U.S. SEC set to lift ban on private placement advertising
WASHINGTON, July 10 (Reuters) - U.S. regulators were poised on Wednesday to lift a longtime ban on advertising for private securities offerings, paving the way for hedge funds, private equity funds and other asset managers to reach new investors through television and the Internet.
The Securities and Exchange Commission's new advertising rules will be attractive to smaller asset managers that until now have had a hard time competing with bigger competitors to reach new large institutional investors and wealthy individuals.
But big companies, such as large private equity firms Bain Capital and Blackstone Group LP, could also take advantage of the chance to use television ad campaigns.
"Lifting the ban will be a game changer in terms of improving access to capital for smaller companies and raising public visibility into financing activity," Cromwell Coulson, chief executive officer of over-the-counter pink-sheet marketplace operator OTC Markets Group, said in a statement late Tuesday.
The SEC first proposed lifting the ban last year after Congress mandated the change in a 2012 law known as the Jumpstart Our Business Startups Act. The JOBS Act relaxes securities regulations to help encourage small companies to go public.
But the proposed SEC rule has languished amid a bitter dispute between consumer advocates who fear lifting the ban will expose investors to fraud and pro-business interests who believe it will help spur small companies' growth and job creation.
Those divisions have also played out internally at the agency, with Republican commissioners Daniel Gallagher and Troy Paredes advocating for lifting the ban quickly, and Democratic Commissioner Luis Aguilar urging it be completely rewritten to include measures to keep investors safe.
Wednesday's public meeting signals that SEC Chair Mary Jo White has the votes to get the measure over the finish line.
However, the lifting of the ban is still likely to generate significant controversy among consumer protection groups and state regulators.
In remarks prepared for Wednesday, Aguilar issued a strongly worded dissent, saying the rule has fatal flaws because it does not contain adequate protections for investors.
"I am disappointed and saddened by the reckless adoption" of the rule, he said. "I want to encourage you to fight on behalf of investors. They will need you now more than ever."
Knowing the rule will upset investor advocates, the SEC on Wednesday also plans to take up two other measures.
First, it will adopt a longstanding rule required by the 2010 Dodd-Frank Wall Street reform that would block felons and other law breakers from pitching private investment deals to unsophisticated customers.
The agency will also vote on a new proposal that contains a raft of measures requiring firms offering private placements to make numerous additional disclosures to regulators before they can advertise the offering.