminate the ban on general
solicitation and advertising for offerings or sales of securities by "private funds."
It is difficult to say whether either of these specific
proposals will go anywhere. Advisory committees and similar petitioners
have lobbied the SEC for private offering reforms over the years to no avail,
and the several capital formation bills that overwhelmingly passed the House
late last year may create reasons for the SEC to wait on any private offering
rulemaking. The SEC may hesitate to adopt rules that may shortly prove to
be inconsistent with, or may not fully accomplish, legislative
directives. Nevertheless, the calls for private offering reforms - from
Congress, campaigning politicians, SEC advisory committees, industry groups...
- seem to reflect continuing momentum to relax private offering rules. We
will keep monitoring developments in this area.
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