July 24, 2013
Please consider this my personal comment on the proposed requirement for advance filing of Form D for offerings under Rule 506(c)..
One major purpose of the so-called JOBS Act was to eliminate the impediments to capital raising imposed by the SEC's rules in order to lower the stubbornly high unemployment rate in the United States. The requirement for advance filing of Form D seriously undermines this Congressional intent by imposing significant legal and accounting costs on would be entrepreneurs before they even know whether their business plan will ever attract investors. For example, an unemployed person with a business plan would have to seek the help of a securities law specialist, with hourly rates of $500 or more, to assist them in filling out the advance Form D. Many would be entrepreneurs wishing to raise capital under Rule 506(c) have not the slightest idea as to whether or not to form a legal entity, what type of entity to form (which may require a tax specialist), who are "related persons" and the answers to the other questions in the proposed advance Form D. During the Rule 506(c) offering, the structure may change many times and the sophisticated accredited investors may ultimately dictate the structure of the investment, which could completely change the entity conducting the offering, or its "related persons"., or the answers to other questions in the proposed advance Form D.
Having to respond to these questions and pay significant legal and accounting fees before the would be entrepreneur even knows that he or she will raise a single dollar of capital completely undermines the purpose of the JOBS Act and should be rejected..
Frederick D. Lipman | Blank Rome LLP
One Logan Square 130 North 18th Street | Philadelphia, PA 19103-6998