WSJ article outlines proposal for simplified rules to raise capital
The Wall St. Journal reports on a proposal to simplify rules for U.S. private companies to raise funds and easing constraints on issuing shares. The review by the SEC and disclosed in a letter from the SEC's Chairman Mary Schapiro to Rep. Darrell Issa (R. Ca.), House Oversight Committee Chairman outlined steps being taken by the SEC to review all rules which constrain raising funds for privately held U.S. companies. The concern among smaller high tech firms is that the current rules limit the amount of funds that they can raise without having to perform a complete financial disclosure. The number initial private offerings in the United States has fallen to 130 a year from an average of 503 during the high-tech IPO boom of the 1990's.
At the moment, firms can only issue shares to fewer than 500 shareholders. The SEC and others are concerned that raising that limit may encourage more insider trading and the SEC has stepped up investigation of how shares are traded on private exchanges. The agencies primary objective continues to be to encourage enterprises to raise funds while protecting the interests of investors. Critics of current policy have also asked for a relaxation of current rules regarding "general solicitation" which stricktly limits the information that issuers can provide to potential investors, especially those in the United States.
SEC Chairman Mary Schapiro