ICI Opposes Proposal to Allow Public Advertising of Private Securities Offerings

Washington, DC, October 16, 2007 - ICI filed recent comments strongly opposing an SEC proposal that would allow private issuers (but not hedge funds and other private investment pools) to announce certain securities offerings in print media and on the Internet. ICI believes the proposal "represents a dangerous erosion of the long established line between public and private securities offerings."

Background
For more than 45 years, it has been the SEC's position that "general solicitation" or "general advertising" is not permissible in connection with most securities offerings that are exempt from registration under the Securities Act of 1933. As part of a package of amendments to its rules governing private securities offerings, the SEC has proposed a new exemption from registration for certain offerings to "large accredited investors." Under proposed Rule 507, private issuers other than hedge funds and other private investment pools would be allowed -- for the first time -- to publish limited announcements in print media and on the Internet to facilitate the sale of an unlimited amount of unregistered securities to eligible investors.

ICI Position
In an October 9 comment letter, ICI states that the limited advertising provision of proposed Rule 507 "represents a dramatic departure from the Commission's longstanding, and logical, position that general solicitation or general advertising is not permissible as part of an offering of unregistered securities." The letter also notes that the SEC has failed to demonstrate that allowing limited advertisements for private securities offerings would be necessary or appropriate in the public interest and consistent with the protection of investors.

The letter endorses the SEC's decision not to make Rule 507 available to hedge funds and other private investment pools. It also urges the SEC to go a step further, by reiterating in its adopting release that any form of general solicitation or general advertising by private investment pools is fundamentally inconsistent with the pools' exclusion from the provisions of the Investment Company Act. The letter also discusses in detail why general solicitation and general advertising by private investment pools would contravene the clear intent of Congress and raise serious investor protection concerns.

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