Operating companies also will be able to advertise for investors after the ban is lifted. They’ll benefit because they’ll be able to reach “a much broader audience than they would be able to with their own contacts,” Guin said.
In an effort to address questions about deception, the SEC will vote separately to introduce a new proposal that seeks to monitor how advertising is used and whether it is contributing to more fraud. The two-step process will allow SEC Chairman Mary Jo White to complete the required rulemaking before two new commissioners join the SEC this summer.
Under the proposal, companies raising funds would have to file a required statement, known as Form D, to the SEC 15 days before the offer closes. The form would have to include information on the type of advertising used. Companies would have to update the information contained in the form within 30 days of completing the offer.
The SEC’s meeting notice states the commission also will consider changes to a rule that holds investment companies accountable for their sales literature. Investor advocates such as the Consumer Federation of America have expressed skepticism about whether the proposal will ever be adopted.
“I don’t think it’s a hopeless exercise but there are a lot of examples where the SEC just can’t get proposals to fruition,” Bullard said in a phone interview. “To be fair, it was either do something now or wait probably at least two or three months after the new commissioners are in place.”
A third rule scheduled for a vote today would block felons and others found culpable of securities-law violations from marketing private offers, which are more lightly regulated than public offers of stock or debt.