SEC Responds to Small Business Forum Recommendations on Capital Raising
In a Report on the 42nd Annual Small Business Forum, the SEC responded to several policy recommendations from market participants to improve the current capital raising regulatory framework.
Among others, the SEC addressed recommendations to:
- expand the definition of "accredited investor" to include "additional measures of sophistication": the SEC responded that it (i) previously adopted amendments under Regulation D to the accredited investor definition which added qualification options and (ii) will keep in mind the recommendation when considering a potential rulemaking recommendation from the Division of Corporation Finance to amend Regulation D;
- not make it more difficult to qualify as an accredited investor based on wealth thresholds: the SEC was noncommittal on this issue;
- provide an exemption for "finders" from broker-dealer registration: the SEC said that a previous SEC proposal in 2020 included a broker-dealer registration exemption for finders but that the SEC was not moving forward with the proposal;
- increase the number of investors allowed in 3(c)(1) funds to more than 100": the SEC said that Congressional action would be required to make this change; and
- facilitate the creation of venture markets that provide a "transparent and regulated environment" for investors to trade in stocks of smaller companies: the SEC said that it has asked for submissions of proposals from market participants to amend the secondary market structure to support smaller-capitalization securities.