Howard Groedel, chair of the Securities Regulatory Compliance Group at Ulmer & Berne LLP, identifies the winners and losers following the SEC’s decision to lift the ban on general solicitation by hedge funds and other private placements…
SEC-registered mutual funds appear to be the big losers, as their advertisements are strictly regulated by SEC rules, and hedge funds will now be able to compete for investors by advertising without restrictions under new SEC Rule 506c.
On the other side of the coin, interactive advertising agencies and financial intermediaries are the big winners, as with many more companies looking to stand out in what promises to be a crowded field, advertising firms and middle-market broker-dealers can expect more clients knocking on their doors. Investor-side securities lawyers are also likely to benefit, as with more companies publicly soliciting for investors, there are bound to more instances of alleged fraud and issuer misconduct.
In addition, as foreshadowed by comments from Commissioners Gallagher and Paredes the SEC meeting, it is likely that the proposed new rules adding filing requirements for those advertisements will be met with stiff resistance.