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February 4, 2013

SEC Committee on Small and Emerging Companies Recommends Additional Measures

By Jacquelyn Lumb

SEC Chair Elisse Walter welcomed the SEC's Advisory Committee on Small and Emerging Companies at last Friday's meeting and said theirs is a much needed voice in the public-private dialogue with the small and emerging business community. She encouraged the advice, recommendations, comments, and, in particular, empirical data, that interested parties may provide with respect to regulations and policies that affect the small and emerging business community. Walter repeated her previously stated view that discussions about balancing the wish for easier capital formation against the need for investor protection is a false choice. Any loss of investor confidence is a cost that no one can afford to bear, in her view. Addressing the needs of the small and emerging business community consistent with investor protection is the most viable path forward, she said.

The committee supports an increase in tick size to improve liquidity for small public companies. They would like the SEC to encourage the creation of an exchange that is limited to accredited investors and where the disclosure requirements would be appropriately limited. The committee supports increasing the market capitalization threshold for small reporting companies and extending to those companies the same benefits granted to emerging growth companies under the JOBS Act.

In particular, the committee recommended exemptions from certain requirements that impose significant costs on smaller reporting companies but do not provide the type of information necessary to making an informed investment decision, such as the conflict-minerals provision. The committee noted that Congress appears to be working at cross-purposes by encouraging capital formation for small companies while at the same time increasing the compliance burden through disclosure requirements that address political, social or foreign policy objectives but do little to enhance investor protection.

The committee's next meeting is scheduled for May 1 in Washington, D.C.

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