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Sends recommendations to SEC in advance of Small Business Forum
WASHINGTON, D.C. – Last week, the American Securities Association (ASA) submitted recommendations to the U.S. Securities and Exchange Commission (SEC) in advance of the 42nd Annual Small Business Forum.
In the letter, ASA outlined the following recommendations:
The SEC should refrain from importing a European Union Markets in Financial Instruments Directive (MiFID II) into U.S. markets.
Broker-dealers should be permitted to receive hard-dollar payments for research from clients without having to register as investment advisers. The SEC should, at a minimum, reinstate its no-action position that would not require brokers to register as investment advisers until a permanent solution can be achieved.
Rule 139 under the Securities Act of 1933 should be amended to permit broker-dealers to continue research coverage of issuers without such coverage being deemed an offer or sale of securities. Currently, the safe harbor only exists for issuers that are Form S-3 eligible, and not for smaller issuers including emerging growth companies (EGCs).
The SEC should produce further concrete recommendations to improve research of pre-IPO and small public companies. While there have been rule changes made to encourage pre-IPO research, without a liability safe harbor it is unlikely that we will see a meaningful increase in pre-IPO research.
Congress should direct the Government Accountability Office (GAO) to conduct a comprehensive study into the impact that the Sarbanes-Oxley Act (SOX) has had on U.S. capital markets and the willingness and ability of companies to go public.
“ASA remains concerned about the decline in the number of public companies and the regulatory disincentives that still exist for growing companies to go public when they need access to the public markets,” ASA CEO Chris Iacovella said. “Smaller firms face a disproportionate share of regulatory costs under Sarbanes-Oxley, and there is a troubling collapse in research and analyst coverage for these small issuers. That’s why a holistic review and comprehensive study on laws such as SOX would guide policymaking decisions and streamline opportunities for businesses to build and maintain wealth.”
ASA has been a leading voice in calling for reforms that will incentivize more companies to go and stay public. In February, ASA submitted similar recommendations to the SEC in conjunction with the agency’s Small Business Capital Formation Advisory Committee meeting.
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