A quartet of high-profile investor advocacy groups have stepped up their efforts to protest rulemaking by the Securities and Exchange Commission that would allow the advertising of private offerings, with one dropping a thinly-veiled threat that legal action might be among the weapons they wield.

In August, the SEC approved a proposed rule to eliminate the current prohibition against general solicitation and advertising for private securities offerings. The proposed exemptions, mandated by the JOBS Act, focus on amendments to Rule 506 of Regulation D. The Commission's  4-1 vote began a comment period, which has since concluded, rather than the immediate implementation an interim rule would have provided.

During a press conference on Tuesday afternoon, Arkansas State Securities Commissioner Heath Abshure, president of the North American Securities Administrators Association, Cristina Martin Firvida, director of financial Security and consumer affairs for AARP, Heather Slavkin Corzo, senior policy adviser for the AFL-CIO, and Barbara Roper, director of investor protection for the Consumer Federation of America, called upon the SEC to withdraw its proposal and craft a new rule that “promotes capital formation without sacrificing investor protection.”

“The SEC's proposed rule would open the door for private equity and hedge funds, typically only offered to the most sophisticated investors, to advertise to the general public without putting in place basic disclosure requirements that would allow investors to make informed decisions about the products being offered,” Corzo said.

Among the investor protections the groups want the SEC to implement:

Establishing specific steps that an issuer could take to verify that an investor is accredited and ensure that those who invest in private offerings have the financial sophistication to assess the risks

Requiring the filing of a Form D in advance of any public advertising and place reasonable restrictions on the advertisements.

Finalizing the “bad actor” disqualifications in Rule 506, as mandated by the two-year-old Dodd-Frank Act.

Addressing problems that arise as a result of hedge fund and private equity fund advertising based on “unsubstantiated, inconsistently calculated performance claims” in the absence of a standard for reporting performance.

“The Commission's failure to consider these alternative regulatory approaches is a clear violation of both the standard imposed by the U.S. Court of Appeals for the District of Columbia Circuit in its decision on the proxy access case and the Commission's own recently released guidelines for economic analysis,” Roper wrote in an Oct. 3 letter to the SEC that was echoed in her comments on Wednesday. “This suggests that a rule adopted pursuant to this proposing release would be highly vulnerable to legal challenge.”