Posts Tagged ‘Capital formation’

The Future of Capital Formation

Editor’s Note: Craig M. Lewis is Chief Economist and Director of the Division of Risk, Strategy, and Financial Innovation at the U.S. Securities & Exchange Commission. This post is based on Mr. Lewis’s remarks at the MIT Sloan School of Management’s Center for Finance and Policy’s Distinguished Speaker Series, available here. The views expressed in this post are those of Mr. Lewis and do not necessarily reflect those of the Securities and Exchange Commission, the Commissioners, or the Staff.

Today I’d like to talk about capital formation—one part of the Commission’s tri-partite mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. There is much to be said about the Commission’s efforts to facilitate capital formation. But because I’m an economist, today I will focus in particular on some of the economic fundamentals that I believe can be considered when thinking about capital formation.

…continue reading: The Future of Capital Formation

The Changing Regulatory Landscape for Angel Investing

Editor’s Note: Keith F. Higgins is Director of the Division of Corporation Finance at the U.S. Securities and Exchange Commission. This post is based on Mr. Higgins’ remarks at the 2014 Angel Capital Association Summit; the full text is available here. The views expressed in this post are those of Mr. Higgins and do not necessarily reflect those of the Securities and Exchange Commission, the Commissioners, or the Staff.

The importance of small businesses in America is unquestionable—they are the foundation of today’s economy and are responsible for many of the new jobs created each year in the United States. And angel investors play a vital role in the development of small businesses by nurturing them at their earliest, most vulnerable stages when they may have little more than the next great idea. For early stage entrepreneurs, angels often are the only ones willing to listen to their business pitch, provide advice, and put in that crucial infusion of capital that is needed to transform an idea into a thriving new business. Yahoo, Google, Facebook, Home Depot—these are just some of the titans of today’s corporate America that, at an earlier stage of their development, were first backed by angel investors. [1] Equally impressive are some of the statistics about the impact of angel investing—by one estimate, in the first half of 2013 alone, angels invested approximately $9.7 billion in over 28,000 ventures, with over 111,000 new jobs created as a result of these investments. [2]

…continue reading: The Changing Regulatory Landscape for Angel Investing

NASAA and the SEC: Presenting a United Front to Protect Investors

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Sunday April 20, 2014 at 9:00 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at the North American Securities Administrators Association’s Annual NASAA/SEC 19(d) Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I have been NASAA’s liaison since I was asked by NASAA to take on that role early in my tenure at the SEC, and it is truly a pleasure to continue our dialogue with my fifth appearance here at the 19(d) conference. This conference, as required by Section 19(d) of the Securities Act, is held jointly by the North American Securities Administrators Association (“NASAA”) and the U.S. Securities and Exchange Commission (“SEC” or “Commission”).

The annual “19(d) conference” is a great opportunity for representatives of the Commission and NASAA to share ideas and best practices on how best to carry out our shared mission of protecting investors. Cooperation between state and federal regulators is critical to investor protection and to maintaining the integrity of our financial markets, and that has never been more true than it is today.

…continue reading: NASAA and the SEC: Presenting a United Front to Protect Investors

SEC Crowdfunding Rulemaking under the Jobs Act—an Opportunity Lost?

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday March 9, 2014 at 8:34 am
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Editor’s Note: The following post comes to us from Samuel S. Guzik, Of Counsel and member of the corporate practice group at Richardson Patel LLP, and is based on an article by Mr. Guzik.

In an article recently posted to SSRN I addressed certain issues faced by the SEC in the ongoing Title III rulemaking process under the JOBS Act of 2012, enacted into law by Congress in April 2012. The SEC issued proposed rules to implement Title III in October 23, 2013, and has yet to issue final rules.

Title III of the JOBS Act created an exemption from registration for the offer and sale of so-called “crowdfunded” securities under the Securities Act of 1933, allowing the offer and sale of securities to an unlimited number of unaccredited investors without registration with the SEC, on an Internet-based platform, through intermediaries (portals) which are either registered broker-dealers or SEC licensed “funding portals.” Title III also provided for a number of built-in investor protections, including limitations on the amount invested, a limitation on the amount an issuer may raise in a 12 month period ($1 million), detailed financial and non-financial disclosure in connection with the offering, and ongoing annual issuer disclosure. Congress left much of the details of Title III in the hands of the SEC, to be fleshed out in the rulemaking process.

…continue reading: SEC Crowdfunding Rulemaking under the Jobs Act—an Opportunity Lost?

The SEC in 2014

Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s remarks to the 41st Annual Securities Regulation Institute Conference; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

For nearly 80 years, the Securities and Exchange Commission has been playing a vital role in the economic strength of our nation. Year after year, the agency has steadfastly sought to protect investors, make it possible for companies of all sizes to raise the funds needed to grow, and to ensure that our markets are operating fairly and efficiently.

That is our three-part mission.

But, while commitment to this mission has remained constant and strong over the years, the world in which we operate continuously changes, sometimes dramatically.

When the Commission’s formative statutes were drafted, no one was prepared for today’s market technology or the sheer speed at which trades are now executed. No one dreamed of the complex financial products that are traded today. And, not even science fiction writers would have bet that individuals would so soon communicate instantaneously in so many different ways.

…continue reading: The SEC in 2014

Regulation A+ Offerings—A New Era at the SEC

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday January 15, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from Samuel S. Guzik, founder and principal of Guzik & Associates.

December 18, 2013 may well mark an historic turning point in the ability of small business to effectively access capital in the private and public markets under the federal securities regulatory framework. On that day the Commissioners of the U.S. Securities and Exchange Commission met in open session and unanimously authorized the issuance of proposed rules [1] intended to implement Title IV of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”)—a provision widely labeled as “Regulation A+”—and whose implementation is dependent upon SEC rulemaking. Title IV, entitled “Small Company Capital Formation”, was intended by Congress to expand the use of Regulation A—a little used exemption from a full blown SEC registration of securities which has been around for more than 20 years—by increasing the dollar ceiling from $5 million to $50 million. Both the scope and breadth of the SEC’s proposed rules, and the areas in which the SEC expressly seeks public comment, appear to represent an opening salvo by the SEC in what is certain to be a fierce, long overdue battle between the Commission and state regulators, the SEC determined to reduce the burden of state regulation on capital formation—a burden falling disproportionately on small business—and state regulators seeking to preserve their autonomy to review securities offerings at the state level.

…continue reading: Regulation A+ Offerings—A New Era at the SEC

Promoting Investor Protection in Small Business Capital Formation

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Saturday January 4, 2014 at 9:00 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at a recent open meeting of the SEC; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [Dec. 18, 2013], the Commission proposes rules to implement Title IV of the JOBS Act. As mandated by that Act, the proposed rule would allow companies to issue a class of securities that are exempted from the registration and prospectus requirements of the Securities Act, provided that certain conditions are met. This is the third major rulemaking undertaken by the Commission to comply with the JOBS Act since its adoption last year.

Enhancements to Investor Protection under Regulation A-plus

The proposed rules being considered today enhance an existing exemptive regime known as Regulation A. Under the current provisions of Regulation A, companies can raise up to $5 million per year without registration, provided that they file an offering statement with the Commission containing certain required information and furnish an offering circular to purchasers, among other conditions.

…continue reading: Promoting Investor Protection in Small Business Capital Formation

Capital Formation from the Investor’s Perspective

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Saturday December 15, 2012 at 10:37 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at the AICPA Conference on Current SEC and PCAOB Developments; the full speech, including footnotes, is available here. The views expressed in this post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I would like to talk about capital formation and the critical role that accountants play in that process. I want to particularly focus on capital formation from the investor’s perspective. Too often, the investor perspective is lost in the discussion over capital formation. The companies, lawyers, and investment bankers that often dominate this discussion often see regulation only as an obstacle to be overcome. They focus the discussion on how to raise money quicker and more cheaply — but seem to forget that the money raised comes from the pockets of hard-working Americans. The capital raising process should not make investors more vulnerable, and attempts to raise money quicker and more cheaply should not come at the investor’s expense. I want to put the focus on investors and examine how protecting investors facilitates capital formation by enhancing confidence, promoting integrity, and fostering transparency.

…continue reading: Capital Formation from the Investor’s Perspective

Effective Small Business Capital Formation

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Friday November 30, 2012 at 8:48 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at the SEC Government-Business Forum on Small Business Capital Formation in Washington, D.C., available here. The views expressed in this post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Small business is a powerful engine for economic growth. Independent businesses with fewer than 500 employees account for half of all private sector jobs and more than half of nonfarm private GDP. [1] Growth in small business helps fuel the U.S. economy, generating opportunity, competition, and demand. Small businesses are essential to sustaining a strong economy, strong communities, and a strong middle class.

Today’s Forum reflects the Commission’s continuing interest in capital formation issues for small businesses. Indeed, the Commission has had a long-term focus on small business, and has utilized multiple avenues to regularly and consistently seek input from small business stakeholders. For example:

…continue reading: Effective Small Business Capital Formation

Abolishing IPOs and Harnessing Private Markets in the Public Good

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday August 8, 2012 at 9:20 am
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Editor’s Note: The following post comes to us from Adam C. Pritchard, Professor of Law at University of Michigan.

In my paper, Revisiting “Truth in Securities Revisited”: Abolishing IPOs and Harnessing Private Markets in the Public Good, I explore the possibility of doing away with initial public offerings. In their place, I propose an expanded system of company registration under which companies would have to trade in private markets for a seasoning period, with mandatory disclosure, before they would be allowed to sell their shares to the public at large. I argue that such system would promote not only efficient capital formation, but also investor protection.

Under the current regime, companies can stay private until one of three triggering events occurs: 1) the company lists its shares for trading on a securities exchange; 2) the company makes a registered public offering; or 3) the company exceeds 2,000 shareholders. Typically, companies trigger public company status through an initial offering of shares, with simultaneous listing of those shares on an exchange. The decision to make an initial public offering, however, is frequently made because the company is pushing the limit on the number of shareholders as a result of prior private issues to employees and early-round investors.

…continue reading: Abolishing IPOs and Harnessing Private Markets in the Public Good

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