The SEC won't make its July 4 deadline to issue rules governing how managers of private securities offerings such as hedge, private equity, real estate and real assets funds, may advertise their investment vehicles, SEC Chairwoman Mary L. Schapiro told Congress on Thursday.
Title II of the JOBS Act, which was enacted April 5, lifted a ban on general marketing and advertising by managers of private investment funds to accredited investors while also requiring that money managers verify that potential investors are qualified.
The legislation gave the SEC 90 days to create rules under Title II, but “the deadline does not provide a realistic time frame for the drafting of the new rule, the preparation of accompanying economic analysis, the proper review by the commission and an opportunity for public comment,” Ms. Schapiro said in prepared testimony to the House Oversight and Government Reforms Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs.
Despite missing the July deadline, SEC staff “have made significant progress on a recommendation and analysis, and it is my belief that the commission will be in a position to act on a staff proposal in the very near future,” Ms. Schapiro said.
A specific time frame for release of the new rules has not been set, said John Nester, an SEC spokesman, in an interview.
Hedge fund attorney Steven B. Nadel said in an interview that it's very difficult to predict what the SEC's new private fund marketing rules will contain, but noted three areas of concern: what advertising content will be permitted; what means of communication will be approved; and what accredited investor verification process will be required.
“While some hedge fund managers already are considering how they might take advantage of the lifting of the ban on advertising, it would be very premature to take action now,” Mr. Nadel said. He is a partner in hedge fund practice of law firm Seward & Kissel.
“When it comes to the manner of advertising, for example, will private equity managers be able to buy an ad in the Wall Street Journal? Will a hedge fund manager buy the naming rights to Madison Square Garden? Might a real estate manager put a billboard up at the entrance of the George Washington Bridge?” Mr. Nadel said.