- JOBS Act contained early July deadline
- Rule change would enable wider marketing
- No indication how commission will act
The Securities and Exchange Commission missed its early July deadline to draft rules enabling the general advertising of private equity funds, but the commission appears to be on track to take up the question before the end of August.
Congress passed legislation in April to stimulate business activity by reducing regulatory burdens for smaller companies. Among the provisions of the JOBS Act was one that eliminated a longstanding prohibition against the general promotion of restricted securities, such as limited partnerships interests in buyout funds. But the law, fulsomely the Jumpstart Our Business Startups Act, also called on the SEC to draft regulations for the marketing of such funds in the future, giving the agency 90 days to act.
SEC Chairwoman Mary Schapiro told a U.S. House oversight panel in late June that certain rulewriting deadlines imposed by the JOBS Act “are not achievable,” sister news service Reuters reported. “The 90-day deadline does not provide a realistic timeframe for the drafting of the new rule, the preparation of an accompanying economic analysis, the proper review by the commission, and an opportunity for public input.”
The agency now has set Aug. 22 as the date for the commission to consider those rules, according to a notice on the SEC Web site. Schapiro’s statements have focused on the rulemaking process rather than the substance of the new rules. I’ts a strategy described by attorney Chris Manderson, a founding partner of Manderson, Schafer & McKinlay LLP, a law firm in Newport Beach, Calif., in a commentary on sister Web site peHub, as one that “could be fairly summarized in the classic Seinfeld excuse, ’the wheels are in motion … things are happening!’”
When the rules are adopted, fund sponsors will presumably find themselves less restricted in speaking with investors, the media or the general public, media-relations expert Bill Haynes, the president of Back Bay Communications, wrote in a column in Buyouts in May. “Firms will now be able to share in news releases information that was once reserved for the prospectus. Firms can also now issue news releases on an ongoing basis on investment activity and other firm events, talk with the media about their firm and share insights on industry investment issues and trends, boosting brand awareness and credibility and remaining top of mind with all audiences.”
It is unclear, however, whether the five-member commission actually will vote on any rules at the August meeting, or how long it would take after that before the rules actually take effect. While the commission often calls for public comment before adopting new rules, the commission does have an option to adopt an interim final temporary rule, in which the rule goes into effect until adoption of a final rule.