“I was very disappointed that the rule as proposed did not
include any of the pro-investor initiatives many commenters had written
in about,” Democratic Commissioner Luis Aguilar told reporters after
speaking at an accounting conference.
“It was very disconcerting to me that on the night before the
Wednesday vote, that Tuesday evening, that proposal had stripped from it
much of the dialogue and discussions that one would consider
pro-investor initiatives.”
At issue is an SEC proposal introduced in August to relax rules that
have kept hedge funds, private-equity firms and small companies from
soliciting to the general public for decades. The proposal, which
Aguilar voted against introducing, is going through a comment period.
Aguilar argued that the proposal, if approved, would result in an
increase in fraud.
The proposal is mandated by the JOBS Act, legislation approved by Congress
in April to help increase capital formation.
Read the SEC's proposed hedge fund advertising ruleAguilar
said that on the evening before the agency voted to propose the rule, it
contained a number of questions about different ways to protect investors
while allowing hedge funds, private-equity firms and small businesses to
advertise broadly. He noted that the questions were stripped “at the
chairman’s request” from the proposal, adding that any ideas related to
those questions can not be considered when the agency votes on a final rule.
The SEC did not return a request for comment.
The SEC commissioner raised concerns about a form that companies make
before they seek investors through advertising. He said that the agency
should be considering whether firms could be required to file the form,
known as Form D, more quickly and whether more information should be
included in it.
Aguilar also said the agency should consider amending the definition of a
so-called accredited investor. Accredited investors must have a net worth of
$1 million or more, or annual income of more than $200,000 in each of the
two most recent years.
It is unclear whether the SEC will move forward on the proposal any time
soon. SEC Chairwoman Mary Schapiro plans to step down later this month,
leaving a split commission with two Democrats and two Republicans.
Last month, Elisse Walter, a Democratic commissioner who will take the
helm of the agency after Schapiro leaves, raised concerns about the
proposal. Walter, who voted to introduce the proposal in August, did not say
she would seek to block the rule from being adopted or seek to propose a new
rule. Instead, Walter said she hopes the agency will consider various
safeguards, including whether it makes sense to place some limitations on
the forms of solicitation.
Read about Walter's concerns.
