By Sarah N. Lynch
Republican members of the House of Representatives criticized top officials at the Securities and Exchange Commission on Thursday for missing congressionally mandated deadlines to complete new rules designed to help small businesses raise capital.
In a hearing that at times grew tense, several Republicans on a House small-business panel vented their frustrations after they did not get clarity from the SEC on when the rules would be completed.
"The SEC expects reporting companies as their regulator to respect their deadlines. Congress is your regulator. Is it fair for us to expect you to respect our deadlines?" asked Michigan Representative Kerry Bentivolio.
"We do, congressman," said Lona Nallengara, acting director of the SEC's Division of Corporation Finance.
Bentivolio later quipped: "No date. No real deadline. Just when you get around to it. I'm getting a lot of verbal moonwalking, but I'm not getting anywhere."
The rules at the center of Thursday's hearing stem from the 2012 Jumpstart Our Business Startups, or JOBS Act.
Signed into law roughly one year ago, the JOBS Act was designed to spur small business growth by relaxing federal securities regulations to make it easier for companies to raise capital and eventually go public.
It received wide bipartisan support, but has also faced criticism from some Democrats and investor advocates who say it causes critical information to be withheld from investors and could expose them to fraud.
Many of the provisions of the JOBS Act went into effect when it was signed into law, but several key sections still require rule-writing by the SEC.
One rule, for instance, would lift a long-standing ban on general advertising for private placement offerings, making it easier for hedge funds and others to reach new investors.
Another rule would establish a new regulatory regime for intermediaries that offer crowdfunding, a capital-raising strategy that lets investors take small stakes in private start-ups over the Internet.
The general solicitation rule has so far generated the most controversy.
SEC staff had initially recommended issuing it right away as an "interim" final rule and tweaking it later as needed. But investor advocates decried that approach, saying the SEC needed to take its time and add critical investor protections before lifting the ban.
Ultimately, however, the SEC decided to propose a draft rule to give the public a chance to comment before adopting a final regulation.
Representative Patrick McHenry of North Carolina later lashed out at the agency for its change in approach after e-mails obtained by a U.S. House panel showed that former SEC Chairman Mary Schapiro delayed immediately implementing the rule amid concerns it might tarnish her legacy as a pro-investor leader of the agency.
Schapiro departed the SEC shortly thereafter, leaving a divided four-member commission unable to agree on a final rule.
The back story of what happened with the general solicitation rule at the SEC was still fresh in many Republicans' minds on Thursday.
"It doesn't seem to be a priority to the SEC. This is a really big deal," said Representative Blaine Luetkemeyer of Missouri. "I don't think you see the importance of your job. You help create economic activity in this country, sir."
Mary Jo White, who was sworn in on Wednesday as the SEC's new chairman, has said JOBS Act rulemaking would be among her top priorities, but she has not yet revealed her thinking on how the rules should be crafted.
Nallengara and the SEC's acting trading and markets director, John Ramsay, who both testified before the House panel on Thursday, declined to provide specific timetables to lawmakers.
But they stressed the agency is trying to get things done.
"The staff...is working as if their rulemaking is the first one to go," Nallengara said. "The staff is working very hard to get these in place."