Subject: File No. S7-07-12
From: William Michael Cunningham
Affiliation: Social Investing Advisor

August 30, 2012

I am writing to suggest a modification to the proposed rule. In the interest of full disclosure, note that I have submitted a "Friend of the Court" brief in SEC vs. Citigroup, a case currently pending before the United States Court of Appeals for the Second Circuit. That case concerns the rejection, by a Federal Judge, of a settlement agreed to by the United States Securities Exchange Commission (SEC) and Citigroup Global Markets Inc. (Citigroup), the latter accused of securities fraud. See:

As I note in my book on the JOBS Act, The JOBS Act: Crowdfunding for Small Businesses and Startups, and in my crowdfunding webinar (, the JOBS Act specifically seeks to benefit Small Businesses and Startups. It is not designed to benefit hedge funds.

The New York Times noted that "The Securities and Exchange Commission on Wednesday proposed rules that would remove a longtime prohibition against general solicitation by hedge funds, a huge change for an industry that has ballooned in size and influence in recent decades." See:

This is contrary to the spirit and the letter of the law. Restrictions were lifted because they had to be. They had to be lifted in order to allow Small Businesses and Startups to raise money over the internet.

Now, hedge funds, the same firms responsible for the recent financial crisis and the lack of small business capital, are seeking a bigger loophole so that they can defraud and damage even more investors than they did last time.

Therefore, the proposed rule should be modified to state that it specifically does not apply to hedge funds.