Will the SEC follow the advice?

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Today the Securities and stock market (SECOND) Office of the Lawyer for Small Business Capital Formation reported to Congress on the 40th Annual SEC Small Business Forum.

The report, integrated below, recaps several meetings held over the past year (May) that shared the frontline experiences of individuals in the capital formation industry, including underserved segments.

The Advocate’s Office was created in recognition of the fact that too often small businesses are ignored while large corporations gain most of the political attention.

In the report, several policy recommendations are presented to improve access to capital. Many of these suggestions are not new, but the regulatory environment tends to change slowly even though many of these do not require legislation. The list includes the following initiatives:

  • Ensure that the rules for raising capital provide fair access to capital for founders and under-represented investors.
  • Establish a micro-offer exemption with minimum disclosure requirements.
  • Revise crowdfunding regulations to remove the GAAP financial statement requirement for companies seeking to raise a small amount.
  • Provide state pre-emption for secondary transactions for shares issued under Regulation A and Crowdfunding regulation.
  • Clarify the status of digital assets to make it clear whether it is security.
  • Broaden the definition of qualified investor to include other measures of sophistication, such as specialized industry knowledge or professional designations.
  • Expand retail investors’ access to funds that invest in private offerings and support under-represented entrepreneurs.
  • Expand the definition of accredited investor to include an investor certification course or test whose program has been approved by FINRA or the SEC.
  • Create more and better wealth creation opportunities for retail investors to build and support resilient and equitable local economies.
  • Adopt rules and coordinate with states to allow community investment funds with sufficient regulatory oversight and flexibility to pursue community investments.
  • Increase the number of investors authorized in 3 (c) (1) funds beyond 99 investors.
  • Increase the $ 10 million cap for qualified 3 (c) (1) venture capital funds to allow more investors in smaller funds.
  • Support under-represented and emerging fund managers and their investors with targeted resources, in collaboration with other federal agencies.
  • Expand qualifying venture capital fund investments to include fund of funds investments in another venture capital fund, secondary securities acquired from founders and early stage investors, and follow-on investments in core companies. emerging growth.
  • Improve research coverage of small state-owned enterprises in light of the challenges of Global Research Settlement, FINRA 2241, MiFID II and other broker obligations.
  • Increase the public float thresholds in the definitions of “small company reporting” and “fast-filing”.
  • Increase the transparency of short selling and dark pool activity.
  • Facilitate the creation of venture capital markets that provide investors with a transparent and regulated environment for trading in shares of small companies.
  • As part of any new environmental, social or governance (ESG) disclosure requirement, provide for exemptions or modulated requirements for small and medium-sized businesses.

The document notes that “the Commission will consider the recommendations of the Forum alongside other public comments for relevant policy initiatives”. Some of these items are currently on the SEC’s regulatory agenda. The goal of broadening the definition of an accredited investor to allow sophisticated people to participate in more private equity offerings has been discussed for years and is one of the SEC’s topics she would like to address. – but will the Commission take the definition in a better direction?

Each of the above recommendations is followed by a response from the Commission – many of which indicate that the SEC will “continue to review” the request and the comments received. Over the next few months, we’ll know better whether the SEC is inclined to improve access to capital or, perhaps, make it more difficult for small businesses to raise the growth capital they need to be successful.


2021_OASB_Annual_Forum_Report_FINAL_508


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