One area that the SEC could potentially address as part of its MIGA movement is the patchwork of rules and statutory provisions that govern pre-offering communications. Despite my best efforts as a regulator over the years to defend the ramparts of Section 5 against illegal communications in securities offerings (I was reviewing Webvan’s IPO when it was delayed for a gun-jumping violation, and later, as Chief Counsel, I dealt with the publication of a Playboy interview with the founders of Google while the company was in registration for its IPO), the “offer” side of the equation has largely been substantially deregulated, as former Corp Fin Director Linda Quinn once envisioned in her 1996 remarks “Reforming the Securities Act of 1933: A Conceptual Framework.” Such deregulatory efforts were jumpstarted by the JOBS Act and have been furthered by the Commission, as it has adopted rules such as Rule 163B, Rule 147 and permissive pre-offering communications regulations as part of Regulation A and Regulation Crowdfunding.

As Anna Pinedo recently noted in Mayer Brown’s “Free Writings & Perspectives” blog, a rulemaking petition has been submitted to the SEC by the CEO & Founder of Radivision, Inc., calling on the SEC to amend its communications rules to facilitate more participation in offerings by retail investors. The blog notes:

A rulemaking petition filed recently highlights the need to address the communications safe harbors. The Securities and Exchange Commission has not reviewed the rules and regulations relating to social media under the securities laws since 2000. The last comprehensive review of the rules relating to offering related communications and safe harbors was Securities Offering Reform, which now was over 20 years ago. Since then, there have been modest changes to the communications rules, principally in connection with exempt offerings and the JOBS Act. The petition notes that, in some respects, the communications rules are more liberal in the case of offerings made pursuant to Regulation Crowdfunding (CF) and Regulation A offerings than in connection with testing-the-waters communications in the context of SEC registered offerings.

The petition requests that the SEC take action to amend Rule 163B to expand the class of permitted test-the-waters investors, which now includes only qualified institutional buyers and institutional accredited investors, so that, at a minimum, accredited investors might be included. The petition suggests that if the categories of persons were to be expanded, then, written test-the-waters materials should include a brief legend noting that no offer to sell is being made and no allocation commitment exists. In addition, the petition requests that Rule 169, the safe harbor relating to regularly released factual business information, be amended to (1) broaden its application to communications during registered offerings, (2) clarify that the safe harbor applies to digital and social media communications, and (3) harmonize the safe harbor with the communications standards applicable under Regulation A and Regulation CF that allow issuers to communicate freely with prospective retail investors while undertaking registered offerings. Finally, the petition requests that the SEC issue interpretive guidance confirming that the SEC’s policy judgments permitting retail solicitation in Regulation CF, Regulation A, and Rule 506(c) offerings apply to IPOs.

We shall see if lawmakers or the SEC will consider any of these suggestions in future legislative or regulatory action.

– Dave Lynn