SEC Holds Meeting of the Advisory Committee on Small and Emerging Companies

The SEC held a meeting of its Advisory Committee on Small and Emerging Companies (the "Committee"). Regulators discussed ways to increase opportunities for investors in small and emerging companies to resell their shares (a process known as "secondary market liquidity"). The Committee also addressed Regulation A+ and voted on recommendations regarding the definition of "accredited investor."

In her opening remarks at the meeting, Chair White explained that SEC divisions have been looking at various means to facilitate the secondary market trading of securities issued by small businesses. She added that the staff is considering whether the development of appropriately structured venture exchanges could provide more liquidity for the securities of smaller companies.

Commissioner Gallagher expressed enthusiasm for the development of secondary market liquidity. He reported that the SEC is discussing (i) the enhancement of secondary trading in private shares, and (ii) the secondary market trading of small company shares, particularly through Venture Exchanges. According to Commissioner Gallagher, Venture Exchanges "are a vital bookend to our JOBS Act rulemaking on Regulation A+."

Commissioner Aguilar shared Commissioner Gallagher's support for secondary market liquidity and Venture Exchanges, but stated that both possibilities must be analyzed thoroughly. He suggested that the Committee should examine the reasons for the demise of the American Stock Exchange's Emerging Company Marketplace, as well as investigate European and Canadian stock markets that have experimented with markets for smaller companies.

Commissioner Aguilar also recommended revising and updating Exchange Act Rule 15c2-11 and its so-called "piggyback" exception, which permits broker-dealers to publish quotations for a security without complying with the rule's information requirements if any other broker-dealer has published regular and frequent quotations for that security. He stated that many of the concerns raised by proposed amendments to Rule 15c2-11 are "equally applicable to today's secondary market for small business shares" and would be helpful to those who deal with the expanding market of small business securities.

See: Committee Meeting Agenda; Chair White's Statement; Commissioner Gallagher's Statement; Commissioner Aguilar's Statement. Related news: SEC Meeting on Small and Emerging Companies and on Definition of Accredited Investor (February 27, 2015).