The Private Placement Improvement Act of 2014 (H.R 4570) is working its way through Capitol Hill. How far this proposed legislation will make it is uncertain, but it represents a solid effort to maximize the value of the Regulation D exemptions for small business issuers attempting to raise capital. For practical purposes, the Act also represents a defensive effort against proposed SEC rules that would add additional compliance burdens and expense for Reg. D issuers.
To quickly summarize a few key points of the Act, it would:
- Prohibit the SEC from requiring an issuer to file Form D prior to the date of first sale in the offering.
- Prohibit the SEC from making the filing of Form D a condition of the Rule 506 exemption.
- Prohibit (with some narrow exceptions) the SEC from requiring an issuer relying on a Rule 506(c) exemption (general solicitation and advertising permitted) to submit its advertising materials to the SEC.
Reasonable people can and will disagree over where to strike the balance between investor protection and facilitating capital formation. Time will tell where the SEC and Congress strike a balance in the context of Regulation D private offerings.