SEC Acting Chair Michael Piwowar was present to open the meeting of the Advisory Committee on Small and Emerging Companies (ACSEC) last week. Piwowar, a Republican appointee, took the opportunity to highlight several policy issues.
While pointing to the importance of small business as the engines of economic growth, Piwowar mentioned several actions by the SEC in recent years including the JOBS Act and its various sections that improved the previously moribund Reg A and lifted the ban on general solicitation. In removing the ban on solicitation, the SEC allowed accredited crowdfunding to commence as issuers became able to advertise their offerings on the internet. Reg A+, as it is called, is a scaled disclosure environment where smaller companies may raise up to $50 million online or off.
Piwowar also updated the Committee on some data points regarding new and improved exemptions;
- As of January 31, 2017, there were 181 offerings filed using Regulation A+, 103 of which have been qualified by SEC staff for the issuer to begin making sales.
- 28 issuers have reported selling approximately $259 million in aggregate using Reg A+.
Piwowar also welcomed a new office to the Commission. At some point this year, the Office of the Small Business Capital Formation or small business advocate will open up to help the Commission generate rules and policies that help small business. The bill creating the new entity was signed into law during the waning days of the Obama administration. The legislation creates the Office and a Small Business Capital Formation Advisory Committee that should compliment ACSEC.
In the past, too frequently rules have been concocted with only the largest of corporations in mind – thus throwing SMEs under the proverbial bus. The concept of a small business proponent at the SEC was first pitched on the pages of Crowdfund Insider by Senior Contributor Sam Guzik. The new office should create an interesting balance with the Office of the Investor Advocate – an office that has, at times, missed its mark in channeling policy for investors.
Commissioner Piwowar’s remarks are published below
Opening Remarks of SEC Acting Chairman Michael Piwowar before the SEC Advisory Committee on Small and Emerging Companies
Acting Chairman Michael Piwowar
Feb. 15, 2017
Thank you, Steve and Sara, and good morning everyone. I have always enjoyed these Advisory Committee meetings and am pleased to be here in my new role as Acting Chairman. I’d like to extend a special welcome to the newest Committee member, Michele Schimpp, who is representing the Small Business Administration. We very much appreciate having the SBA’s insights and we look forward to working with Michele.
No matter where you are in the United States, small and emerging companies raise the tide for so many people to succeed. The freedom to innovate and grow has always been fundamental to American success, and we as regulators must constantly assess how our work meets the needs of today’s innovators.
That’s why this Committee is so valuable. Committee recommendations put forward in early 2012 about lifting the ban on general solicitation, expanding Regulation A, and raising the Section 12(g) registration thresholds helped lead to enactment of the JOBS Act.
In 2015, the Committee recommended that the Commission modernize Rule 147 to help facilitate intrastate offerings, and I am pleased the Commission did just that. As of last month, the amended Rule 504 is now in effect and the new Rule 147A will go into effect in April, providing more options for companies looking to raise capital.
The Committee also recommended raising the financial thresholds in the “smaller reporting company” definition to expand the number of smaller companies that qualify for scaled disclosures. In line with that recommendation, the Commission proposed amendments to raise those thresholds last year.
The list of your valuable recommendations and discussion topics goes on, and it seems Congress was so impressed with your efforts that in December it codified the Committee into law! The bipartisan Small Business Advocate Act of 2016 put into the Exchange Act two new provisions. The first establishes the Office of the Advocate for Small Business Capital Formation headed by a new Advocate for Small Business Capital Formation. The second establishes a Small Business Capital Formation Advisory Committee. These are parallel to provisions in the Dodd-Frank Act that established the Office of the Investor Advocate and the Investor Advisory Committee.
I’m proud to say we are already taking steps, including working with our Appropriations Committees, to stand up the new Office of the Advocate for Small Business Capital Formation. I anticipate that we will begin the search for the new Advocate for Small Business Capital Formation in the near future. The law requires that the new Advocate be someone who is not a current SEC employee, so I hope you will encourage good candidates you may know to apply.
In the meantime, we want you to continue down this exciting path. The charter of this Advisory Committee expires in September, and I know that between now and then you will continue your efforts to bring forward ideas for ways to facilitate capital formation for small and emerging companies.
Your agenda today – secondary market liquidity, finders, and why private companies are not going public – reflect important topics facing small and emerging companies.
Secondary market liquidity for shares held by investors in Regulation A securities is becoming an increasingly important issue. Between June 19, 2015 – the date when amendments to Regulation A took effect – and January 31, 2017, there were 181 offerings filed using Regulation A, 103 of which have been qualified by SEC staff for the issuer to begin making sales. Twenty-eight issuers have reported selling approximately $259 million in the aggregate. I look forward to any recommendations on ways to remove frictions that may stand in the way of investors being able to readily exit their investment.
I also am pleased you are discussing why more companies are choosing not to go the route of an IPO. The menu of capital-raising choices available today for small businesses presents more flexibility and more alternatives than ever before. But there is always more we can do to provide robust public capital markets. I look forward to your input.
Thank you again for your service on this committee and your continued commitment to facilitating capital raising by small businesses.