US SEC chair pushes for more disclosures in private stock deals

Reuters

By Sarah N. Lynch

WASHINGTON, Oct 18 (Reuters) - The head of the U.S.Securities and Exchange Commission vowed to plow ahead withcontroversial new rules requiring hedge funds to disclosedetails about private stock deals before advertising them, amove that is likely to irk the industry.

"For investors' sake and the sake of the new marketplace, weneed to move expeditiously toward adoption," SEC Chair Mary JoWhite told the Managed Funds Association in a speech in New Yorkon Friday.

The plan aims to help the SEC get more information about theprivate securities market by requiring numerous additionaldisclosures.

It was proposed in July in an effort to appease critics whohad urged the SEC to delay adopting a related rule that liftedan 80-year-old ban on general advertising for private stockdeals by hedge funds and other firms.

The lifting of the advertising ban was required by the 2012Jumpstart Our Business Startups (JOBS) law that eases securitiesregulations to help small businesses raise capital and gopublic.

Investor groups had urged the SEC to include more customerprotections before lifting the ban.

Instead, White opted to press ahead with adoption of theadvertising rules and separately propose a set of additionaldisclosures for private securities offerings in an effort tohelp the SEC better protect investors.

The new advertising rule went into effect in late September.

The proposal championed by investor advocates has generatedmore than 450 comment letters so far, White told the audience onFriday.

"This is an important proposal, and there are a lot ofdifferent views about it, so it is important to have anopportunity to consider these views," she said.

Many of the comments have been negative, with criticsincluding New Jersey Republican Congressman Scott Garrett sayingthe additional disclosures will "increase regulatory burdens onsmall businesses" and essentially undermine the whole purpose ofthe JOBS Act.

In another sign that White is not willing to easerestrictions for private funds, she also said she would not givein to pressure by some to allow private funds to avoidinspections by SEC examiners.

Last month, Garrett and House Financial Services CommitteeChair Jeb Hensarling wrote a letter to White urging the SEC tostop spending so much time conducting compliance exams of hedgefund and private equity fund advisers.

The lawmakers argued that investors in these funds are moresophisticated, and that the SEC's time would be better spentexamining advisers who offer mom and pop investors advice.

Without naming the lawmakers in her speech, White rejectedthat argument on Friday.

"The SEC has a mission of investor protection that runsacross the investor landscape. It applies to all investors, andall investors in the U.S. markets deserve to know that there isa regulator on the block," she said.

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