Now that the Securities and Exchange Commission has been ordered by the US Congress to remove the ban on general solicitation, companies will be able to more easily offer their private offerings to the masses for the first time since the 1930’s. The purpose of this is to assist small businesses and start-ups to raise capital.
The lifting of the ban is part of the wider mandate established under the Jumpstart Our Business Startups Act. Firms will be able to advertise to anyone. However, only “accredited investors” in possession of a certain amount of income ($200,000 or $300,000 if married) or with net worth greater than $1 million (primary residence not included) can buy the private offerings.
While the private equity industry says that this change will liberate firms from limitations that restrict entrepreneurship, advocates are worried that investors will be even more at risk of falling victim to high-pressure sales tactics and fraud. They are calling for the SEC to mandate related protections. Even the North American Securities Administrators Association, which represents state securities regulators, reportedly expects private placement fraud cases to go up once the lifting of the ban actually happens.
“It is incredible that, witnessing Wall Street’s practices and securities fraud in general, regulators and the lawmakers they control are actively exposing the general public to even more opportunities to be defrauded,” said Securities Lawyer William Shepherd. “Investment fraud dwarfs all other forms of fraud combined. Meanwhile, senior citizens and others can no longer survive on interest from their savings. As these unsophisticated Americans are forced to consider other investments to sustain their livelihood, even the securities police are lowering the bar so they can be swindled more easily. How is this a good thing?”
If you believe you or someone you love was the victim of securities fraud, contact Shepherd Smith Edwards and Kantas, Ltd, LLP today.
Related Web Resources:
New SEC Rules Would Make It Easier to Advertise Investment Opportunities, ADVISEN FPN/Washington Post, January 14, 2013
More Blog Posts:
Proposal Getting Rid of Ban Against General Solicitation and Advertising For Certain Private Placements Ended up with Narrower Scope Because of Short Deadline, Said SEC Deputy Director, Stockbroker Fraud Blog, September 20, 2012
Will the JOBS ACT Will Expand Private Offerings But Hurt Public Markets?, Institutional Investor Securities Blog, July 6, 2012
SEC Acts to Put into Effect Provision of JOBS Act that Allows General Advertising and Solicitation in Securities Offerings, Stockbroker Fraud Blog, September 4, 2012