26 Nov SEC Small Business Conference Highlights

As I have for many years, last week I attended the SEC’s annual business conference on smaller companies in our nation’s capital. Always love my trips to DC- I especially liked when my breakfast waiter called me Senator (flattery gets you a good tip)! Now that the SEC knows that Congress looks at the list of recommendations we develop annually, the importance of this conference has certainly increased. Here are some highlights from the panels and speakers, apologizing in advance for the somewhat technical language (we’ll talk more about the recommendations when they are released in a few months):

• Rule 506(c) allowing general solicitation in private deals has not caught on much yet, representing less than 5% of all Regulation D offerings. But also not seeing any evidence of fraud in the space.
• 85% of the IPOs since the JOBS Act have been “emerging growth companies” taking advantage of the benefits of the Act including reduced disclosure and confidential IPO filing.
• Regulation A+ remains potentially exciting, enhancing what one commissioner called the “continuum” of capital raising options. It would be better if the SEC would allow state preemption of resales of Reg A+ stocks.
• The proposed changes to Rule 147 and Rule 504 under Regulation D could help companies do state-based fundraising easier with no SEC involvement.
• The states are working to strengthen the “coordinated review” program to streamline state blue sky review of offerings when required.
• Interesting statistic not boding well for crowdfunding: only 3% of the bottom 50% of folks based on net worth invest in stocks and even then usually less than $5000. But almost 30% of the group right below accredited status invests, and an average of $20,000. This is where Regulation A+ could really make a difference for the “barely unaccredited” folks that can’t invest in most Regulation D deals.
• One panelist noted a “definitional issue” with crowdfunding. Which is which? We will address this again in a future post.

Happy Thanksgiving to all my fellow Americans!