The new SEC Chairman, Jay Clayton, testified on June 27 to the Senate Appropriations Subcommittee about the SEC’s budget request. His comments clearly show that rulemaking is in the pipeline at the Staff level to facilitate capital formation in the public markets. In this regard, Chairman Clayton states, “U.S. capital markets remain the envy of the world, but fewer companies are choosing to enter the public capital markets than in the past, and, as a result, investment opportunities for Main Street investors are more limited.” The following is an excerpt of Chairman Clayton’s comments.

Facilitating Capital Formation

The SEC performs a critical function for companies seeking to raise capital to grow their businesses. The SEC’s efforts in this area contribute to job growth and an expanding economy, as well as help ensure that investors – including Main Street Americans – have access to a broad range of investment choices. The Commission’s rules seek to facilitate offerings by large and small companies engaged in all manner of commerce, while also protecting investors and maintaining confidence in the U.S. capital markets. 

In recent years, the SEC has carried out this responsibility through a number of key initiatives, including most recently in response to the JOBS Act and FAST Act, with a particular emphasis on expanded capital-raising opportunities for smaller businesses. While much progress has been made, I believe the SEC can and should strive to do more to enhance capital formation particularly (1) for small and emerging companies and (2) in our public capital markets. U.S. capital markets remain the envy of the world, but fewer companies are choosing to enter the public capital markets than in the past, and, as a result, investment opportunities for Main Street investors are more limited. Your support for our FY 2018 budget request will enable the staff to develop and present to the Commission rulemaking initiatives aimed at promoting firms’ access to capital markets to generate economic growth while fostering important investor protections. I recently named a new Director of the Division of Corporation Finance, Bill Hinman, who is leading these efforts and working with the staff to develop proposals for consideration.  Bill is a recognized leader with more than three decades of experience advising companies of all sizes in capital-raising and acquisitions. We share the view that there is no better architecture for fostering capital formation, providing investment opportunities, and protecting investors than our public company disclosure-based system.

The FY 2018 request also will enable the agency to devote resources to staff the new Office of the Advocate for Small Business Capital Formation. In the near future, the SEC plans to commence a nationwide recruitment effort to identify and hire a Small Business Capital Formation Advocate who will serve as the head of this office. This Office will provide assistance to small businesses and small business investors, conduct outreach to better understand their concerns, and recommend to the Commission ways that the regulatory environment might be improved. Once the Advocate is on board, your support for our budget request will enable the agency to staff this office in FY 2018.

If you have any questions regarding any of the topics covered in this blog post, please feel free to contact a member of our Corporate & Securities practice group or, if applicable, contact your primary Bass, Berry & Sims relationship attorney.