The Advisory Committee on Small and Emerging Companies, created by the U.S. Security and Exchange Commission (SEC), issued its Final Report last month summarizing its recommendations from the past six years as well as detailing those areas the Committee has identified as areas for continued focus. The SEC formed the Committee to provide recommendations on rules, regulations, and policies relating to capital raising, securities trading, public reporting, and corporate governance of small private businesses and publicly traded companies with less than $250 million in public market capitalization.
Among its findings, the Advisory Committee noted that disclosure requirements place a disproportionate burden on smaller companies, even though the SEC has attempted to simplify filing requirements for these companies. The Committee suggested that the reporting accommodations made to the category of “emerging growth company” ought to be extended to “smaller reporting companies”, and that the threshold definition of “smaller reporting companies” should be increased. Additionally, the Committee is concerned that the U.S equity markets do not always offer a satisfactory trading venue for the securities of small and emerging companies. Accordingly, the Committee urged the SEC to facilitate the creation of a separate U.S. equity market for trading by accredited investors in small and emerging companies generally, and in particular by adopting its prior recommendation to preempt certain state regulations.
The Committee also noted that current SEC rules have failed to require disclosure of Board diversity, which would be useful to stockholders, employees, and customers, renewing its recommendation that the SEC amend its rules to generate more disclosure useful to investors.
With regard to the directive that the SEC periodically review the SEC definition of “accredited investor” the Committee recommended the SEC not implement heightened standards for qualifying as such because any decrease in the number of accredited investors would disproportionately impact those living in areas with lower cost of living, as well as women and minorities. The Committee actually recommended that the SEC expand the definition to take into account other measures beyond income and wealth.
The Committee made other important observations and recommendations that may impact your investing practices. Discuss the recommendations and questions you may have about securities and investments laws in any country in which you have investments with the securities lawyers at your Ally Law member firm. For more information about our services in this area, contact us at email@example.com.