This Day On The Street
Continue to site right-arrow
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

Stocks in this article: FB

To be sure, many in the industry fear such information may lead to enforcement actions.

Hanks said that many small securities issuers do not hire experienced attorneys and, as a result, may not understand that proposed Rule 510T would require them to submit written communications following the guidelines of Rule 405 under the Securities Act. Rule 405 defines graphic and broadcast material as written communications.

"It will not occur to people not steeped in the technicalities of securities law that a video is 'written,'" Hanks stated in her letter. As a result, she said many common forms of general solicitation and advertising will "remain innocently unsubmitted."

Hanks also asserted that because there is no way for the SEC to determine whether all materials have been submitted, there may be a built-in incentive to undersubmit.

"There is every incentive for issuers to submit whatever materials they find easiest to submit and deliberately withhold materials they least want the SEC to see or which present challenges to uploading," she wrote. The withheld materials are most likely to include innovative approaches to fundraising, Hanks said, while the submitted materials are most likely to include traditional, text-heavy disclosures such as private placement memoranda.

Materials such as slide-decks, videos, legal documents, platforms that allow for due diligence or information calls between issuers and investors will present challenges to issuers in terms of their filing requirements.

For the SEC, building a system that can handle the potential volume and different types of data will be "difficult and expensive," Hanks wrote. In addition, the SEC's possible use of information gathered from such filings in enforcement actions may create incentives for issuers to feign compliance and withhold materials that might raise concerns with regulators.

Hanks said the SEC would be better served in its efforts to be informed about the small-cap financing market by relying on the existing array of advisory bodies and working groups on small business and investor protections.

Many of Hanks' concerns were echoed by Scott Purcell, the founder and CEO of Arctic Island LLC, in a July 22 letter to the SEC. San Francisco-based Arctic Island plans to offer software and services to help small businesses raise private placement financing.

2 of 5

Select the service that is right for you!

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 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • 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