Facebook Deal Prompts SEC Review

A 1960s rule requiring companies to disclose investors may be too outdated to handle companies like Facebook: Prompted by Goldman Sachs' recent $450 million investment in the social-networking site, the Securities and Exchange Commission is considering whether the rule, written in 1963, should be updated. An important dividing line between public and private, the old rule requires companies with over 500 investors to disclose certain financial information. But some are concerned it may be an obstacle to tech startups like Facebook and Twitter that need to raise lots of money but need to avoid going public before they're ready. (The rule was one reason for Google's decision to go public in 2004.) Facebook's deal with Goldman Sachs will create an investment vehicle that allows Goldman's richest shareholders to buy billions in Facebook equity, and the SEC will examine if that sort of strategy is designed mainly to skirt the law.