There is no doubt that the federal government wishes to encourage job growth in the United States. There is also little doubt that it has attempted to learn lessons from various pyramid schemes, such as those perpetrated by Bernie Madoff. But those two initiatives appear to be at odds as the Securities and Exchange Commission (SEC) considers proposals related to the Jumpstart Our Business Startups Act in relation to private placements.
The JOBS Act was passed in 2012 with the backing of Republicans and Democrats alike. It is intended to encourage investment in U.S. small businesses by loosening security regulations. As part of the act, the SEC would lift an advertising ban for hedge funds looking to raise cash through private placements.
In an effort to protect investors from scams, the SEC has proposed certain safeguards, such as requiring that companies notify the Commission 15 days before publicizing an offering. These safeguards are not part of the JOBS Act, but investor groups, state regulators and others have encouraged these actions by the SEC.
House Republicans, among others, have criticized the notification period. “Congress did not say that the Commission can delay free speech for fifteen days,” wrote Reps. Patrick McHenry (R-N.C.) and Scott Garrett (R.-N.J.) to the SEC in July. “The Commission must withdraw this proposed pre-filing requirement.”
The SEC has already received over 350 comments on the matter, and it has decided to extend the comment period through the end of October. This extension of the comment period should allow the SEC to get a better sense of criticism and support for the safeguards, allowing it to adjust the policies if necessary, as it looks to strike a balance between creating jobs and avoiding scams.