The Securities and Exchange Commission hosts an annual small business forum, which brings together (this year, virtually) a broad range of participants to consider regulatory and policy issues affecting small and medium-sized businesses. The SEC Forum recommendations often have prompted the SEC to take action. This year's Forum, hosted by the SEC's Office of the Advocate for Small Business Capital Formation had as its theme discussions relating to economic inclusion and measures to promote women-owned, minority-owned, and rural businesses. The principal recommendation (which now has been addressed) related to expansion of the definition of accredited investor to include other sophistication measures, such as specialized professional experience. Related to this, the participants also urged the SEC to: revise the disclosures required for non-accredited investors in Rule 506(b) offerings, and expand the accredited investor definition to include an investor test or self-certification. The participants also urged the SEC to increase the offering limit for offerings made pursuant to Regulation Crowdfunding, permit the use of pooled vehicles for crowdfunding, increase the threshold for reviewed financial statements to $500,000 in targeted offering proceeds, and prioritize transparency and simplicity. Participants also urged the SEC to expand retail investor access to funds that invest in private offerings, potentially subject to investment limits. This would enable retail investors to invest alongside institutional or accredited investors. The Forum participants also discussed a potential new self-executing exemption for micro-offerings, including for debt offerings of up to $250,000. A second Forum discussion session focused on concerns applicable to smaller cap companies. The principal priority highlighted by Forum participants for smaller cap companies relates to secondary market liquidity. Participants made a number of recommendations that have as their goal promoting liquidity, including: providing state preemption for non-exchange secondary transactions where there is current and publicly available information; increasing the transparency of short seller transparency; supporting the establishment of dedicated exchanges for smaller public companies; and supporting the development of an electronic "expert market" in which retail investors can sell to professional investors shares that are not otherwise publicly quoted. The full report is available here.
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