Small Business Capital Formation Advisory Committee Jan. 29 Meeting to Focus on Smaller Public Company Markets

On January 29, 2021, The Securities and Exchange Commission (SEC) Small Business Capital Formation Advisory Committee virtually hosted a public meeting that fixated on the experiences of smaller public companies and the Commission’s recent Securities Act Rule 701 and Form S-8 proposals. The committee meeting consisted of two sessions, one in the morning discussing the tendencies and dynamics of the smaller public and later-stage private companies, and another one in the afternoon examining the equity compensation in today’s digital economy.

Overview of Annual Report from the SEC’s Office of the Advocate for Small Business Capital Formation.

Deputy Director of the Office, Sebastian Gomez Abero and Policy Manager, Jenny Riegel started off the meeting with a quick overview of the FY2020 Annual Report, and with a focus on the state of small business capital formation. The Fiscal Year of 2020 Annual Report of the Office of the Advocate for Small Business Capital Formation (OASB) demonstrates the office’s mission in advocating for small businesses and their investors to promote better access to capital markets. Some main highlights taken from Fiscal Year 2020 were:

  • HBCU Outreach Event at Morehouse College, a panel discussion on best practices for minority businesses to captivate investment capital
  • Roundtable with Miami entrepreneurs and investors on raising capital in partnership with the Miami-Dade Beacon
  • iFundWomen workshop to course through pathways available to ingress investment capital
  • Virtual Coffee Break with Start Out, analysis of issues encountered by the LGTBQ+ entrepreneurs and data on repercussions of exclusion

Gomez and Riegel deliberated on data from numerous segments of the market and implemented a perspective on the burden that the COVID-19 pandemic has had on small businesses. To add, the report reflects on data that has challenged minority businesses such as women-owned businesses, businesses in communities affected by natural disasters, and rural businesses.

Pulse of the Public Markets

The Committee examined what has been going on with smaller public companies, and the possible trends that may not have made the news. Trading venue representatives highlighted some of the dynamics they’ve been observing in regards to smaller public companies, and how recent innovations have impacted these smaller companies on the public market. The key representatives in the meeting were as follows:

  • Martin Alvarez, Chief Commercial Officer, Long Term Stock Exchange
  • Cass Sanford, Associate General Counsel, OTC Markets Group
  • Jeff Thomas, Senior Vice President, Head of Western U.S Listings and Capital Markets, Nasdaq
  • Carolyn Saacke, Chief Operating Officer, Capital Markets, NYSE

Compensatory Offerings for Workers

Later in the afternoon, the Committee deliberated on the equity compensation in today’s digital economy which included the Commission’s recent proposition to modernize the groundwork that allows employees and other workers to receive equity compensation from their company. This proposition took place on November 24, 2020. With this, the Commission expressed two proposals for public opinion.

The first proposal suggests a package of technical updates to Securities Act Rule 701 and Form S-8. The Securities Act Rule 701 provides any exemption from registration of issuance of compensatory securities by non-reporting issuers. And the Form S-8 is a Securities Act registration statement for compensatory offerings by reporting issuers.

The Commission’s second proposal is a five-year pilot program which permits an issuer to administer equity compensation to specific “platform workers”. These “platform workers” are the ones who provide services available through the issuer’s technology-based platform. This five-year pilot program is subject to dollar limits, percentage limits, and other conditions.

Meeting Overview

The Small Business Capital Formation Advisory Committee held this virtual public meeting to focus on small public companies and the experiences they are facing, but to also discuss the recent Securities Act Rule 701 and Form S-8 proposals. Other areas of focus were the framework of the implications the COVID-19 pandemic has had on smaller businesses and the effects it has on minorities such as women-owned businesses. The SEC’s Office of the Advocate for Small Business Capital Formation, released an overview video to the public that illuminates the result changes from the two proposed rules.


In conclusion, the Committee wrapped up the meeting by discussing the two proposals and the experience they’ve had with equity compensation.






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