However, the SEC may have no choice. Lifting the ban was required by the 2012 JOBS Act, and the SEC is already past the scheduled deadline to implement this and other provisions. According to the WSJ, the SEC will propose additional safeguards today (e.g. restrictions on sales materials, barring of "bad actors" or felons), but is moving forward with lifting the ban itself.
The hedge fund industry and some businesses have argued (and effectively lobbied to Congress) that the advertising ban limits their ability to raise capital.The JOBS Act was designed to encourage private investment in small companies, and thus lifting the ban was argued to promote private investment and thus stimulate job growth.
However, the proposal is rife with opportunities for fraud. Private placements often have very little transparency and include almost no regulatory oversight. Investors in private placements often have little access to their funds and are frequently given stale or managed information by sponsors. It will be very difficult to ascertain whether the claims made in general solicitations are accurate or supported by reasonable evidence, and many investors may find themselves drawn into misleading investments or outright scams.
That said, Congress may prove amenable to the SEC restricting general solicitation in some fashion for the sake of investor protections. It will be interesting to see the details of how the SEC intends to move forward with this controversial regulatory change.
