Jim Hamilton, the author of a leading blog on securities regulation, posts today on a petition by the Managed Funds Association (the “MFA”) asking the SEC to amend Regulation D, which would end a ban on “general solicitation or general advertising with respect to private funds.” Jim Hamilton writes:
[E]liminating the ban would reduce the cost of capital for private funds and lead to greater efficiency in private offerings, said the MFA, which in turn would facilitate the allocation of capital and investment by private funds throughout the financial markets. Private fund managers face significant costs in seeking to comply with the ban due to its broad application, the limited scope of existing guidance, and the severe consequences of an inadvertent violation. Managers expend considerable time and resources when making any sort of communications or participating in industry events, and often take a conservative approach and refrain from such activity. These effects impose administrative burdens for managers and unnecessarily limit communications with potential investors, increasing the cost of obtaining capital for private funds.
via Jim Hamilton
The Petition is in addition to pending House and Senate legislation that seeks, in effect, to achieve the same outcome, albeit by legislation rather than by agency rule making. Interestingly, however, today’s petition is made only on behalf of private investment funds (i.e., hedge funds), and apparently is not intended for application beyond “private funds.” By comparison, the proposed legislation, if passed, would have far more comprehensive effect.