SEC Commissioners Peirce, Roisman, Criticize Updated Regulatory Agenda. Exempt Securities at Top of the List (Again)

SEC Commissioners Hester Peirce and Elad Roisman have once again voiced their concern regarding SEC Chairman Gary Gensler’s regulator agenda – a list that was recently updated.

Last summer, Gensler published his regulatory agenda and now an update is available. When Gensler posted his initial goals, Commissioners Peirce and Roisman issued a statement criticizing the list of rules and regulations the Gensler Commission was seeking to address. Today, the two Commissioners are once again expressing their disappointment in Gensler’s agenda.

The two Commissioners have posted a statement labeled “Falling Further Back” calling Gensler’s agenda “ambitious in scope” but failing “to include any items intended to facilitate capital formation.”

“Instead, the agenda is brimming with plans to redo recently completed rules, add new regulatory obligations, and constrain investor choice,” chastised the two Commissioners.

At the very top of Gensler’s list (once again) are exempt securities offerings as well as a change to the definition of an accredited investor – a move that would most certainly aspire to limit access further to private securities.

To quote the statement but the Commissioners:

“One example is the proposal to alter the thresholds at which an issuer is required to register a class of securities with the Commission. In 2012, Congress enacted the bipartisan Jumpstart Our Business Startups (a.k.a., the JOBS Act), which, among other provisions aimed at improving capital access for newer companies, specifically raised these thresholds in order to allow companies greater flexibility in deciding whether and when to go public. This provision has been especially important for pre-IPO companies that use equity as part of their employee compensation arrangements and for startups in industries with high initial capital requirements. Lowering these thresholds may both contradict the express will of Congress and potentially undermine our mission to facilitate capital formation. A likely unintended consequence of lowering thresholds will be to limit the opportunity of employees, smaller investors, and other non-institutional investors to invest in promising businesses.”

Gensler is also pursuing a change to Reg D filings. Reg D is the most successful vehicle for firms to raise private capital raising trillions of dollars and a vital part of economic growth in the country. Peirce and Roisman note that smaller firms have legitimate reasons to be discreet about early funding rounds and imposing greater disclosure could undermine the exemption’s effectiveness, especially during a time of “great uncertainty caused by COVID-19.”

Regarding investor protection, Gensler whiffs on digital assets. This is a sector of capital formation that is in dire need of greater clarity yet it doesn’t even garner a mention on a list that has dozens of regulatory ambitions.

Peirce and Roisman “urge the Commission to apply our scarce resources toward better uses than undermining recent precedent and depriving the markets and investors of these rules’ benefits.”

You may read the statement by the two Commissioners here.

The regulatory agenda is available here.

 



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