SEC's Aguilar frustrated at pace of Reg D protections

Bloomberg News

Expressing disappointment that action hasn't come more quickly, Securities and Exchange Commission member Luis Aguilar Thursday called on the SEC to move ahead on a proposal to strengthen rules surrounding sales of unregistered securities.

In July, when the SEC voted to give hedge funds, private-equity funds and issuers of private offerings the go-ahead to begin advertising to the public, an accompanying proposal was introduced that would bolster disclosure related to the private investments.

The solicitation ban was lifted in late September, but in a speech in Washington Thursday, Mr. Aguilar said that he is frustrated that the SEC hasn't yet acted on the additional safeguards.

“Unfortunately, it's been almost five months since those proposals have been issued for comment,” he said at a Consumer Federation of America conference in Washington. “I can assure you, you're not going to see these anytime in the next month or two.”

The amendments to Rule 506 would require issuers to divulge more information about the offerings, their advertising and their investors on their Form D filings. The changes also would mandate that the Form D be submitted 15 days before solicitation begins.

“Every day that these proposals are not adopted is another day that investors face great harm,” Mr. Aguilar said. “I'm frustrated because investors are going to be damaged.”

The Consumer Federation of American, state securities regulators and other groups criticized the SEC for lifting the ban on general solicitation without including more investor protections. The SEC kept in place requirements that investors in private investments meet net-worth and income minimums.

The SEC advertising rule implemented a provision of a law that eases securities registration for startup companies. Proponents of the measure said that it would facilitate the flow of capital to small business and help create jobs.

Its backers, including Capitol Hill Republicans, have warned the SEC not to implement the additional changes to private offerings, arguing that they undermine the intent of the law. The SEC split, 3-2, on the vote on whether to propose the amendments to Rule 506.

In an Oct. 18 speech to the Managed Funds Association in New York, SEC Chairman Mary Jo White said the agency should “move expeditiously toward adoption” of the proposal after it has reviewed the more than 450 comment letters it has received. She hasn't said when the commission will act.

Although he is urging action, Mr. Aguilar emphasized that he is one of only five SEC members, and that Ms. White sets the commission's priorities.

“When she puts it on the agenda, I'l! l be the first to say, 'You're late. It's about time,'” he said.