Two SEC Commissioners have voiced concerns over the proposed rule that would lift the ban on general advertising for private offerings. The rule has been heavily criticized for not including enough investor protections, including many protections imposed on mutual fund advertising, which would leave the door open for potential fraud. For example, the proposed rule does not require hedge fund performance to be calculated using standardized methodologies, making it difficult for hedge fund performance to be compared to that of other products. In addition, there is no requirement for hedge funds to disclose that they are not the same as mutual funds -- which could create confusion among investors.
The rule was statutorily mandated by the Jumpstart Our Business Startups (JOBS) Act and was proposed in August. Commissioner Luis Aguilar dissented at the time the rule was proposed, and more recently, Commissioner Elisse Walter, has expressed concerns that the new rule could unduly harm investors.
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