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Caveat Emptor

Sigma Investment Counselors

September 11, 2012

Apparently the SEC is shifting to a “Let the Buyer Beware” approach to regulation.

On August 29, the SEC proposed a rule permitting private issuers to promote offerings to the general investing public for the first time (thank you Dodd-Frank). While the new regulations may ease capital-raising for many legitimate companies, they could also subject unwary and vulnerable investors to deals that offer limited financial disclosure and even less liquidity.

Until now, companies could generally market private securities only to wealthy investors, who, presumably were either more sophisticated and/or had access to professional advisors. The new rule, directed by Congress, essentially allows private securities to be marketed anywhere, by any means.

While it is impossible to predict how this will play out, giving promoters a much wider net increases the potential for abuse.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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