By Alexandra Alper
WASHINGTON, Oct 5 (Reuters) - An influential U.S. lawmaker has called on the Securities and Exchange Commission to scrap and repropose a rule that would lift a longstanding ban on advertising for private stock offerings because it does not do enough to protect investors.
Democratic Senator Carl Levin said in a comment letter to the SEC dated Friday the rule needed to do more to shield investors from deceptive advertising, inappropriate or unfair sales tactics, and investment fraud.
The rule, proposed by the SEC in August and mandated by the JOBS Act, was signed into law by President Barack Obama in April. It scales back a number of securities regulations to help smaller companies raise capital and create jobs.
Consumer advocates have said the law leaves investors too vulnerable.
The rule allows companies to advertise to investors as long as they take "reasonable steps" to verify that purchasers are "accredited investors." Accredited investors include those with net worth of at least $1 million or an annual income of at least $200,000.
SEC Chairman Mary Schapiro voted in favor of the rule but said during the SEC's August meeting, "I recognize that there are very real concerns about the potential impact of lifting the ban on general solicitation."
Levin said the rule failed to specify the "reasonable steps" necessary for issuers to ensure t hat investors are accredited.
He said issuers should be required, at a minimum, to provide documentation of the steps they took to ensure buyers were accredited before selling them securities, as is required in banking and other industries.
"The proposed rule inexplicably ignores such common sense practices and fails to require even minimal documentation either from the issuer or the investor," he said.
Comment period for the rule is closed. (Reporting By Alexandra Alper)