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US SEC Chair Pushes for More Private Stock Disclosures

Securities and Exchange Commission Chair Mary Jo White at meeting of the Financial Stability Oversight Council, Washington, April 25, 2013.
Securities and Exchange Commission Chair Mary Jo White at meeting of the Financial Stability Oversight Council, Washington, April 25, 2013.
The head of the U.S. Securities and Exchange Commission vowed to plow ahead with controversial new rules requiring hedge funds to disclose details about private stock deals before advertising them, a move that is likely to irk the industry.
"For investors' sake and the sake of the new marketplace, we need to move expeditiously toward adoption," SEC Chair Mary Jo White told the Managed Funds Association in a speech in New York on Friday.
The plan aims to help the SEC get more information about the private securities market by requiring numerous additional disclosures.
It was proposed in July in an effort to appease critics who had urged the SEC to delay adopting a related rule that lifted an 80-year-old ban on general advertising for private stock deals by hedge funds and other firms.
The lifting of the advertising ban was required by the 2012 Jumpstart Our Business Startups (JOBS) law that eases securities regulations to help small businesses raise capital and go public.
Investor groups had urged the SEC to include more customer protections before lifting the ban.
Instead, White opted to press ahead with adoption of the advertising rules and separately propose a set of additional disclosures for private securities offerings in an effort to help the SEC better protect investors.
The new advertising rule went into effect in late September.
The proposal championed by investor advocates has generated more than 450 comment letters so far, White told the audience on Friday.
"This is an important proposal, and there are a lot of different views about it, so it is important to have an opportunity to consider these views," she said.
Many of the comments have been negative, with critics including New Jersey Republican Congressman Scott Garrett saying the additional disclosures will "increase regulatory burdens on small businesses" and essentially undermine the whole purpose of the JOBS Act.
In another sign that White is not willing to ease restrictions for private funds, she also said she would not give in to pressure by some to allow private funds to avoid inspections by SEC examiners.
Last month, Garrett and House Financial Services Committee Chair Jeb Hensarling wrote a letter to White urging the SEC to stop spending so much time conducting compliance exams of hedge fund and private equity fund advisers.
The lawmakers argued that investors in these funds are more sophisticated, and that the SEC's time would be better spent examining advisers who offer mom and pop investors advice.
Without naming the lawmakers in her speech, White rejected that argument on Friday.
"The SEC has a mission of investor protection that runs across the investor landscape. It applies to all investors, and all investors in the U.S. markets deserve to know that there is a regulator on the block," she said.

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