The Securities and Exchange Commission has published its Regulatory Agenda for the coming year, marking a significant shift from the previous administration.
During the Biden presidency, former SEC Chairman Gary Gensler placed much of the focus on political ambitions like ESG, such as climate disclosure. Investor protection was another big topic, but unfortunately, many of these issues forced topics like innovation, access to capital, and opportunity to take a back seat.
With the advent of current SEC Chairman Paul Atkins, the Commission is adhering to its mission while supporting innovation that can benefit everyone. For example, previously, digital assets fell under the regulation-by-enforcement model, but today the Commission is actually doing its job and pursuing new rules.
The entire SEC Regulatory Agenda is available here, with a few items of interest to the online capital formation sector and the digital asset realm.
Rule 144 may be heading for an update. According to the SEC, the “Division is considering recommending that the Commission repropose amendments to Rule 144, a non-exclusive safe harbor that permits the public resale of restricted or control securities if the conditions of the rule are met, to increase instances in which the safe harbor would be available.”
This may mean that certain private securities may become easier to sell. Perhaps by shortening mandated lock-up rules. This could impact Reg D issuances and also Reg CF offerings.
Crypto Assets and the SEC’s regulatory treatment have been a focus since the beginning of the Trump administration. The SEC is doing its part to clarify the treatment of digital assets instead of hoping them away. The agenda item states: “The Division is considering recommending that the Commission propose rules relating to the offer and sale of crypto assets, potentially to include certain exemptions and safe harbors, to help clarify the regulatory framework for crypto assets and provide greater certainty to the market.”
The treatment of “Emerging Growth Companies” was a big win for the JOBS Act, which also legalized online capital formation. The SEC is seeking to enhance Emerging Growth company accommodations while simplifying reporting. The SEC may recommend rule amendments to “expand accommodations that are available for Emerging Growth Companies (defined generally to include new issuers with total annual gross revenues of less than $1.235 billion) and to rationalize filer statuses to simplify the categorization of registrants and reduce their compliance burdens. “
Updating the Exempt Offering Pathways is another subject that could improve online capital formation. The move to lessen the regulatory burden could help Reg D, Reg A+, and Reg CF issuers and the platforms that support them. While details are thin, things like updating funding limits and improving access for investors could end up here.
Recission of climate-related disclosure rules is a big one for the SEC. The previous Commission sought to burden public firms with amorphous climate impact disclosure requirements that would have saddled firms and their investors with an unknown cost. It would also have impacted downstream, private firms that worked with reporting companies. In the end it was a total cluster you know what. Silly and naive from start to finish that would have diminished public markets.
Enhancing retail exposure to private markets is another important rulemaking and policy topic. For too long, smaller investors have been discriminated against in accessing private securities markets. As everyone knows, promising young firms stay private for as long as possible due to the burden of excessive regulation and the fact that there is an ocean of money willing to invest before firms go public. This simple fact has led to greater wealth disparity as the masses lose out and the wealthy gain. This is something that should ahve been addressed many years ago. The potential change aims to allow access to “private markets through registered investment companies and to allow investment advisers to charge performance fees to an expanded set of clients.”
The topic of Finders has been an issue for many years and something the SEC has failed to address. Allowing individuals to connect investors to firms in need of capital makes sense. But if you do that today, and you are not registered with the SEC, you are breaking the law. Finders need clarified rules to support access to capital as this will help underserved segments the most.
There are other items on the agenda that should improve capital markets if they are successfully updated.
In announcing the regulatory agenda, Chairman Atkins said:
“This Commission recognizes the importance of advancing our regulatory framework to reflect the realities of today’s operating environment – embracing innovation and new technology. To deliver on President Trump’s goal to ensure that the United States is the crypto capital of the world, we are embracing innovation to bring more products onshore, creating clear rules of the road for capital raising with crypto assets, and providing clarity as to how market participants can custody and facilitate trading of tokenized securities onchain. All while ensuring strong investor protection guardrails are in place and continuing to pursue bad actors who violate the law.”
He added that “reversing the decline of public companies and revitalizing our public markets” is vitally important and “both public and private – should not be reserved for wealthy insiders.” It is about time.