This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: SEC Rule on Advertising May Be Too Tough for Startups

NEW YORK (TheStreet) - The Securities and Exchange Commission's proposed rule that would require private placement issuers to file general solicitation and advertising materials with the commission could lead small companies to raise less capital, rather than more, under the common securities law provision that many currently use.

That is the opinion of numerous entrepreneurs and advocates for startup companies, expressed in interviews and in letters filed with the SEC as comments on the proposal.

Sara Hanks, co-founder and CEO of CrowdCheck Inc., said in a lengthy, July 6 letter to the SEC that the commission is unlikely to receive all the solicitation materials it is expecting because many small securities issuers don't understand the nuances of the securities laws. CrowdCheck, based in Alexandria, Va., provides due diligence and disclosure services in small, online securities offerings.

"This imposes a significant burden on the founders of small issuers, whose focus should be on running their companies and making sure that their communications are complete and accurate, not on uploading large, continually changing files to the commission," Hanks wrote.

Proposed Rule 510T was published for public comment on July 10. It would require private placement issuers relying on Rule 506(c) of the Securities Act to file written general solicitation materials with the SEC.

The filings would be made through an intake page on the SEC website no later than the date of the first use of the materials. The filing requirement does not apply to oral communications. Filings would not be available to the general public and would expire after two years, under the proposal.

The SEC made the proposal on the same day that it approved a rule to eliminate the ban against general solicitation and advertising of private placement offerings.

Congress had required the SEC to end the general solicitation ban under the Jumpstart Our Business Startups Act, which was signed into law in April 2012. Ending the ban was one of numerous provisions of the JOBS Act that was meant to make it easier for small companies to raise capital. The SEC wants the 510T filings in order to gather information about how general solicitation and advertising develops in the private placement market. The commission plans to use the information to make any necessary changes to protect investors from market abuses.

1 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,019.63 -19.86 -0.12%
S&P 500 1,991.63 -0.74 -0.04%
NASDAQ 4,544.6940 +12.59 0.28%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs