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In a report submitted to Congress, the SEC Office of the Advocate for Small Business Capital Formation (the "advocate") summarized policy recommendations made by participants at the SEC's 40th Annual Small Business Forum (see previous coverage here).
Among the recommendations, participants proposed:
- supporting equitable access to capital for underrepresented entrepreneurs;
- creating a micro-offering exemption within the exempt offering framework;
- removing the GAAP financial statement requirement from Regulation Crowdfunding for issuers seeking to raise a small amount;
- clarifying when a digital asset is a security;
- expanding the "accredited investor" definition under Regulation D ("Rules Governing the Limited Offer and Sale of Securities without Registration under the Securities Act of 1933");
- increasing the thresholds for ICA Section 3(c)(1) funds, including the number of investors allowed in and the $10 million cap for qualifying venture capital funds;
- increasing the thresholds in the "smaller reporting company" and "accelerated filer" definitions;
- increasing the transparency of short selling and dark pools; and
- providing exemptions from liability for environmental, social and governance (or "ESG") disclosures.
Commentary
The SEC should eliminate entirely the limit on the number of investors in ICA Section 3(c)(1) funds. The size limit simply serves to prevent smaller investors from having access to the Section 3(c)(7) funds that institutional investors typically invest in. The result is not to protect retail investors; it prevents them from piggybacking off the indirect protections that they would receive from being able to rely on the due diligence and other oversight provided by larger investors.
Primary Sources
- SEC Press Release: SEC Delivers Report to Congress with Recommendations from the 40th Annual Small Business Forum
- SEC Report: 40th Annual Small Business Forum
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