The North American Securities Administrators Association, or NASAA,
recently tapped former SEC enforcement lawyer Tom Sporkin to help
respond to an SEC proposal on small public stock offerings that the
state group says defies the will of Congress, exceeds the SEC's
authority and reduces state policing powers.
Sporkin, a partner at BuckleySandler LLP in Washington, spent nearly
20 years at the SEC, including a stint as director of the Office of
Market Intelligence, a triage center for handling the SEC's tips and
"He has good experience understanding the inner workings" of the
SEC, NASAA President Andrea Seidt said in an interview. "We
certainly value his input. He is helping us solidify our thinking."
State regulators frequently clash with lawmakers to retain their
jurisdiction, which has been scaled back before, but it is unusual
for them to tussle with the SEC over jurisdictional issues so
The dispute centers on how regulators should oversee a type of small
public stock deal known as a "Regulation A" offering. The deals are
rarely used because companies can only use them to raise $5 million,
and the offerings must be registered separately in every state where
they are sold — often more effort than the relatively small amount
of money is worth.
The SEC wants to raise that threshold to $50 million and exempt the
deals from state registration laws so that more companies can use "Reg
A" to raise new capital.
State regulators do not want to lose oversight authority of these
deals due to concerns about fraud. Beyond that point, they say it
would be against the law for the SEC to pre-empt state oversight.
"This is one of those rare occasions where the SEC has gotten a
little out of synch with this rule," Sporkin told Reuters in an
"I know that NASAA is committed to working with the Commission to
revise the proposal in a way that will preserve this important
partnership," he said.
"We look forward to reviewing all of the comments we receive on the
proposal," said SEC spokesman John Nester.
The SEC's Regulation A proposal stems from the 2012 Jumpstart Our
Business Startups, or JOBS Act, which relaxes securities rules to
help companies raise money and go public.
NASAA has disagreed with many provisions of the JOBS Act, but this
is the first time it has hired outside counsel to help it push back
against a rule related to the law.
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The law requires the SEC to increase the amount that Regulation A
offerings can raise. But regulators were flummoxed over how to
handle the patchwork of different "blue sky" state laws so that
compliance costs would not cancel out the benefits to companies of
raising more money.
NASAA has offered a solution. Last year, it said the states were
developing a streamlined system that would let companies register
offerings once, instead of in every state separately. But the SEC
surprised the group by proposing that many of the Reg A deals would
be removed from state supervision.
"It's not appropriate for the SEC at any time ... to exceed its
statutory authority," Seidt said. "Pre-emption is not an option on
The group's recent 17-page comment letter to the SEC, which Sporkin
helped review, accuses the SEC of defying Congress.
It does not make a specific legal threat, but the letter references
tactics used in previous challenges, such as asking whether the SEC
weighed the costs and benefits of its proposal.
The letter also suggests that companies may be afraid of facing
enforcement action from individual states if they try to sell
unregistered shares there, even if the offering complies with SEC
That could deter companies from issuing Reg A offerings, according
The state securities regulators' group plans to meet with SEC
commissioners, including Chair Mary Jo White, and staff early next
month, before the NASAA's public policy conference in Washington on
April 8, to discuss its concerns.
Seidt said she was hopeful the matter could be resolved without
resorting to litigation.
"Right now our perspective is partnering with the SEC in a
productive, constructive way and hoping that it doesn't have to take
a detour south," Seidt said.
(Reporting by Sarah N. Lynch; editing by Linda Stern, G. Crosse and
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