Securities and Exchange Commission Investor Advisory Committee
Minutes of October 12, 2012 Meeting1
The Investor Advisory Committee held a telephonic meeting at 12:00 p.m. on October 12, 2012. The meeting lasted until approximately 1:00 p.m. and was open to the public. Those attending were:
Advisory Committee Members
J. Robert Brown, Jr.
Staff of the Securities and Exchange Commission
Mr. Dear opened the meeting and invited Barbara Roper to present the Investor as Purchaser Subcommittee’s recommendations to the Committee.
DISCUSSION OF RECOMMENDATIONS OF THE INVESTOR ADVISORY COMMITTEE REGARDING SEC RULEMAKING TO LIFT THE BAN ON GENERAL SOLICITATION AND ADVERTISING IN RULE 506 OFFERINGS: EFFICIENTLY BALANCING INVESTOR PROTECTION, CAPITAL FORMATION AND MARKET INTEGRITY3
Ms. Roper highlighted major aspects of the proposed recommendations: (i) the need for appropriate investor protections in rulemaking; (ii) the adoption of methods to ensure offerings are sold only to accredited investors; and (iii) the need for increased information flow to federal and state regulators about general solicitation practices and offerings so the regulatory requirements can be verified, especially the accredited investor requirement.
Ms. Roper noted the subcommittee’s encouragement for adoption of the Dodd-Frank Wall Street Reform and Consumer Protection Act Section 926 mandating rulemaking disqualifying felons and other “bad actors” from reliance on the safe harbor from Securities Act registration provided by Rule 506 of Regulation D. Ms. Roper also noted that the definition of “accredited investor” should be revised so that it includes investors who are sufficiently sophisticated and wealthy to absorb the investment loss.
The Committee discussed the following Recommendation 2 drafting issues: (i) the breadth of the language in requiring all issuers relying on the exemption to furnish solicitation materials to the Commission; and (ii) in contrast to the subcommittee’s rationale, requiring materials to be “furnished” is no less expensive than “filing” because issuers will hire legal counsel to review materials sent to regulators, regardless of the distinction between the two terms. Ms. Roper read suggested drafting amendments to the Committee, which were unanimously adopted.
The Committee discussed the following Recommendation 5 drafting issues: (i) private funds are unfairly targeted by the recommendation; and (ii) the recommendation requires clear well-defined standards for investment performance claims, but they already exist. Ms. Roper read suggested drafting amendments to the Committee, which were unanimously adopted.
Ms. Roper moved the Committee to adopt the subcommittee recommendations, which were unanimously adopted.
Mr. Dear closed the meeting.
1 The audio recording of the meeting is available at http://www.sec.gov/spotlight/investor-advisory-committee-2012.shtml.
2 For purposes of these minutes, descriptions of discussions have been grouped and listed seriatim, even though the discussions of different items overlapped on occasion.
3 The recommendations are available at http://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-general-solicitation-advertising-recommendations.pdf.