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News April 30, 2012 Issue

Save the Cold-Calling for Now, JOBS Act Still a Work In Progress

The JOBS Act has been signed into law, but it is far from launch time.

The Jumpstart Our Business Startups (JOBS) Act rescinded the general advertising and solicitation prohibitions under Regulation D, which has some private fund advisers cheering.

The prohibitions remain in effect however, until rules are written to flesh out the legal mandate. The rules are due from the SEC by July 4.

"You canít be advertising now," said Arnold & Porter partner David Freeman on a private fund marketing panel at the ACA Compliance Group/ACA Insight Spring Compliance Conference. Freeman recommended waiting a little longer than when the rules arrive to take advantage of new JOBS Act freedoms.

The JOBS Act has already given rise to a number of potential conflicts and interpretive questions. The SEC will likely put out FAQs, which can include interpretive twists, he said. The rules will pre-empt any applicable state laws and will also provide a narrow exemption from broker-dealer registration.

New Mountain Capital CCO Paula Bosco agreed that patience is the right approach. "I think the exemptions will be very, very narrow," she said.

The key takeaway here is that advisers should continue to follow their current policies and procedures, donít drop the ball now.

She observed that the SEC could extend the effective date as well. It may be another six months and even up to a year before new rules take effect, she said.