In a new report, the SEC highlighted activities and recommendations from an August 2019 forum organized by the Office of the Advocate for Small Business Capital Formation.

Participants within the "small [and] emerging businesses" category recommended:

  • revising the "accredited investor" definition to (i) include a sophistication test as a way to qualify, (ii) grant tribal governments parity with state governments, and (iii) update dollar amounts to scale for geography;
  • improving "clarity and education" by (i) being consistent in terminology in exempt offering rules, (ii) utilizing bright-line rules and examples, and (iii) providing information regarding what is a security and what is not;
  • adopting rules which clearly define categories of finders and what triggers classification as a broker;
  • providing non-accredited investors with access to alternative investment vehicles; and
  • updating the Regulation Crowdfunding rules to "allow accredited investors to make unlimited investments and raise the maximum limit on the overall deal."

Participants within the "mature and later-stage private companies" category recommended:

  • granting federal preemption for all resales of the securities sold in a Regulation A Tier 2 offering;
  • providing an unconditional exemption from Exchange Act Section 12(g) for all Regulation A Tier 2 reporting companies;
  • codifying the relief provided in the M&A Brokers No-Action Letter in order to harmonize state and federal law, as well as provide guidance on the circumstances where finders must be regulated;
  • providing exemptions from the Investment Company Act for diversified funds selling securities under Regulation A, Regulation Crowdfunding, and Regulation D; and
  • exempting investments of less than $25,000 for up to 35 non-accredited investors.

Participants within the "small reporting companies" category recommended:

  • reforming the proxy process to (i) provide oversight of proxy advisory firms under Rule 14a-2(b), (ii) highlight the importance of investment advisers' fiduciary duties to their clients, and (iii) change the submission and resubmission thresholds for shareholder proposals under Rule 14a-8;
  • enhancing disclosure requirements regarding significant holdings of publicly-traded equity securities by (i) requiring timely disclosure of significant short positions, (ii) extending Exchange Act Section 13(f) to OTC securities, (iii) restricting insiders and affiliates from holding shares in objecting beneficial owner accounts, and (iv) mandating disclosure of insider and affiliate transactions in securities of non-SEC reporting companies;
  • harmonizing the definitions of "non-accelerated filers" and "smaller reporting companies";
  • increasing disclosure requirements from paid promoters and transfer agents; and
  • providing guidance on best practices in connection with OTC securities clearing and depositing.

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