North American Securities Administrators Association ("NASAA") President Mike Rothman testified before the House Committee on Financial Services, Capital Markets Subcommittee on the impact of the JOBS Act on U.S. capital markets. Mr. Rothman critiqued the JOBS Act and weighed in on future legislation.
Mr. Rothman asserted that while the JOBS Act was intended to lessen regulation governing capital formation (which was expected to benefit companies going public), a secondary goal was to provide ordinary investors an opportunity to directly participate in the private securities markets. He argued that since taking effect, the legislation supports these two contradictory priorities: (i) enabling companies to raise more money in the private markets and thus enabling them to stay private, and (ii) enabling companies to raise money that might eventually allow them to go public. Mr. Rothman noted the decline in the number of U.S. listed public companies. He posited that such decline might reflect a "fundamental and permanent shift" in the types of businesses being created (rather than over-regulation).
Mr. Rothman expressed concern over legislative proposals that would make it more difficult for states to police private securities offerings, and said that Congress has an obligation "when creating [new] markets" to provide regulatory agencies with the necessary tools to supervise market participants. On state exemptions, Mr. Rothman said:
"NASAA also questions the basis for proposals to establish certain new or overly broad securities registration exemptions, and to expand demand and liquidity for [certain] offerings through the regulatory engineering of certain small-sized exchanges, especially if such exchanges are to be exempted from state securities laws."
Mr. Rothman expressed skepticism about the value of the JOBS Act. He stated: "Main Street investors should not be treated as the easiest source of capital for the most speculative business ventures." He also reiterated NASAA's objections to the SEC's adoption of Regulation A+.
Finally, Mr. Rothman emphasized NASAA's support for the Senior$afe Act and told the Committee that NASAA remains dedicated to working with Congress to ensure that policies aimed at encouraging capital formation "promote fairness and efficiency, meet the legitimate and evolving needs of the marketplace, and maintain or expand investor protection."
In a set of recommendations to Congress, the North American Securities Administrators Association emphasized protections for retail investors, seniors and securities markets, as well as the continued "empowerment" of state regulatory authorities.
The SEC and the North American Securities Administrators Association entered into a memorandum of understanding to ensure that recently adopted exemptions to intrastate crowdfunding and regional offering requirements are "facilitating access to capital for small business."
NASAA requested comments on a proposed model statute and model rule that would permit "testing the waters" in Tier 1 offerings conducted under Regulation A of the Securities Act.
Available only to Cabinet Premium subscribers.
Combining regulatory and enforcement news, analysis, and practical work tools on an easy-to-use digital platform.