The Securities and Exchange Commission (SEC), Small Business Capital Formation Advisory Committee (SBCFAC), meets tomorrow (July 22, 2025) to discuss two key issues impacting capital formation.
First, the Committee will review Reg A and explore ways to improve the exemption.
Reg A or Reg A+ is an exemption that was effectively unused until the JOBS Act of 2012, which updated the rule and exempted state blue-sky review, providing a path for issuers to raise money online across the country. Sometimes called a “mini-IPO,” as offering documents must be qualified by the SEC prior to raising funds, and a security may be immediately traded on an exchange or marketplace, the exemption has gained popularity among smaller firms and real estate funds. At the same time, it needs an update, including improvements that can be achieved by increasing the funding cap, currently set at $75 million, and streamlining the qualification process to reduce the time needed for SEC approval. Some have criticized the slow process, claiming that a firm may go bankrupt before the offering is approved.
The SBCFAC is expected to discuss recommendations that will be sent to the Commission, aimed at improving the exemption.
The Finder issue has been debated for too many years. The SEC has been asleep at the wheel on this issue, as it should have resolved it decades ago. A Finder is someone who matches investors with a firm in need of growth capital. This would help underserved markets that lack extensive financial connections. Sounds simple enough, but it is not.
In late 2020, the SEC proposed a rule for Finders that exempted them from registering as a broker-dealer. Unfortunately, this did not come to pass, and the Biden Administration soon took over the helm of the Commission in 2021, crushing any hope that a Finder rule would become reality. During the Biden Administration, some described the SEC as the anti-capital formation commission as the leadership sought to pursue an extreme social agenda, including adding new obtuse rules (and costs) for businesses.
Today, it is a different story, as the Chairman of the Commission, Paul Atkins, firmly supports access to capital and opportunities for smaller investors. Expect Atkins to approve real Finder rules in the coming months.
The SBCFAC meeting will be live-streamed on the SEC website starting at 10AM ET. The agenda is shared below.
10:00 Call to Order; Introductory Remarks by Commissioners
10:30 Regulation A
As a follow-up to the Committee’s May 6, 2025 discussion, the Committee will continue exploring potential regulatory improvements to Regulation A and deliberate possible related recommendations.
11:00 Deep Dive on “Finders”
In 2020, the Commission proposed, but did not finalize, a limited, conditional exemption from broker registration for “finders” who assist companies with raising capital in private markets from accredited investors. In an ongoing effort to promote small business capital formation, including access to capital for founders who are building businesses outside of prominent entrepreneurial hubs or without robust capital-raising networks, the Committee will explore issues surrounding “finders.”
To facilitate discussion and deepen the Committee’s understanding of “finders” and provide historical regulatory context, members will hear from SEC staff in the Division of Trading and Markets who will provide an overview of the 2020 proposal and share certain feedback from commentors. Thereafter, the Committee will have the opportunity to learn more about the role of “finders” and possible regulatory solutions from industry practitioners. As part of this discussion, the Committee will explore potential principles, frameworks, conditions and safeguards that could permit certain “finders” to engage in limited capital-raising activities.
Speakers:
-
- Gary Ross, Ross Law Group
- Kelley Arena, Golden Hour Ventures
12:30 Lunch
1:45 Deep Dive on “Finders” (cont’d)
Committee members will continue discussion of “finders” by deliberating on potential principles and frameworks for “finder” activity.
3:30 Wrap-up and Adjournment
the SEC issued a proposed rule aimed at creating a limited, conditional exemption from broker registration requirements for finders assisting issuers with raising capital from accredited investors. However, the proposed rule did not become law. Hopefully, this issue will be revisited again and add a necessary exemption and additional clarity.