From: Iris K. Linder
I have two comments to your proposed changes to Regulation D.
1. Definition of Accredited Investor - 239.501(a)(8). You need to address implementation of the increase in the dollar amount thresholds for accredited investor status when the increase is scheduled to occur in the middle of an offering. It seems odd that the same offering would have two different standards depending on when the investor subscribed. I'm not advocating for any specific resolution, but feel that it needs to be explicitly addressed.
2. Disqualification provisions - 230.502(e)(1)(v). I strongly disagree with this provision. Most state securities laws give regulators an assortment of remedies they can use. A cease and desist order is generally viewed as a slap on the wrist for inadvertent errors, often the result of working with legal counsel who isn't knowledgeable about the securities laws.
The state regulators have the option to also prohibit the issuer and related parties from relying on an exemption from registration in future sales of securities. This remedy is used when it is perceived that the issuer was more knowing in its violation of the securities laws. It would be appropriate to limit an issuer's ability to rely on Regulation D if a state securities agency has limited the issuer's ability to participate in an exempt offering under state law. It would not, however, be appropriate to restrict an issuer's ability to rely on Regulation D if all the state agency did was issue a cease and desist order. Given all of the inept lawyers out there, subsection (v) is far too punitive to the issuer.
Iris K. Linder