SEC Advocate Reports on Small Business Capital Formation
The SEC Office of the Advocate for Small Business Capital Formation ("OASB") recommended policy solutions to address current issues impacting capital formation.
In its 2020 Annual Report, the OASB outlined (i) the regulatory pathways companies use to raise capital, (ii) the primary types of offerings and the types of companies taking advantage of them, and (iii) how and where companies use these offering types.
The OASB described the impact of the COVID-19 pandemic on capital formation efforts as:
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most severely impacting small business founders and investors in historically underrepresented communities, smaller fund managers, and emerging small businesses;
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disproportionately affecting small businesses, as a result of social distancing measures; and
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resulting in a significant reduction of spending in businesses that rely on in-person interaction (e.g., retail, entertainment, transportation, personal services, food services and hospitality).
The OASB recommended:
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providing more small business education in order to reduce the challenges associated with offering complexity;
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providing regulatory clarity to facilitate networks between small business founders and investors;
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diversifying access to capital; and
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directing efforts towards making public markets more attractive for investments.