On March 31, 2016, US Securities and Exchange Commission Chair Mary Jo White discussed the importance of strong governance and investor protection in the wake of developments and innovation in technology and financial markets. Specifically, Chair White discussed the importance of pre-IPO companies making accurate disclosures, and in particular the implications and potential consequences of the increase in so-called “unicorns,” which are private start-up firms with valuations that exceed $1 billion. White also remarked on the need to protect investors that are investing under new SEC rules for capital raising under the JOBS Act—Regulation D, Regulation A+ and Regulation Crowdfunding—all of which are designed to allow smaller companies to access the capital markets. White noted that implicit in improving investor protection are strong financial controls and corporate governance, topics which are particularly important for private pre-IPO companies particularly as they go public and grow, often exponentially. Tools such as ensuring relevant expertise on boards and implementing investor protections while pre-IPO companies are private can help mitigate against the risks faced by rapidly growing start-ups. Finally, White noted that the SEC is closely monitoring developments and related investor protection issues in digital finance or fintech, namely blockchain technology, automated investment advice (robo-advisors) and online marketplace lending platforms.
Chair White’s speech is available at: https://www.sec.gov/news/speech/chair-white-silicon-valley-initiative-3-31- 16.html.