Doug Ellenoff Tells Us Why The SEC Needs To Take Its Time With The JOBS Act

The Securities and Exchange Commission missed a deadline of July 4, 2012 to adopt rules lifting a general advertising ban for private securities offerings as a part of the JOBs Act. Mary Shapiro, Chairman of the SEC expects to approve the rule sometime this summer, however the delay in finalizing rules on general solicitation suggests that the timeline for crowdfunding legislation to be implemented may also be pushed back. The JOBs Act was signed into law by President Obama on April 5, 2012.

Below, OneMedRadio interviewed Doug Ellenoff, partner at Ellenoff Grossman & Schole, a New York based law firm that focuses on securities law. He notes that there are meetings, forums, and seminars where industry leaders are getting together and talking about the pros and the cons of the JOBS Act and it’s a very healthy debate. “The SEC is taking it all on board in order to fashion what they believe to be the appropriate rule given what is a very clear rule which is just the lifting of the ban on general solicitation as it’s written through the legislative history and congress is watching,” he said.

OneMedForum NY 2012, held July 12 at The Metropolitan Club will host 4 panels centered on the JOBS Act and crowdfunding. For more info, click here.

Click below to hear more of the interview and see transcript that follows.

Brett Johnson:   Welcome, Brett Johnson in New York City with OneMedRadio. Today, I’m with Doug Ellenhoff who is a partner at Ellenoff Grossman & Schole, who’ve been leaders in the area of crowdfunding. Doug, thanks for joining us today.

Doug Ellenoff:   Brett, thanks for having me. I appreciate the opportunity to speak with you and your listeners about the Jobs Act generally and crowdfunding in specific.

BJ:   So, Doug, we talked 60 days ago about just sort of what’s happening with the crowdfunding and the Jobs Act legislation, and I think what’s interesting now is that we were to be today talking about  the day July 5th when the rules were supposed to come down. SEC has missed that deadline. Can you tell us what that means and, you know, why they missed the deadline and what the significance of that is?

DE:       The 90-day period while it’s written into the law that it was something where rules were supposed to be created by the Securities and Exchange Commission with respect to the listing on the ban on general solicitation, your audience needs to understand that this is a very sensitive issue for the SEC as well as industry participants. It’s not something where you just want the law and the rules to be enacted without a lot of thought and deliberation as to the many consequences that it all creates. I believe that the SEC and its staff are going through a dutiful process of trying to understand what is really a change in the law that’s been around for nearly 80 years. It’s taking a very hard line stance as to what their views are on what the rules ought to look like and the staff integrating that thought process into how they evaluate, how to proceed, and it’s a very earnest process between the industry as well as the rule makers. While the deadline is met, I believe that it is a process that is well under way and while we won’t obviously meet that deadline, it is something that the SEC is very carefully monitoring and hopes not to exceed by too long a period since there are many people watching.

BJ:   Terrific. I know on July 14th, I’m sorry July 13th which is one day after the session I know that you’re hosting at OneMedForum on crowdfunding and the Jobs Act, you’ll be going to Washington and apparently there’s a – can you tell us about the group that’s convening there to provide guidance to the SEC?

DE:      In a continuing dialogue that the SEC, FINRA and other regulators have encouraged so that they can understand how to proceed with respect to crowdfunding as opposed to the lifting on the ban on general solicitation. But crowdfunding specifically, the industry and various think tank individuals and government officials are getting together to discuss the issues relating to crowdfunding and how portals ought to operate and be regulated in order to balance the very sensitive issue between investor protection and encouraging capital formation into entrepreneurial activities.

BJ:  So is this the first time this group has gathered?

DE:     In this particular manner, yes. There have been many groups that have gone to see the Securities and Exchange taskforce that’s been created to implement the rules. This happens to be external to any one of the regulatory agencies that’s in a private setting. There are many participants that have been invited to give their views on best practices and ways to go forward and recommendations to both regulators, the SEC and FINRA, as to how to proceed with the proposed rules in order to make sure that this program operates as efficiently as possible.

BJ:    Okay. Well we’ll be very interested to see, you know, how that goes. So we’ll follow up with you later on in July about the July 13th outing. Can you tell us a little bit about the session that you’re hosting or rather moderating at the OneMed Forum, Jobs Act, crowdfunding? What kinds of things will you guys be covering on that panel on July 12th?

DE:     Well, Brett, I’m glad you asked. I think it’s really interesting as to how this  is coming together and different verticals are finding their way to the forefront healthcare, biotech, med device in particular. At this particular panel that you’re referring to, there’ll be several portals that have been designed specifically for the healthcare vertical and they’re not general portals for any entrepreneur to post their potential opportunities, but they are healthcare specifically and there are three different portals that are being created for that vertical. There’s a lawyer from Europe who’s been involved with some of the crowdfunding initiatives over there and then there are three portal operators and myself to discuss how portals and equity funding will help enable capital formation for healthcare opportunities.

BJ:    Okay. Well we’ll look forward to seeing you there again. Now again that’s on July 12th at the OneMed Forum. More information, OneMedForum.com. So Doug, thanks so much joining us today.

DE:      Thank you. I appreciate it.

BJ:  So that was Doug Ellenhoff who’s general partner at Ellenoff Grossman & Schole, a firm that’s focused a lot of energy on the Jobs Act and specifically in crowdfunding. Brett Johnson in New York City for OneMed Radio signing off. Good day.

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