The North American Securities Administrators Association (NASAA) is distributing a letter sent to the Biden Administration asking the new President to “pause on the further expansion and deregulation of the private offering marketplace.” This includes exemptions created by the JOBS Act – a bill signed into law during the Obama administration that legalized online capital formation or investment crowdfunding.
NASAA is a lobbying group that advocates on behalf of state and provincial securities regulators. Its members include appointed and elected officials in all 50 states as well as Canada and Mexico. NASAA has consistently advocated against investment crowdfunding but its statements typically do not focus on any of the benefits of online capital formation such as job creation and access to capital for smaller firms and underserved markets.
The letter is signed by NASAA as well as a litany of others interested in curtailing the growth of the private securities sector. NASAA urges the Biden Administration “not to weaken securities laws” while hammering the Securities and Exchange Commission (SEC) and Congress – two entities that “acted repeatedly over the past two decades to expand the number and scope of securities registration exemptions.”
The letter tells President Biden to:
“pause to study the impact of the expansion of private offering exemptions on the protection of investors, the state of our public markets, and the health of the overall economy. In developing its policy response, your Administration should commit, from Day 1, to giving at least equal consideration and attention to the expectations and needs of retail investors who, because of the expansion of private markets, are increasingly directly exposed to the risks of these markets.”
NASAA and the co-signors believe that “mom and pop” investors have little interest in private deals enabled by the JOBS Act.
The JOBS Act is a unique act of legislation that came about during the aftermath of the great recession. The bill received broad bipartisan support that was in recognition of the dire need to enabling access to capital to smaller firms – the same firms that are frequently ignored by banks and struggle to acquire needed growth capital. It is well documented that smaller firms generate around 50% of all jobs in the US.
The letter states:
“… as you undertake critically important efforts to stimulate the economy, we urge you to actively oppose the inclusion of any provisions that would expand or codify any proposed or adopted securities registration exemptions, and instead focus on restoring market information and efficiency.”
The letter advocates on behalf of reinvigorating public markets, a sector of finance that has moved away from providing access to capital to smaller firms largely due to the excessive cost as well as the expense related to increasing, and ongoing, reporting demands.
Signatories to the letter include the North American Securities Administrators Association, Consumer Federation of America, Healthy Markets Association, Better Markets, Public Investors Advocate Bar Association, Public Citizen, Americans for Financial Reform, Ceres Accelerator for Sustainable Capital Markets, and the Institute for Agriculture and Trade Policy.
The academics who signed the letter in an individual capacity include Renee M. Jones, Associate Dean for Academic Affairs, Professor of Law, and Thomas F. Carney Scholar, Boston College Law School; Elisabeth de Fontenay, Professor of Law, Duke University School of Law; James D. Cox, Brainerd Currie Professor of Law, Duke University School of Law; Urska Velikonja, Professor of Law, Georgetown University Law Center; Erik Gerding, Professor of Law, University of Colorado Law School, and Patricia A. McCoy, Professor of Law, Boston College Law School.
