Of course we are all happy that the stock market has been hitting new highs these past weeks. It has been a long road back from 2009 when the market had less than half its current value. The M&A market is awake, lots of large financings taking place, and even though the economy is not yet totally fab, people are feeling more optimistic.

But in the world of very small public companies, not so much. Sure, we’re getting more financings done than before, which is great. But here’s the problem. The PIPE market, which helped fuel tons of financings for microcaps in the late 2000s, is tremendously challenged. Many funds simply shut down during the downturn. Others are under investigation. Many of the others, still around, have made clear they would really rather invest only where they have immediate liquidity in their investment.

Companies with more than $75 million in “public float” can use “short form” registration on Form S-3. This allows them to take some shares, make them tradable, and let them sit on the shelf until an investor comes along. This form can be effective in just a few weeks and is simple. Then when an investor writes a check he gets shares he can trade right away. The SEC, in 2007, proposed allowing all full SEC reporting companies to use short form registration, but in their final rule on the subject summarily reversed this and took it away for “smaller reporting companies” (SRCs) with less than $75 million in public float.

The SRCs, if current in their filings, should also have this ability. By the way, a company that’s an SRC but trading on a major exchange can also use S-3. So many tiny companies are struggling to raise money at a time when they should not have to. If the SEC could allow SRCs to be S-3 eligible, they could do so with limitations. Only once a year. Only a certain percentage of company stock. The benefit would be huge and very little risk of reducing investor protection.