SEC Chair Jay Clayton highlighted the agency's commitment to ensuring that the public securities markets work in a fair, orderly and efficient manner and to fostering small business capital formation.
In remarks at Central Michigan University, Mr. Clayton described the importance of protecting "Main Street" investors and small businesses, saying that investors' contributions to capital markets, and the long-term commitment of capital by businesses, have given the U.S. economy a "competitive advantage." Mr. Clayton said that the SEC protects these investors by ensuring public securities markets are "fair, orderly and efficient." He noted that the SEC works to foster small business formation and growth by creating a "handful of geographically small and highly functioning 'networks'." These networks, according to Mr. Clayton, help to create a more "entrepreneurial ecosystem" that reduces the costs of access to information and contracting, and ensures the verification of information, the protection of rights and the pursuit of remedies.
Commentary
When it comes to capital formation and assisting small businesses, the various U.S. regulators are neither (i) on the same page nor (ii) consistent in between their actions and their deeds. Some of this is a matter of different regulators expressing their individual preferences, and some of it is a matter of individual regulators taking wholly inconsistent positions; e.g., advocating for both assisting small businesses with capital formation and for imposing greater regulation on small businesses that seek to raise capital.
Notably, the House Financial Services Subcommittee just held a hearing on, among other things, entrepreneurship and capital markets. At that hearing, the current head of NASAA criticized the private placement markets saying more companies should be forced to go public. Clearly, the SEC and the state securities regulators are not on the same page.
If regulators really want to facilitate small business capital formation, they need to consider how they can reduce regulation and costs. They also need to concede that some reduction in regulation means accepting some increase in risks. You cannot both maximize regulation and maximize growth.
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