SEC Advisory Committee Recommends Changes to Enhance Capital Formation Measures
On February 1, the SEC’s Advisory Committee on Small and Emerging Companies held a meeting to discuss potential recommendations related to new capital formation measures and to discuss the IPO Task Force report titled “Rebuilding the IPO On-Ramp,” which was submitted to the Treasury Department in October 2011.
The Advisory Committee considered recommendations related to registration and reporting rules under the Securities Exchange Act of 1934 that would enhance the process for companies seeking to go public. The Committee recommended: subjecting a company to registration and reporting requirements after it had a class of securities held by 1,000 or more owners; and allowing a company that is currently subject to reporting requirements to cease public reporting after the number of owners of the class of securities that subjects the company to reporting is less than 500. The Committee recommended the SEC immediately implement the changes through interim rulemakings and to conduct a study on the new threshold limits.
The Committee also considered a number of other recommendations regarding changes to Regulation A that would substitute the rule with a new exemption for offerings that provides for public offerings of up to $50 million annually. The Committee suggested the SEC “appropriately calibrate” the requirements of the new exemption by taking into account the size and resources of companies that would utilize the exemption. The Committee also recommended that the SEC “review and consider” proposals that would permit crowdfunding as a way for small and start-up companies to raise capital. The Committee stated that there was not enough consensus on the issue and that more consideration must be given to various crowdfunding proposals, such as H.R. 2940, offered by Rep. Kevin McCarthy (R-Calif.), which would remove the prohibition on general solicitation for certain securities offerings. Committee co-chair, Stephen Graham said the whole area of general solicitation is “fraught with danger” and that any subsequent proposals to be considered must protect against fraudulent behavior.
The Committee also discussed the IPO Task Force report and outlined the benefits of how IPOs support job creation and the reasons for why such activity has decreased over the years. The task force recommended improved access to information for investors and a one-time IPO tax incentive to buy and hold IPO shares. The task force also recommended lowering the capital gains rate for buyers of newly issued stock if those buyers hold it for two years.
For more information on the meeting, please click here.
On February 1, the SEC’s Advisory Committee on Small and Emerging Companies held a meeting to discuss potential recommendations related to new capital formation measures and to discuss the IPO Task Force report titled “Rebuilding the IPO On-Ramp,” which was submitted to the Treasury Department in October 2011.
The Advisory Committee considered recommendations related to registration and reporting rules under the Securities Exchange Act of 1934 that would enhance the process for companies seeking to go public. The Committee recommended: subjecting a company to registration and reporting requirements after it had a class of securities held by 1,000 or more owners; and allowing a company that is currently subject to reporting requirements to cease public reporting after the number of owners of the class of securities that subjects the company to reporting is less than 500. The Committee recommended the SEC immediately implement the changes through interim rulemakings and to conduct a study on the new threshold limits.
The Committee also considered a number of other recommendations regarding changes to Regulation A that would substitute the rule with a new exemption for offerings that provides for public offerings of up to $50 million annually. The Committee suggested the SEC “appropriately calibrate” the requirements of the new exemption by taking into account the size and resources of companies that would utilize the exemption. The Committee also recommended that the SEC “review and consider” proposals that would permit crowdfunding as a way for small and start-up companies to raise capital. The Committee stated that there was not enough consensus on the issue and that more consideration must be given to various crowdfunding proposals, such as H.R. 2940, offered by Rep. Kevin McCarthy (R-Calif.), which would remove the prohibition on general solicitation for certain securities offerings. Committee co-chair, Stephen Graham said the whole area of general solicitation is “fraught with danger” and that any subsequent proposals to be considered must protect against fraudulent behavior.
The Committee also discussed the IPO Task Force report and outlined the benefits of how IPOs support job creation and the reasons for why such activity has decreased over the years. The task force recommended improved access to information for investors and a one-time IPO tax incentive to buy and hold IPO shares. The task force also recommended lowering the capital gains rate for buyers of newly issued stock if those buyers hold it for two years.
For more information on the meeting, please click here.