Proposed Regulations for Reg D Financing

By Stephen Barlas
July 1, 2016

Small business advocates and state securities regulators disagree over proposed legislation to make it easier for smaller and growth companies to raise financing. The issue has to do with Regulation D, which allows companies to sell stock under some conditions without filing a registration statement with the Securities & Exchange Commission (SEC).


The Jumpstart Our Business Startups Act (JOBS Act), passed in 2012, repealed a long-standing prohibition on general solicitation and advertising of securities under Rule 506 of Regulation D, which regulates private securities offerings. The SEC finalized a rule doing that in 2013 but at the same time voted to propose rules that could mitigate the risk to ordinary investors from Rule 506 offerings, such as making the pre-filing of Form D required and imposing meaningful penalties on issuers who fail to file a Form D. The Private Placement Improvement Act (H.R. 4852) would essentially prohibit the SEC from moving forward with that proposed rule.


William Beatty, division director at Washington Securities and past president of the North American Securities Administrators Association, Inc., said, “H.R. 4852 threatens to eliminate the few investor protection components the SEC has either adopted or proposed adopting in connection with Rule 506.” Raymond Keating, chief economist with the Small Business & Entrepreneurship Council, says, “The separate rule proposal would impose a number of new regulatory requirements on small companies seeking to utilize amended Rule 506.”


Stephen Barlas has covered Washington, D.C., for trade and professional magazines since 1981 and since 1984 for Strategic Finance and its predecessor Management Accounting. You can reach him at sbarlas@verizon.net.
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