New securities offerings rule raises preemption questions

For the past 80 years or so, privately held U.S. companies and investment funds wanting to raise money by selling stock had two choices: conduct a public offering registered through the Securities and Exchange Commission, or avoid public filing burdens by selling only to accredited investors and a very limited number of unaccredited investors. "For issuers doing general solicitation and reliance on the new rule, the world is a more dangerous place," Keith Bishop of Allen Matkins said. "Lots of bad things can happen. The state can take enforcement action, and I expect we'll see states doing that, and I expect we'll see that in California. In a worst-case scenario, it's a criminal case."