Amidst all the recent publicity surrounding government action in combating corporate wrong-doing (passage of the Sarbanes-Oxley Act and the prosecution of the top brass at Enron and other scandal-ridden companies) little attention has been focused on the dramatic reform of the securities regulations that was enacted in late 2005. This article attempts to survey and assess the merits of that reform.

The new regulations essentially provide that most companies no longer have to comply with basic restrictions on the securities offering process that have been the cornerstone of the securities regulatory regime since its inception in 1933. Chief among these restrictions are those pertaining to communications. Where communications have traditionally been widely curtailed during a new offering of securities to the public, the new reforms now allow most companies to communicate with the public relatively freely. Further, the heightened liability that attached to communications prior to the reforms will not apply to the new free communications. In the name of efficiency the restrictions and heightened liability have been eliminated. At the same time, I will argue, investors actually are being left more vulnerable to potential manipulations of corporate wrongdoers. In addition, the article will directly call into question whether the SEC has in fact exceeded its rule making authority by altering so dramatically the very character of the regulatory regime that the Securities Act sought to construct.