The Consumer Federation of America and the U.S. Chamber of Commerce Center for Capital Markets Competitiveness are clashing over investor protections in the Securities and Exchange Commission’s proposed rules for expanded Regulation A offerings.

The JOBS Act expanded the maximum amount companies could raise through stock sales from $5 million to $50 million without going through the costly process of SEC registration and ordered the regulators to write new rules for them.

The Chamber said the proposed Reg A rules provide an appropriate balance between investor protections and enhancements for issuers. The proposal offers anti-fraud measures and sufficient disclosures, the Chamber added.

But in a letter to the SEC at the end of the comment period Monday,
Consumer Federation of America Director of Investor Protection Barbara Roper accused the SEC of zapping investor protections in its proposed rules by barring state oversight of  offerings and opening the door for risky start-ups to lure unsophisticated investors.

She added the SEC’s proposed investment limit of 10 percent of an investor's income or net worth is too high to protect an investor against suffering unaffordable losses.

Roper said allowing Reg A offerings to be conducted without an SEC staff review should be scrapped because the examinations are critical to ensuring investors receive accurate and reliable information on which to base their investment decisions.

Roper said a sale of securities to average retail investors demands a level of regulatory protection that is simply not affordable for many companies seeking to raise small amounts of capital, and for those issuers that can afford the regulatory expense, a public offering that is only incrementally more expensive may simply be a more attractive option.

Roper, vice chair of the SEC’s Investor Advisory Committee, said a majority of Americans lack the necessary financial literacy to evaluate the condition of these inherently risky small start-up companies and determine whether the shares are fairly valued, yet the SEC’s proposed guidelines allow anyone to put money in them.