Oesterle, Dale A.

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REPAIR OR REPLACE:LIFTING SEC REGULATION FROM PATCHWORKTO PERMANENCEOHIO STATE ENTREPRENEURIAL BUSINESSLAW JOURNAL 2012 SYMPOSIUMDALE A. OESTERLE*On April 13th, 2012, the Ohio State Entrepreneurial Business LawJournal held a symposium on the pressures of the digital age on federalsecurities regulation. The formal title was "Repair or Replace: Lifting SECRegulation from Patchwork to Permanence." The focus of the symposiumwas on the regulation of the securities offering process. A variety ofquestions were addressed. Is the public/private distinction still useful?Should the regulation of private offerings permit widespread use of theInternet? Should the regulation of public offerings include Internetsolicitations?The week before the symposium, Congress surprised many by reachinginto its basket of pending bills on securities offering procedures, pulling outone bill, and passing it-the Jumpstart Our Business Startups Act' (JOBSAct). The JOBS Act is controversial, affecting both public and privateofferings. It attracted most of the comments from panelists and audiencemembers during the symposium. Discussion was lively and, well, fun.The opening panel on private offerings consisted of Professors RobertBrown, Jr., Rutheford B Campbell and Eric Alden. Professor Campbelldiscussed exempt offerings under Regulation A and Regulation D.Regulation A was rarely used before the JOBS Act, and Professor Campbellremains skeptical of the Act's effect on the use of Regulation A. His verythorough paper on the subject follows. Professor Campbell previouslywrote a remarkable piece on Regulation D that carefully examined thefuture of what was intended to be the most-used registration exception topublic offerings. The picture he painted was not pretty. Like Regulation A,* Professor Oesterle is the J. Gilbert Reese Chair in Contract Law at the Ohio StateUniversity Moritz College of Law.1 Jumpstart Our Business Startups Act, Pub. L. No. 112-106, 126 Stat. 306 (2012)(to be codified in scattered sections of 15 U.S.C.).284 OHIO STATE ENTREPRENEURIAL Vol. 7.2BUSINESS LAWJOURNALRegulation D appears not to have been affected by the JOBS Act. Hispreviously published article has been reprinted in this edition to providecontext to his most recent research. Professors Brown and Alden alsodiscussed private offerings and, among many other topics, the limits ongeneral advertising. Congress relaxed some of these limits in the JOBS Act,but the impact has yet to be seen. Professor Brown was very leery of thereduced investor protections in the JOBS Act for private offerings.Our second panel included Professor Joan Heminway, ProfessorAndrew Schwartz and practicing attorney Jeremiah Thomas. Their paneltopic was the "crowdfunding" phenomena: the use of public offeringsthrough the Internet. The crowdfunding provisions of the JOBS Act were animmediate public sensation. Do they incentivize new forms of investorfraud or are they a belated recognition of a changing information industry?The debate was lively and mufti-faceted. Professor Heminway's essayconsiders the definition of a security in light of the rush to engage incrowdfunding. Her conclusion, that we need to simplify our definitions,rings true. Mr. Thomas emphasized the value in the new crowdfundingprocedure, describing a lawyer's attitude to the new rules: "We will find away to use them."Our third panel discussion focused on public offerings under the JOBSAct. Panelists included myself, Professor Alan Palmiter and ProfessorWilliam Sjostrom. Professor Palmiter's fine piece on the lack of adequatedisclosure of issuers' methods of pricing offerings, a critical and yetoverlooked subject, follows. Professor Sjostrom centered his presentationon the new liability provisions for crowdfunding, arguing that they may killthe public offering procedure. I focused on the new disclosure rules that aregraded by issuer size. Will the new reduced disclosure rules for "emerging"companies lead to more initial public offerings? Both my and ProfessorSjostrom's articles on these topics will be included in our next edition.Professor James Park delivered the symposium's keynote address,which was a thoughtful analysis of the relationship between tighter federalrules on corporate governance and more lenient rules on corporate publicofferings. In this edition, he evaluates whether the interrelated trends willlead, in the end, to suboptimal investor protections.Our symposium was one of the first on the JOBS Act, an astonishingpiece of legislation, both for what it included and for what it did notinclude. The participants seemed to enjoy the novelty of the new rules, andbrought an array of viewpoints on their possible effects. The JOBS Act wasCongress's statement that existing rules on private and public offerings areunsatisfactory in light of digital-age developments. However, Congress'sresponse was both a bit crude and a bit messy, leaving the SEC to reconcilethe various requirements. The prospect of significant changes in the private2012 Foreword 285and public offering rules promises stimulating discussion for the nearfuture. I suspect, however, that Congress and the SEC will revise this entirearea shortly when there is more information available on the JOBS Act'ssuccess at effecting reform of the current public offering regime.286 OHIO STATE ENTREPRENEURIAL Vol. 7.2BUSINESS LA WJOURNAL

Repair or Replace: Lifting SEC Regulation From Patchwork to Permanence

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Repair or Replace: Lifting SEC Regulation From Patchwork to Permanence

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