SEC Chair Jay Clayton Challenges Advisory Committee to Improve Private Offering Regulation
SEC Chair Jay Clayton urged the SEC Small Business Capital Formation Advisory Committee (the "Committee") to consider ways to facilitate investment opportunities for "Main Street" investors, and for small businesses to raise capital, through private placements.
In remarks before the Committee, Mr. Clayton advocated for a less costly and complicated approach to private offering regulation that would facilitate better opportunities for "Main Street" investors. According to Mr. Clayton, differences between the opportunities available to Main Street and institutional investors result in part from the current "overly complex and rigid" approach to private offering regulation. He said that this approach - which began 35 years ago and was implemented on a "patchwork basis" - relies on the wealth-based definition of "accredited investor," leading to only the wealthiest investors being able to invest in the private markets.
Mr. Clayton stated that businesses seeking to raise capital in the private markets typically favor institutional investors due to the cost of raising capital from Main Street investors. He said that the private capital markets do not sufficiently help small- and medium-sized companies raise capital. Further, most small- and medium-sized companies cannot grow beyond the start-up stage unless they have "established relationships with professional investors." Mr. Clayton advised the Committee to examine whether there are regulatory changes that would remedy this.
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