| WASHINGTON, April 8
WASHINGTON, April 8 U.S. securities regulators
should not be so quick to scale back the power of the states to
police certain smaller public stock deals, a top U.S. Securities
and Exchange Commission official warned on Tuesday.
The remarks by SEC Commissioner Kara Stein, a Democrat,
represented a small victory for state regulators, who have been
locked in a deep jurisdictional and legal battle with the SEC
over a plan that proposes to preclude states from regulating
some smaller stock offerings.
The North American Securities Administrators Association,
which represents state securities regulators, has been trying to
convince a majority of the SEC's five commissioners not to vote
for the plan, known as "Regulation A-Plus," in its current form.
The state regulators' group was holding its annual meeting
in Washington on Tuesday. Its leaders have been meeting with SEC
commissioners this week to make its case.
"I think the more eyes on the market, the better," Stein
told reporters on the sidelines of NASAA's conference.
The SEC's Regulation A-Plus proposal would make major
changes to the current rules on the books that govern small
public stock deals.
Companies rarely use Regulation A to raise money today
because it limits them to a $5 million cap, and because the
offerings must be registered separately in every state where
they are sold. Such registration is costly, and often not worth
The SEC wants to raise that threshold to $50 million and
exempt some of the larger deals from state registration laws so
that more companies can use "Reg A" to raise new capital.
NASAA contends that the SEC's effort to cut states out of
regulating the deals violates the law and the will of Congress.
The group recently hired former SEC enforcement lawyer Tom
Sporkin of BuckleySandler LLP to help devise a strategy to fight
Stein addressed NASAA at its annual meeting, where she gave
a speech suggesting she is sympathetic to the group's concerns.
"I remain concerned that the proposed Reg A-Plus does not
provide workable options for smaller issuers, and that it
unwisely precludes the states from their critical oversight
function," Stein told the group.
She stopped short of saying how she might ultimately vote on
In addition to trying to persuade the SEC that the plan in
its current form is unlawful, NASAA is also working to win
support for a new system to make the registration process easier
NASAA has approved a new streamlined system that would let
companies register offerings once, instead of in every state
So far, at least 48 of the 53 regulatory agencies that
comprise NASAA have signed an agreement to execute the plan.
Whether the SEC will abandon its proposal to pre-empt state
oversight of Reg A deals remains to be seen.
SEC Commissioner Luis Aguilar, a Democrat, told NASAA
earlier in the day that he had sought legal advice from the
SEC's general counsel office about whether pre-empting state
oversight violates the law.
He said the states' proposal "should be a factor that the
Commission seriously considers" before adopting the rule, but
did not give any hints on how he may vote.
Last week, SEC Commissioner Daniel Gallagher, a Republican,
gave a much dimmer view on the subject, telling reporters on the
sidelines of an event that the people at NASAA "don't have a
process" for registering the deals.
(Reporting by Sarah N. Lynch; Editing by Karey Van Hall and Jan