SEC Commissioner Uyeda Wants Less "Paternalistic" Regulation

SEC Commissioner Mark T. Uyeda decried "paternalistic policies in the regulation of private markets," and called for a more cost-effective and transparent regulatory framework that better facilitates capital formation.

At the 55th Annual Securities Regulation Seminar of the Los Angeles County Bar Association, the Commissioner made recommendations to (i) better facilitate properly functioning capital markets, (ii) improve capital formation for smaller private companies and (iii) promote transparent application of rules—particularly on digital assets—rather than de facto regulation through enforcement. 

Mr. Uyeda asserted that the strength of capital markets lies in its ability to provide a decentralized, efficient system "where ideas meet funding." He argued that that the private sector—not the government—is best equipped to determine the viability of business ventures and that proper regulation requires a cost-effective framework that ensures material and accurate disclosures, while promoting integrity and transparency among market intermediaries.

On small business capital formation, Mr. Uyeda called for simplifying the registration exemption. He advocated for streamlining the numerous exemptions available for private offerings to align better with the needs of businesses at different stages of growth.

Mr. Uyeda honed in on the accredited investor definition, which limits private market participation to individuals with high income or net worth. He argued that this threshold prevents many investors from accessing private offerings, despite their ability to understand and manage investment risks. He urged the SEC to "consider whether there are new approaches that should be taken" including "using a sliding scale that would allow any individual to invest at least a modest amount in private investments over the course of a year."

Mr. Uyeda also argued that proactive rulemaking is needed on cryptocurrencies and digital assets, rather than regulation through enforcement and case-by-case litigation.