The Securities and Exchange Commission organized an Advisory Committee on Small and Emerging Companies to provide the SEC with advice on its rules, regulations and policies as they relate to emerging privately held small businesses and publicly traded companies with less than $200 million in public market capitalization.   The Advisory Committee issued its recommendations to the SEC Chair, Mary Jo White back on September 23, 2015:

  • Persons receiving transaction-based compensation solely for providing names of or introductions to prospective investors are not subject to registration as a broker.
  • Intermediaries that are actively involved in discussions, negotiations and structuring, and solicitation of prospective investors for private financings, are exempt from broker registration at the federal level, conditioned upon registration as a broker under State law.
  • The SEC undertake a joint effort with the North American Securities Administrators Association and the Financial Industry Regulatory Authority to ensure coordinated State regulation related to small businesses.
  • The SEC should immediately take incremental steps to begin to address issues regarding regulation of intermediaries in small business capital formation transactions, rather than wait until development of a comprehensive solution.The Advisory Committee’s letter to Chair White, including the recommendations, can be found here.

Although the SEC has yet to officially adopt these recommendations, Chair White indicated at the February 26, 2016 meeting of the Advisory Committee that various divisions within the SEC were continuing to review the issues raised by these recommendations. A link to Chair White’s remarks from the February 26 Advisory Committee meeting can be found here.

Hopefully, the SEC will adopt the Advisory Committee’s recommendations, which will facilitate the ability of small and emerging companies to raise necessary capital.