Despite the personal support that President Obama and leaders of both parties have given the Jumpstart Our Business Startups Act (JOBS Act), the SEC will not be meeting the Congressional deadline to issue the new rules promised in the April legislation.
The JOBS Act, enacted in April 2012 with wide bipartisan support, is intended to reduce regulatory burdens for smaller companies, in order to help them raise capital and grow. A key component of the new law is to lift the long-standing ban on general advertising for private securities offerings.
SEC Chairman Mary Schapiro, who has been outspoken in her criticism of the JOBS Act in the past, testified yesterday before the U.S. House Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs Oversight and Government Reform Committee that the deadlines imposed by the JOBS Act were not realistic and not achievable. The SEC continues to fall behind on various deadlines related to the implementation of the Dodd-Frank Act, originally adopted in 2010.
Although part of the JOBS Act went into effect immediately, other parts, including removing the general solicitation ban, require explicit SEC rulemaking. The SEC is now required to modify the prohibition against general solicitation and general advertising in Rule 506 of Regulation D and Rule 144A under the Securities Act of 1933 (Securities Act).
New rules lifting the ban will likely seek to limit any negative impact on investor protection. Typically, before issuing a new rule, the SEC would conduct an extensive exercising that would include writing the new rule, conducting a certain amount of economic and cost/benefit analysis and provide for public review and comment.
Shapiro claims that the SEC will get to this when they feel like it significant progress has been made on the draft rules and that a staff proposal should be forthcoming in the near future.
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