Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

SEC Commissioner Luis A. Aguilar gave a speech to an annual conference of the North American Securities Administrators Association, otherwise known as NASAA.  On the issue of Reg A+  preemption of state law, the Commissioner noted NASAA’s proposed coordinated review of Reg A+ offerings could ameliorate many of the concerns raised by commenters regarding state blue sky review of Tier 2 offerings.  While some costs of state review will remain, a viable Coordinated Review Program should certainly reduce issuer legal costs significantly, while also reducing delay and uncertainty.

I think that most of us that advise issuers believe that Reg A+ without pre-emption is not useful.  It’s not self-serving, Tier 2 offerings have increased disclosure requirements that render state review unnecessary.

SEC Commissioner Kara Stein also gave a speech at the conference, which includes a useful analysis that the term “blue sky” originated in Kansas legislation.

Ms. Stein also demonstrated her support for NASAA ideas.   As to the pending Reg D proposals, according to Ms. Stein:

  • Form D filings should be of little moment to the legitimate issuer, while giving serious pause to those intending fraud. While firms are required to file Forms D now, that obligation is rarely enforced. If an issuer, attempting to raise millions of dollars, cannot even meet the most basic of requirements to complete and submit its Form D filings, should that issuer be allowed to rely on the Rule 506 exemption for that offering? Honest mistakes by issuers can be quickly and easily cured, or even, when appropriate, waived by the Commission.
  • We must also ensure that investors get the information they need to understand what they are being sold. Shouldn’t each piece of advertising clearly and plainly alert the investor to the risks of the investment? Or is it okay to have cautions buried in fine print or relegated to an afterthought?
  • Finally, shouldn’t we gather, and permit public analysis of the general solicitation materials? These advertising materials could be used to find problems in particular offerings, better understand our markets, look for trends and best practices, and inform our policy choices.

As to the Regulation A+ proposals, Ms. Stein noted “I have made no secret of my views that we need to work with you, our state partners here, and can benefit greatly from your unique expertise and ability. I want to take a moment to commend and congratulate NASAA and the states for voting to implement your new Coordinated Review Program. It’s my understanding that it is essentially ready to go. Well done. I have said this before, and it bears repeating, I remain concerned that the proposed Reg A+ does not provide workable options for smaller issuers, and that it unwisely precludes the states from their critical oversight function. I look forward to a continued dialogue with NASAA and others to find a better way to continue our partnership in the new Reg A+ framework.”


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