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55 Old Field Point Road Greenwich, CT

55 Old Field Point Road Greenwich, CT

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Published by Dan Primack

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Published by: Dan Primack on Mar 16, 2010
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03/17/2010

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55 Old Field Point RoadGreenwich, CT 06830
P
203.422.5000
F
203.422.2481www.nyppex.com
 
Laurence G. Allen
Managing MemberD 203.422.5101M 203.912.9265E lallen@nyppex.com
Securities offered through NYPPEX, LLC · Member FINRA, SIPC 1 of 3
December 28, 2009The Honorable Christopher J. Dodd448 Russell BuildingUnited States SenateWashington, DC 20510Re: “Restoring American Financial Stability Act of 2009” Private PlacementsDear Senator Dodd:I am writing on behalf of NYPPEX, LLC to respectfully request that you revise thediscussion draft of the bill entitled the “Restoring American Financial Stability Act of 2009” (the“Draft Bill”) to remove Section 928, which otherwise would eliminate the federal preemption of state regulation of securities offerings made pursuant to Regulation D of the Securities Act of 1933 (the “1933 Act”) (“Private Placements”).If the states are permitted to regulate Regulation D offerings of securities, it would have adeleterious affect on the capital formation process for small businesses, eliminate a useful capitalraising tool for issuers of all sizes, and harm employees of start-up companies who often arecompensated with unregistered securities that may only be practically sold pursuant toRegulation D.Overview of NYPPEXNYPPEX is a global securities firm that is registered with the U.S. Securities andExchange Commission and in all 50 states as a broker-dealer. Among other things, NYPPEXprovides access to private market liquidity for unregistered equity and debt related securities inprivate companies and receivables and interests in a variety of private funds.NYPPEX is recognized by the U.S. Internal Revenue Service through a private letterruling in 2004, as a Qualified Matching Service for private partnerships under IRS §1.7704. TheNYPPEX IPL Private Trading System™ matches buy and sell orders, anonymously and at lowtransaction cost. In 2009, private transactions advised by NYPPEX were valued at over $3billion.
 
 
Securities offered through NYPPEX, LLC · Member FINRA, SIPC 2 of 3
Background on the National Securities Markets Improvement Act of 1996As you know, when Congress adopted the National Securities Markets Improvement Actof 1996 (“NSMIA”)
1
it eliminated the duplicative system of federal and state regulation of securities offerings that had existed since the enactment of the 1933 Act by providing for federalpreemption of state registration and review of transactions involving,
inter alia,
securities offeredpursuant to Regulation D.In the
 Joint Explanatory Statement of the Committee on Conference
concerning NSMIA
 ,
 the House and Senate managers (the “Managers”), including yourself, noted that:“The development and growth of the nation's capital markets has prompted theCongress to examine the need for legislation modernizing and rationalizing ourscheme of securities regulation to promote investment, decrease the cost of capital, and encourage competition. The Managers have sought to achieve thesegoals while also advancing the historic commitment of the securities laws topromoting the protection of investors. In particular, the system of dual Federaland state securities regulation has resulted in a degree of duplicative andunnecessary regulation. Securities offerings and the brokers and dealers engagedin securities transactions are all currently subject to a dual system of regulationthat, in many instances, is redundant, costly, and ineffective.. . .“The Managers have sought to eliminate duplicative and unnecessary regulatoryburdens while preserving important investor protections by reallocatingresponsibility over the regulation of the nation's securities markets in a morelogical fashion between the Federal government and the states.”
2
 Discussion of Draft Section 928If the Draft Bill is enacted with Section 928 intact, Congress will make the capital raisingprocess even more difficult for companies of all sizes who are in need of funds following therecent financial crisis. Specifically, if states are no longer preempted from regulating theRegulation D private placements, a company that seeks to raise capital pursuant to Regulation Dwill need to obtain pre-review by and pre-approval from each individual state in which potentialinvestors reside who may be interested in investing in the company’s securities. Unlike today’snotice filing process for Regulation D offerings, this could mean a substantive review state-by- 
1
Pub. L. 104-290, 110 Stat. 3416 (Oct. 11, 1996).
2
H.R. R
EP
. N
O
. 104-864 (1996) (Conf. Rep.), available athttp://thomas.loc.gov/cgi-bin/cpquery/?&sid=cp104xbGcm&refer=&r_n=hr864.104&db_id=104&item=&sel=TOC_120433&. 

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