The value of public capital markets needs to be defended, and efforts that expand the incentives for staying private should be rebuffed, say U.S. state securities regulators in a new report.
The North American Securities Administrators Association (NASAA), the umbrella group of U.S. state and Canadian provincial regulators, issued a report setting out its recommendations for reinvigorating capital markets while also ensuring investor protection.
Among other things, the report details opposition from state regulators to a variety of legislative proposals that are pitched as efforts to foster economic growth.
In particular, regulators oppose various provisions of the JOBS Act 4.0 legislation.
“We are concerned that a majority of the proposals in the JOBS Act 4.0 would erode our public markets further and adversely affect the businesses and investors that rely on those markets to raise investment capital and build sound financial futures,” it said.
Additionally, the report indicated that certain proposals run counter to the traditional principles of securities regulation, and threaten to “undermine the longstanding efforts of state securities regulators to strengthen our public markets, support a healthy ecosystem for entrepreneurs and small businesses to raise capital successfully, and increase opportunities for investors.”
Among other things, the report detailed NASAA’s opposition to a proposed shift to semi-annual financial reporting from quarterly reporting; a proposal to create a regulatory framework tailored to “venture” exchanges; expanding registration exemptions for venture funds; exempting private placement finders from registration; and creating a “safe harbour” for micro-offerings of under US$500,000.
“We strongly oppose efforts to weaken state investor protection laws,” it said in the report, in response to various provisions that would limit the role of state regulators in overseeing capital raising in the private market.
The report also details NASAA’s support for certain proposals, including the idea of launching a comprehensive enforcement database that covers everyone convicted — or held liable — in criminal, civil, and regulatory actions involving financial services.
“The proposed database would provide additional transparency to investors and likely would facilitate greater coordination among state and federal agencies,” it said. “Striving toward the use of a single, master database of public enforcement actions against individuals and institutions would save the government, financial services employers, and investors time and other resources.”
Additionally, NASAA advocated for stronger coordination between state and federal regulators, and improved regulatory data collection, particularly on activity in the private markets.
“Regulators have almost no visibility into private offerings, and for years, we have urged the SEC to amend its rules so it can collect critical data about these offerings to support evidence-based rulemaking,” it said.
“Congress should require the SEC to make these changes and, further, should direct the SEC to conduct a holistic study of the capital markets and how best to restore the primacy of the public markets.”