Regulators and industry members discussed capital formation issues confronting small businesses and potential remedies. The SEC Government-Business Forum on Small Business Capital Formation included a panel on "How Capital Formation Options Are Working for Small Businesses," moderated by officials from the SEC Division of Corporation Finance, followed by "breakout groups" where participants formulated specific policy recommendations for SEC consideration.
SEC Chair Jay Clayton delivered remarks in which he affirmed the SEC's dedication to driving capital formation forward for small- and medium-sized businesses while maintaining important investor protections and fair, orderly and efficient markets. He recommitted to providing more diverse investment opportunities for retail investors, including the ability to invest in companies that are smaller or in an earlier stage of development. Chair Clayton emphasized the importance of a scaled disclosure regime in incentivizing growing businesses to participate in public capital markets, and said that the SEC is likely to consider expanding the definition of "smaller reporting company" to encompass even more businesses. He said that this initiative represents a small part of the larger SEC goal to create an environment that is conducive to capital formation.
SEC Commissioner Michael Piwowar highlighted the Division of Corporation Finance's efforts to provide for the confidential submission of draft registration statements, as well as its interpretive guidance on the pay ratio disclosure requirement. While noting that this disclosure requirement was "[n]ot [his] favorite legislative mandate," Commissioner Piwowar added that it will be effective in reducing costs pending Congressional repeal of the requirement, which he characterized as a "gift to politically connected special interests." He also framed the recently proposed amendments to simplify Regulation S-K disclosure requirements as part of an important effort to reduce regulatory burdens and improve the "fruitfulness" of the disclosure regime.
Commentary / Steven Lofchie
Both Chair Clayton and Commissioner Piwowar are sending a strong message that the SEC will be making a (welcome) return to its historical (and appropriate) focus on capital raising, corporate disclosures, investor protections and market structure. Politically motivated rulemakings will take a (hopefully) lower priority.
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