[ by C-I staff ] U.S. regulators are delaying rules that would allow hedge funds and other firms to solicit investors more broadly, a win for advocates who said hasty changes to solicitation rules could increase fraud. Congressional Republicans protested the delay, saying the SEC needs to finish rules to allow businesses and funds to find new investors.  The advertising rules stem from the JOBS Act, enacted in April, which mandates that the SEC repeal a ban on so-called general solicitation for private stock offerings. Investors in such deals will still have to be wealthy institutions or individuals.  Critics cite the existing ban as a barrier to small businesses seeking capital.  The agency missed the JOBS Act's July deadline to repeal the ban. SEC Chairman Mary Schapiro was planning to implement rules Wednesday, while concurrently putting the new rule out for public comment that could lead to subsequent changes.  Instead, she advised congressional lawmakers last Thursday that she plans to listen to comments on a proposed repeal of the solicitation ban before finalizing it. The repeal could be finalized as early as this fall, people familiar with the matter said. An SEC spokesman said implementing rules too hastily could expose the agency to court challenges.  A spokesman for the Managed Funds Association, a hedge-fund industry group, declined to comment. Investor advocates and state securities regulators this past week urged the SEC to take a slower approach to repealing the ban and to consider imposing restrictions on fund advertising, arguing that unfettered marketing of unregistered securities increases the potential for fraud.  They noted that the agency has missed other deadlines, such as in the 2010 Dodd-Frank financial overhaul.

"We encourage the commission to prioritize investor-protection rules ahead of the exemptions in the JOBS Act, and we urge you to resist the pressure to act hastily, especially where ill-considered changes could have such devastating impacts on investors." -- Jack Herstein, president of the NASAA.

Republicans Still Not Satisfied. Republican lawmakers insisted that Ms. Schapiro was effectively blocking a bill that had the backing of the Obama administration as well as a broad bipartisan congressional coalition.  They stressed the measure called on the SEC to do more to help firms raise capital.

"By kicking the can down the road, you are abdicating your responsibility to follow the law, failing to fulfill your sworn commitment to this subcommittee, and ignoring the will of Congress and the president." -- Rep. Patrick McHenry (R., N.C.) wrote in a letter to Ms. Schapiro.  Mr. McKenry chairs a House oversight subcommittee, and added that he plans to hold a hearing on the issue next month.

For further details, go to:  [WSJ, 8/20/12].