In a letter to the SEC, dated May 4, 2012, the Managed Futures Association (“MFA”), a hedge fund industry advocacy group, made several recommendations to the Commission regarding implementation of the repeal of the ban on general solicitation under the JOBS Act (the “Act”), particularly ways in which the Act can better be harmonized with existing securities laws. Passed in early April, 2012, the Act directs the Commission to lift the long standing ban on general advertising and general solicitation in the offer and sale of securities in private placements under Rule 506 of Regulation D of the 1933 Securities Act. The Act now allows issuers selling securities under the safe harbor provisions of Rule 506 to publicly advertise and solicit investors provided reasonable steps are taken to ensure that all investors in such issuance are “accredited”. In summary, MFA made the following recommendations:
• The association urged the Commission to provide greater guidance and flexibility in regard to the types of information private fund managers can provide investors in advertisements. In particular, the association encouraged the Commission to clarify how the Act was meant to be interpreted in light of the limitations currently imposed on advertising under Section 206 of the Advisers Act. Arguing that the disclosure of more information than is currently permissible under the Advisers Act would serve to provide transparency and contemplated by Congress when passing the Act, MFA urged the Commission to allow private funds to provide a broad range of information in advertising.
• The association also urged the Commission to continue its long standing practice of allowing knowledgeable employees of private issuers to retain an ownership interest in their employer’s private fund even when such employee does not meet the net worth requirements of an accredited investor. The hedge fund group emphasized that this long-standing policy of permitting knowledgeable employees of an investment manager to invest in a private fund is critical to meeting the demands of institutional investors, which seek to have fund principals and employees interests aligned with their own when they invest with a manager.
The following is a link to the MFA’s letter MFA_Comments_on_JOBSAct_05-04-2012
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