SEC considers raising exemption for small company deals

Proposal would boost threshold for registering offerings to $50 million

Dec 18, 2013 @ 2:26 pm

By Joyce Hanson

In a move that could raise the value of small-company private stock offerings under the JOBS Act by 10 times, the SEC on Wednesday voted to propose rules that would increase access to capital for small companies.

The Securities and Exchange Commission’s proposal would build on Regulation A, which exempts small offerings of up to $5 million from registration for 12 months. Under the updated exemption, small companies would be able to offer and sell as much as $50 million of securities in 12 months.

The SEC’s proposal will undergo a 60-day public comment period after it is published in the Federal Register. SEC’s proposal Once the SEC reviews the comments, it will determine whether to adopt the proposed rules.

No comments have as yet been received, according to SEC spokeswoman Christina D’Amico.

“This proposal is intended to help increase access of smaller companies to capital,” SEC chairman Mary Jo White said while attending a commission meeting in Washington on Wednesday. “In shaping this proposal, we sought to develop an effective, workable path to raising capital that, very importantly, also builds in necessary investor protections.”

The Reg A changes are required by the 2012 Jumpstart Our Business Act. When Congress passed the JOBS Act, lawmakers sought to expand the exemption from registration under the Securities Act of 1933 to make if more useful for small companies.

“It’s been a long time coming,” said Diahann Lassus, a certified financial planner who served on the White House Conference of Small Business under President Bill Clinton in 1995.

“A lot of our discussions were around how this could be done and cut the red tape. We all know small business really drives the growth in our economy,” said Ms. Lassus, who is president of Lassus Wherley & Associates.

At the same time, she applauded the SEC’s limitation of individual investors’ stake in such offerings to a maximum 10% of an individual’s annual income or net worth.

The Reg A proposal also would pre-empt these small-stock deals from state oversight. This change was sought both by small businesses and Republican lawmakers who support the change.

However, Andrea Seidt, president of the North American Securities Administrators Association and the Ohio securities commissioner, expressed displeasure with the SEC’s proposal, saying that NASAA in recent meetings with the SEC had urged members not to pre-empt the states.

“Congress, when considering the Regulation A+ provisions of the JOBS Act, concluded that states should not be pre-empted from review of offerings under the exemption, citing both the ‘high-risk’ nature of these offerings and the ‘essential’ function that state review plays in discouraging fraud,” Ms. Seidt said in a statement. “The commission’s proposed rule ignores Congress’ recent judgment and defies Congress’ clear intent.”

This is the third JOBS Act rule that the SEC has addressed. In addition to advancing Wednesday’s Reg A proposal, which received a unanimous 5-0 vote in favor of expansion, the SEC on Oct. 23 proposed rules to permit equity crowdfunding and July 10 lifted the ban on advertising hedge funds and private stock deals.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

On the red carpet with Tom James and others at Icons & Innovators

Reflections from Jeffrey Gundlach, Edmund Walters and more at the New York City event

Latest news & opinion

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print