Sam Guzik, a securities attorney and Crowdfund Insider Senior Contributor, has shared his perspective on Congressman Patrick McHenry’s letter to SEC Chair Jay Clayton. Guzik welcomes, McHenry’s requests but believes more needs to be done;
“I applaud the unrelenting and tireless efforts of Congressman McHenry to improve access to capital by startups and early stage businesses, especially those located outside the handful of U.S. metropolitan areas which have historically the most disadvantage,” said Guzik. “His latest effort, a letter to the newly appointed SEC Chair Clayton with a laundry list of action items for the new Commission, on the eve of the one year anniversary of equity crowdfunding, is both well timed and well taken.”
Guzik believes the some of the changes that need to take place will necessitate legislative action;
“… this is only one prong by Congressman McHenry and others of a broader, ongoing effort in Washington to improve and expand JOBS Act provisions, both in Congress and at the SEC,” shared Guzik. “Some of the points raised in the McHenry letter, such as allowing SPV’s, increasing the offering limit from $1.07 million, are already the subject of pending Congressional bills sponsored and/or supported by Congressman McHenry – and, in my opinion, can only be addressed through legislation – and not simply SEC rulemaking.”
The current situation where Reg CF issuers may unnecessarily become “reporting companies” – businesses that must file ongoing and complicated legal documents with the SEC just does not make sense and is something the SEC should address immediately;
“One other item in the McHenry letter, excluding Reg CF securities from determining when a company becomes a fully reporting company, can clearly be implemented by SEC rulemaking alone – and is sorely needed for a number of reasons, as I explained in an article in Crowdfund Insider last week. The result, I believe, would be to both improve the quality of companies utilizing Regulation CF and decrease the number of offerings of what is the most prevalent type of Reg CF security to date, “SAFE’s.” As I discussed in last week’s article, the offering of SAFE’s to unsophisticated investors has recently come under intense regulatory scrutiny at the Commission – and for good reason: they are too damn complicated – posing a significant risk for the average investor, who is not likely to fully understand this security and its peculiar risks, if at all.”
All industry participants acknowledge that improvements can and should be made to the newest securities exemption. Now it is just a question as to whether, or not, the Commission acts. Or just treads water.