A federal regulatory meeting Wednesday is expected to shed light on how aggressively startups can solicit investments and thus reach beyond venture capitalists and other established investors.

At the meeting, Security and Exchange Commission Chairman Mary Schapiro is expected to reveal how the SEC proposes to rescind longstanding rules that bar startups from advertising that they are seeking investments. She is also expected to unveil new proposed rules outlining how aggressive startups can be when engaging in such “general solicitation,” which is barred under the SEC’s “Regulation D” rules but allowed under the JOBS Act signed into law in April. The proposals would then be subject to a public comment period expected to last one to three months.

"It’s expected to have enormous repercussions in Silicon Valley – it rewrites the venture capital rules."The investment community is particularly keen to see the proposed rules because they will mark the first major chunk of the JOBS Act to be interpreted by the SEC. The rules will also undermine a key advantage of Silicon Valley venture capitalists and “super angel” investors: Dealflow. Since startups haven’t previously been able to broadcast that they are raising money, they must approach potential investors directly, and they tend to reach out to the biggest names. This gives prominent, established investors a big edge: Not only do they get first dibs on many deals, but they are also in a position to pass deals that don't fit their investment profile on to favored second-tier investors; earning gratitude and solidifying their power. When startups can widely advertise that they are looking to raise money, potential investors will be able to screen a large number of startups at once and open unsolicited deal talks.

“It’s expected to have enormous repercussions here in Silicon Valley,” says Robert Bartlett, a law professor at the University of California, Berkeley who has followed the issue closely. “It really rewrites the rules for private placement in the venture capital context.”

Allowing tech startups to widely announce their fundraising efforts should open up the funding market to distant firms well outside the exclusive circles of Sand Hill Road venture capital and San Francisco Bay Area “super angel” investors. It could also challenge a cottage industry of private placement agents, who connect entrepreneurs with more obscure angel investors and other potential investors, and should also empower startups outside Northern California, New York, Boston and other traditional money hubs to more easily to connect with investors. Finally, allowing fundraising advertising could help kindle investor networks in cash-starved industries beyond tech.

“I think this is most interesting for industries that are under-funded like consumer products and retail,” says Ryan Caldbeck, founder and CEO at CircleUp, a San Francisco startup that brokers consumer product investments and which should see its business surge under the new rules.

The new proposed SEC rules on general solicitation will only apply to companies seeking investments from accredited investors like traditional venture capital firms and wealthy angel investors; companies seeking so-called “crowdfunding” investments from non-accredited investors will have their own, generally looser advertising restrictions as laid out in the JOBS Act.

One big question about the forthcoming proposed rules is how strictly the SEC will regulate fundraising advertisements. A liberal set of regulations would provide for TV ads and billboards, while a conservative set could restrict startups to dowdy “tombstone”-style ads, like the unadorned text announcements for initial public offerings and other deals that often appear in the Wall Street Journal.

Another big question is how quickly the SEC will propose to lift the ban on general solicitation and implement its new rules. Schapiro has not stated how long the public comment period will last, though observers think a period of 30 to 90 days is most likely. After public comment comes implementation, a move that's been tricky for the SEC: Schapiro has taken time well beyond a 90-day deadline specified in the JOBS Act for lifting the ban (the deadline passed in July). She also backed awayfrom a plan to both unveil and implement the rules last Wednesday.

It’s not certain Schapiro will even put forward the full text of the proposed general solicitation rules Wednesday. CircleUp, which has a keen business interest in the new rules, strongly believes that they will be put forward, but other observers, like Sherwood Neiss of the Crowdfunding Professional Association, wonder if the SEC will simply discuss possibilities. “We’re watching it very, very closely,” Neiss says.

While they wait, SEC-watchers might open their history books to get a sense of what the commission hopes to avoid with its new rules. In 1992, the SEC exempted from the general solicitation ban companies raising less than $1 million (under Rule 504 of Regulation D). Seven years later, the general solicitation ban was reinstated for such companies because, Bartlett says, there was an explosion of pump-and-dump schemes, or at least a perception of such an explosion.

“We know there’s an incentive to do that again,” Bartlett says. “You can imagine a boiler room operation that sees this [new set of rules] and says, ‘Lets get on the phone and start pushing this microcap offering. Let’s just start cold calling....’ This is a tough issue.”