September 5, 2007
We are writing to comment on that portion of File S7-18-07 which proposes to modify Regulation D to apply disqualification provisions to all offerings conducted under the Regulation.
We are concerned that elimination of the safe harbor exemption will:
1. Encourage issuers desiring access to the Regulation D safe harbor exemption to substitute undisclosed consultants for officers/directors whose biographies, including regulatory histories, would have previously been disclosed in their capacities as officers/directors. We believe that investors are better able to reach informed investment decisions if they are provided with disclosure of the regulatory background of management, than if prospective investors are not provided with disclosure of persons in their roles as consultants.
2. Encourage issuers to aggressively interpret Section 4(2) so that they can complete necessary financings under circumstances that were not intended to fall within the scope of that exemption. We understood that Regulation D was adopted, in part, to provide a degree of certainty with respect to private offering compliance and the elimination of the safe harbor exemption appears counterproductive to this end.
3. Create a regulatory overreaction as relates to the many persons whose disqualifications resulted from technical rule violations and persons who lacked the resources necessary to defend an SEC enforcement action.
We believe that disclosure of regulatory histories is a more appropriate response to Staff concerns than elimination of the only safe harbor exemption from registration that is available to many issuers.