On May 1, 2013, the Securities and Exchange Commission held a meeting of its Advisory Committee on Small and Emerging Companies. The Committee heard presentations from Chief Executive Officer of NYSE Euronext, William R. Hambrecht, Chairman and Chief Executive Officer of WR Hambrecht + Co., and Robert Greifeld, Chief Executive Officer of NASDAQ OMX Group. The presenters focused on the positive impact small and emerging companies continue to have on the economic growth in the United States, and emphasized the importance of access to capital markets for the development of small companies. Additionally, the speakers all agreed that the current regulatory burdens placed on public companies together with market inefficiencies present significant barriers for small companies to access the capital markets.
Mr. Niederauer discussed how the Jumpstart Our Business Startups Act (JOBS Act) attempts to ease entry for smaller issuers by allowing confidential filings of registration statements. He stated that the ability to make confidential filings encourages small and emerging companies to avail themselves of the public markets as the confidentiality prevents unwanted media scrutiny and protects against the stigma of having numerous SEC comments, or what investors may deem as "too many" comments. Mr. Niederauer also stressed the need to make microfinance more transparent, to improve the regulatory model for community banks, and to reform tick size in order to provide capital for small and emerging companies.
Mr. Hambrecht noted that the use of IPOs as an exit strategy by venture-backed, emerging growth companies is an important fuel for growth in the U.S. economy yet the overwhelming majority of venture-backed companies use mergers and acquisitions as an exit instead of IPOs. He focused on the need for the SEC to propose and adopt rule-making for "Regulation A Plus," a part of the JOBS Act, which provides an exemption from registration for offerings up to $50 million. He stressed that in order for Regulation A Plus to provide a meaningful alternative to the S-1 registration statements for smaller companies, the filing process must be streamlined with a shorter turnaround time between filing and marketing.
Mr. Greifeld spoke on the ability of alternative markets to serve as an entry point for smaller and emerging companies. He described the successes of NASDAQ's alternative markets, including NASDAQ OMX First North, as examples of markets for emerging companies, with less onerous admission and ongoing listing requirements than major exchanges. Mr. Greifeld also encouraged the SEC to implement a pilot program to increase the secondary trading and liquidity of the stock of smaller companies.
SEC Chairperson Mary Jo White also appeared at the meeting and noted that while the rules were not proceeding as quickly as many would have liked, the SEC was determined to get the rules right the first time. She also pointed out that in addition to the JOBS Act, there were other issues that needed to be addressed to improve access and liquidity for small and emerging companies. At the conclusion of the meeting, the SEC staff reiterated Chairperson White's statements that the SEC is currently drafting rules and proposals in these areas and stated that they did not have a definite timetable for when additional rules and proposals would be released.
To view a video webcast of the meeting on the SEC's website please click here.