From: Keith Paul Bishop
Dear Ms. Morris:
I am writing to submit additional comments respect to the Securities and Exchange Commission's (the "Commission") proposal to amend the limited offering exemptions in Regulation D, 17 CFR 230.501 through 230.508. Among other things, the Commission has proposed proposed the adoption of a new Rule 507 which would create an exemption for limited offers and sales to "large accredited investors". If the Commission adopts a new Rule 507 exemption, it should consider amending the following rules:
3. §270.17j-1(a)(8); and
The Commission should not amend Rule 504(b)(1) to provide that the limitations on resale set forth in Rule 502(d) would apply to securities sold in a Rule 504(b)(1)(iii). For the reasons set forth in my October 1, 2007 comment letter, resale restrictions increase investor risk by limiting liquidity.
The Commission's proposed amendment to Rule 501(a)(3) is unclear. The Commission has proposed expanding the current "laundry list" of entities and adding a catch-all for "other legal entity with substantially similar legal attributes". As proposed, the list of non-natural persons includes widely disparate types of entities. Thus, it is not possible to identify what similar legal attributes they might share. Further, it is unclear what the Commission intends to achieve by use of the term "legal" as opposed to "non-natural". Finally, the proposed amendment would appear to require that a "governmental body" have total assets or investments in excess of $5 million. There appears to be no reason why this requirement should be imposed on governmental bodies. Moreover, it may be difficult to apply this requirement to governmental entities. Therefore, I recommend that the Commission amend Rule 501(a)(3) to read as follows:
"Any government or political subdivision thereof or any non-natural person provided the person: (i) was not formed for the specific purpose of acquiring the securities offered; and (ii) has total assets or investments in excess of $5 million (each adjusted for inflation in accordance with the Note to paragraph(a))."
I am an attorney in private practice in Irvine, California and an Adjunct Professor of Law at Chapman University Law School. I am writing in my individual capacity and not on behalf of my law firm, the law school or any of my law firm's clients. I previously served as California's Commissioner of Corporations and in that capacity administered and enforced California's securities laws.
Very Truly Yours,
Keith Paul Bishop