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ASA Submits Recommendations to SEC Small Business Capital Formation Advisory Committee

ASA continues to have concerns about the decline in the number of companies going public over the last two decades.

WASHINGTON, D.C. – Today, the American Securities Association (ASA) submitted a letter with recommendations to the U.S. Securities and Exchange Commission’s (SEC) Small Business Capital Formation Advisory Committee.

“ASA remains concerned about the decline in the number of public companies over the last two decades, and the regulatory disincentives to go public that still exist for growing companies who need access to the public markets,” ASA CEO Chris Iacovella said. “Smaller firms face a disproportionate share of regulatory costs under laws such as Sarbanes-Oxley, and there is still a startling lack of research coverage for small public companies. ASA continues to be a leading voice in calling for reforms that will incentivize more companies to go and stay public.”

The ASA provided the Committee and SEC with the following recommendations:

  • 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.

Additionally, ASA recommended the Committee conduct a comprehensive study into the impact that the Sarbanes-Oxley Act (SOX) has had on U.S. capital markets.

“A study of this nature on SOX could be an additional tool for the Commission to have in its arsenal as it contemplates policies to revive the IPO market and offer streamlined opportunities for businesses and investors to build and maintain wealth. As always, ASA is ready and willing to engage with members of the Committee and with the SEC staff and commissioners on these important issues,” Iacovella said.



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