01 Sep SEC: More Help for Small Business Capital Formation Please

There is a section of the US Securities and Exchange Commission’s website titled, “Completed Initiatives of Interest to Small Business.” Since 2008 there are only three items listed. Two were mandated by Dodd-Frank and the other by the Jumpstart Our Business Startups (JOBS) Act of 2012. There were a number of major new helpful rule changes adopted by the SEC in 2007 and 2008. These followed the recommendations of a 2006 advisory committee. Most of these suggestions paralleled those of the annual SEC conference on small business. Then in 2011 the SEC launched a similar blue-ribbon advisory committee. Congress paid attention, and included some of the recommendations in the JOBS Act, and the SEC is now working to implement them as required by the legislation. But other than that it does not appear the Commission has taken up any of the 2011 committee’s suggestions, which also closely tracked the annual conference’s list.

Much of the SEC’s attention in recent years has been to combat fraud in the small and microcap markets, including deregistering many non-reporting companies, issuing various investor warnings, and its decision in 2011 to require companies completing most reverse mergers to trade in the over-the-counter markets before uplisting to a national stock exchange. I supported some but not all of these initiatives. There was, thankfully, a fairly recent administrative decision which made it tougher for electronic trading of smaller companies through the Depository Trust Company (DTC) to be stopped without notice and hearings (though just 2 weeks ago proposed rules to implement even that change were withdrawn by DTC without explanation). But unfortunately, other than that it is not clear what initiatives the SEC has undertaken on its own initiative since 2008 to improve opportunities for capital formation in smaller companies.

My suggestion: take a look at the bills passed before this summer by the House Financial Services Committee (many are calling this collection of bills the “JOBS Act 2.0”). Or just pick up the list of recommendations from the 2011 advisory committee or last year’s government-business conference. Many of these suggestions help small companies with minimal if any reduction in investor protection. It would be great to see my hard-working friends on the Staff of the SEC and the current Commissioners come together to make positive changes to help smaller companies, the true engine of the US economy, grow and achieve their business plans without the need for Congressional action, which now appears likely after the November elections.