On June 18th, 2020, The Office of the Advocate for Small Business Capital Formation virtually hosted the SEC’s 39th annual Government-Business Forum on Small Business Capital Formation. The SEC Chairman Jay Clayton, Commissioner Hester M. Peirce, Commissioner Elad L. Roisman, and Commissioner Allison Herren Lee gave introductory remarks. Given below are excerpts from the chairman and the commissioners.
Chairman Jay Clayton
Chairman Jay Clayton brought attention to the distressed economy due to COVID-19. According to statistics quoted by him, over 1 million businesses are owned by minorities, out of which 99.9% have less than 500 employees. He stressed the importance of supporting small businesses, including minority-owned, women-owned and rural small businesses, as 50% face immediate or near-term risks.
The chairman remarked, “We also recognize that small businesses are the engine of economic growth and that we will need small businesses to support post a COVID-19 economic recovery” and invited ideas and suggestions on how the SEC can customize regulations to fit the needs of small and medium-sized businesses.
Commissioner Hester M. Peirce
Commissioner Peirce brought up the topic of “finders” that she has been trying to get attention for quite some time now. She raised concern on the regulatory clarity required on “finders,” which has been due over decades because of Commission inaction and staff no-action letters.
“Finders” here refers to a third party who brings issuers and accredited investors together for mutual benefit.
In her address, she mentioned that the OSAB has been raising the request repeatedly over the last two decades, and it is particularly crucial at this moment, as explained by the committee member Greg Yadley in the last OSAB meeting. She mentioned that the Commission has provided temporary, conditional relief to small businesses under Reg CF offerings and is open to recommendations and ideas on other short-term/longer-term measures to facilitate small businesses.
Commissioner Pierce stressed that innovators are neither the same, nor do they reside in the same region, so there is a need for proper regulatory structure that can facilitate access to capital into every community across the country. She said, “This pandemic and the attendant embrace of working from home may change what it means for a business to be located in a particular place, and new technology is changing the way innovators collaborate. It is, therefore, the perfect time to work on ways to ensure that capital can follow the talent wherever it goes.” Finally, she left the participant with suggestions that are:
- Revising the current financial thresholds in the accredited investor
- Considering an investing-related course at an accredited college or university in the definition of accredited investor
- Creating a new micro-offering exemption to enable people to support entrepreneurs they know
- Making the temporary crowdfunding relief permanent
Commissioner Elad L. Roisman
Commissioner Roisman expressed concern on the alarming number of business operations affected adversely due to pandemic. He pointed out that the CARES Act has provided relief, but uncertainty prevails as the small businesses are not sure of when, how, or if they will be able to carry on their work.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was formed on March 27th, 2020, to provide fast and direct economic assistance to American workers and families, small businesses, and preserving jobs for American industries. For more information, click here
Commissioner Roisman said, “I look forward to hearing about the successes and challenges such entrepreneurs have faced at the different points in the business lifecycle.” He invited ideas on how regulators can help and provided assurance on addressing concerns.
Commissioner Allison Herren Lee
Commissioner Lee was hopeful about the benefits of the new crowdfunding rules on businesses and investors and pointed out the importance of boosting growth for rural entrepreneurship, women, and minority-owned businesses. She said, “Too often we take a “rising tide lifts all boats” approach in our efforts to facilitate capital raising, and fail to consider the unique challenges that face particular communities.”
Click here to read about the SEC’s expedited Regulation Crowdfunding issued in the interest of small businesses.