Implementation Of Proposed Private Issuer Advertising Rule May Result In Litigation For SEC In 2013 Hot

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The most volatile issue at the SEC of late is the proposal to allow issuers of private securities like hedge funds to advertise to the public and solicit accredited investors directly.
 
The Wall Street Journal (WSJ) reported that imminently departing SEC chair Mary Schapiro delayed implementing the rule because she was concerned about her legacy.
 
A WSJ editorial last week purported Schapiro was following the edicts of Barbara Roper, head of investor protection at the Consumer Federation.
 
Roper fired back that those implications were absurd. And Schapiro has been urged by Rep. Patrick McHenry (R-NC) to act on the measure before she leaves this Friday, December 14th.
 
It’s largely agreed that rules covering private placements are in need of an overhaul. But as soon as they get one, consumer groups may file suit.
 
One such group, Fund Democracy, alleged in a letter that the SEC makes a mockery of cost-benefit analysis, which has been the sticking point often used to stop rule making perceived to benefit the industry over consumers.
 
This indicates the upheaval at the SEC may continue after Schapiro leaves, a not-so-welcoming gift for successor Elisse Walter.

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