MFA Releases Statement on JOBS Act Rules (with Lofchie Comment)

The MFA commended the SEC for approving new rules related to the JOBS Act, which allows hedge funds to advertise their funds to qualified investors.

The MFA stated it is hopeful that the steps taken by the SEC will help modernize existing securities laws to enhance market transparency, improve capital formation, and strengthen investor protection.

Lofchie Comment: The MFA letter references the fact that under the CFTC Rules it is unclear whether a "pool" is able to rely on the private placement exemption. It is generally expected that the CFTC will amend or interpret its rules so as to give assurance that this is the case. In the meantime, the law firm community is somewhat divided as to whether any such amendment or interpretation is necessary. Certainly, from a policy perspective, there would seem to be no reason why one set of private placement requirements should apply to entities that use futures and swaps, and another set of requirements should apply to the rest of the United States. Accordingly, it would be better, even from the standpoint of those who believe that no CFTC action is actually required, for the CFTC to give the requested comfort that its rules are consistent with the rules adopted by the SEC pursuant to the requirements of the JOBS Act.We also caution that funds, and other issuers, should be mindful that the rules adopted under the JOBS Act do not give any exemption from broker-dealer regulation. Accordingly, a fund or other issuer fconducting public solicitation as permitted by the JOBS Act should consider whether they are engaging in any activity that could require it to register as a broker-dealer.

See: MFA Statement on JOBS Act Rules.See also: The SEC Approves JOBS Act Rules (with Delta Strategy Group Meeting Summary) (with Lofchie Comment) (July 10, 2013).