MARKETS
Updated July 10, 2013, 3:48 p.m. ET
SEC Lifts Ban on Hedge Fund Ads
Move Reverses Decades-Old Restriction for Private Offerings
By ANDREW ACKERMAN And JESSICA HOLZER
WASHINGTON — The Securities and Exchange Commission voted to lift an 80-year-old ban on publicizing shares of hedge funds and other businesses issuing private stock, a move expected to transform how startups and investment firms raise cash.
The vote satisfies a provision in last year's Jumpstart Our Business Startups Act, which was aimed at making it easier for small businesses to raise funds. The ad ban will officially end 60 days after the rule is published in the Federal Register.
The relaxation was approved 4-1, with Luis Aguilar, a Democrat, voting against ending the ban and warning that the agency was "reckless" to ease restrictions without finalizing appropriate safeguards.
The SEC did propose a package of investor protections that officials said will help the agency track and police the roughly $900 billion in private offerings sold annually affected by the ban. The proposal would require hedge funds and companies to notify the SEC 15 days before an offering will be publicized.
Currently, businesses must file a notification within 15 days following the first sale, but there are few if any penalties for failing to do so. Companies that fail to provide advance notice would be disqualified from making new private offerings for one year. Firms also would have to provide the SEC with additional information about their offerings.
Currently, businesses must file a notification within 15 days following the first sale, but there are few if any penalties for failing to do so. Companies that fail to provide advance notice would be disqualified from making new private offerings for one year. Firms also would have to provide the SEC with additional information about their offerings.
SEC Chairman Mary Jo White said the agency would move swiftly to finalize the package of protections. Yet the decision to lift the ban without finalizing the protections prompted concerns from investor advocates, who are worried that some investors could be drawn in without fully understanding the risks.
"It is a sad day for the commission when it treats investor protection as an afterthought, something it may get around to addressing in the future if it can only find the will and the time," said Barbara Roper, director of investor protection at the Consumer Federation of America.
Two Republican commissioners, Troy Paredes and Daniel Gallagher, voted against the investor-protection package, warning that the restrictions were too onerous on businesses and would harm private markets.
Investor advocates had wanted the SEC to consider raising the asset and income thresholds to be deemed an "accredited" investor. But agency officials said they were prohibited from taking on that issue for at least another year because of congressional restrictions.
Accredited investors are generally those with a net worth of more than $1 million excluding the value of one's primary residence, or more than $200,000 in annual income for the past two years. Hedge-fund investors have to meet a net-worth threshold of at least $2 million, excluding their primary residence.
The final regulation would include a list of verification methods that businesses may use to determine whether an investor is accredited, including reviewing copies of Internal Revenue Service filings.
The SEC also voted unanimously to bar felons and other "bad actors" convicted of securities fraud from participating in the private offerings, finalizing provisions it originally floated two years ago.
0 comments:
Publicar un comentario