Good afternoon and thank you to the participants in the Commission’s 43^rd Annual Government-Business Forum on Small Business Capital Formation and to today’s panelists. This annual forum gives the Commission direct insights from the companies, practitioners, and entrepreneurs that grapple with our complex regulatory regime. Before I begin, I must remind everyone that my views are my own as a Commissioner and not necessarily those of the Securities and Exchange Commission or my fellow Commissioners.

In the past couple weeks, we experienced some unusual natural events: an earthquake in the New York City area and a total eclipse of the sun in much of the United States. No glasses will shatter, and you do not need special glasses for today’s event, but I expect it will be equally noteworthy. Few topics in the securities world are of greater interest than why the number of public companies has declined so sharply.[1] Many have pondered the issue and offered solutions, but the answer to this enigma is likely multifaceted. Today’s discussion will help us puzzle through it.

Small cap companies make up almost half of public companies and are vital to a healthy, growing economy.[2] A Commission that wanted to see more companies in the public markets would reduce the barriers to going public and the costs of being public. As to the former, the Commission recently did the opposite by imposing new costs on companies looking to enter the public markets using the Special Purpose Acquisition Company route. As to the latter, the Commission has resisted tailoring regulations so that small cap companies can better afford to participate in the public markets. The Commission brushes aside the need for scaling by explaining that the rule is so important that every public company, no matter its size, should bear the rule’s associated costs. Investors in these companies, who have to foot the bill, might not agree. Welcoming small cap companies into the public markets gives retail investors a chance to share in their growth. Recent research suggests that small cap companies, as a class, may offer greater investment returns than larger companies.[3] Small companies are often more disruptive, operationally nimble, and dynamic than their larger counterparts.

I hope that today’s discussion will help the Commission identity a better path forward for our regulatory treatment of issues that affect small cap companies. I have the following questions.

1. As I mentioned, over the last few years, the Commission finalized many corporate disclosure requirements without meaningful tailoring. Which requirements are or will be the most onerous and unnecessary for small cap companies?
2. Should the Commission tailor for small companies other requirements that have been on the books longer?
3. Would it help small cap companies if Emerging Growth Company status lasted ten years instead of the current five years?
4. The 2023 annual report from the Commission’s Office of the Advocate for Small Business Capital Formation recommended “aligning the SRC and non-accelerated filer categories.”[4] The report argued that this “would allow all SRCs to enjoy all the benefits of being non-accelerated filers—namely the exemption from the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act.”[5] Should the Commission adopt this change?
5. I have heard reports that smaller reporting companies have lost their SRC status due to temporary variations in their public float, which governs SRC eligibility. Should the Commission calculate an SRC’s public float based on a rolling average, say over the course of a year?
6. Today’s discussion may touch on the sparse research coverage of small cap companies compared to larger public companies.[6] What – if anything – could the Commission do to address this problem? For example, should the Commission revisit the withdrawn no-action letter that allowed broker-dealers to comply with European regulations by receiving separate payments for research, without the broker-dealer having to register as an investment adviser?[7]
7. Another frequently cited issue is disappointing liquidity for small cap companies listed on exchanges. What can we do to facilitate exchange experimentation with different approaches to cultivating better liquidity?
8. Today’s discussion may also cover the initial public offering process.

1. Is going public through a special purpose acquisition company still a viable path for private companies, given the Commission’s recent final SPAC rulemaking?[8]
2. What reforms to the traditional initial public offering process – if any – would improve the process for smaller potential public companies?

9. Some evidence suggests that Regulation A is underused. From July 2022 through June 2023, Reg. A offerings raised only $1.5 billion while traditional initial public offerings raised $17 billion and Reg. D offerings raised almost $3 trillion.[9] Is Commission pre-emption of state blue sky laws for secondary transactions of Reg. A Tier 2 securities necessary to make Regulation A a viable path? Should the Commission consider other reforms?

Thank you, and enjoy the discussion. I look forward to your recommendations.

Good afternoon and thank you to the participants in the Commission’s 43^rd Annual Government-Business Forum on Small Business Capital Formation and to today’s panelists. This annual forum gives the Commission direct insights from the companies, practitioners, and entrepreneurs that grapple with our complex regulatory regime. Before I begin, I must remind everyone that my views are my own as a Commissioner and not necessarily those of the Securities and Exchange Commission or my fellow Commissioners.

In the past couple weeks, we experienced some unusual natural events: an earthquake in the New York City area and a total eclipse of the sun in much of the United States. No glasses will shatter, and you do not need special glasses for today’s event, but I expect it will be equally noteworthy. Few topics in the securities world are of greater interest than why the number of public companies has declined so sharply.[1] Many have pondered the issue and offered solutions, but the answer to this enigma is likely multifaceted. Today’s discussion will help us puzzle through it.

Small cap companies make up almost half of public companies and are vital to a healthy, growing economy.[2] A Commission that wanted to see more companies in the public markets would reduce the barriers to going public and the costs of being public. As to the former, the Commission recently did the opposite by imposing new costs on companies looking to enter the public markets using the Special Purpose Acquisition Company route. As to the latter, the Commission has resisted tailoring regulations so that small cap companies can better afford to participate in the public markets. The Commission brushes aside the need for scaling by explaining that the rule is so important that every public company, no matter its size, should bear the rule’s associated costs. Investors in these companies, who have to foot the bill, might not agree. Welcoming small cap companies into the public markets gives retail investors a chance to share in their growth. Recent research suggests that small cap companies, as a class, may offer greater investment returns than larger companies.[3] Small companies are often more disruptive, operationally nimble, and dynamic than their larger counterparts.

I hope that today’s discussion will help the Commission identity a better path forward for our regulatory treatment of issues that affect small cap companies. I have the following questions.

1. As I mentioned, over the last few years, the Commission finalized many corporate disclosure requirements without meaningful tailoring. Which requirements are or will be the most onerous and unnecessary for small cap companies?
2. Should the Commission tailor for small companies other requirements that have been on the books longer?
3. Would it help small cap companies if Emerging Growth Company status lasted ten years instead of the current five years?
4. The 2023 annual report from the Commission’s Office of the Advocate for Small Business Capital Formation recommended “aligning the SRC and non-accelerated filer categories.”[4] The report argued that this “would allow all SRCs to enjoy all the benefits of being non-accelerated filers—namely the exemption from the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act.”[5] Should the Commission adopt this change?
5. I have heard reports that smaller reporting companies have lost their SRC status due to temporary variations in their public float, which governs SRC eligibility. Should the Commission calculate an SRC’s public float based on a rolling average, say over the course of a year?
6. Today’s discussion may touch on the sparse research coverage of small cap companies compared to larger public companies.[6] What – if anything – could the Commission do to address this problem? For example, should the Commission revisit the withdrawn no-action letter that allowed broker-dealers to comply with European regulations by receiving separate payments for research, without the broker-dealer having to register as an investment adviser?[7]
7. Another frequently cited issue is disappointing liquidity for small cap companies listed on exchanges. What can we do to facilitate exchange experimentation with different approaches to cultivating better liquidity?
8. Today’s discussion may also cover the initial public offering process.

1. Is going public through a special purpose acquisition company still a viable path for private companies, given the Commission’s recent final SPAC rulemaking?[8]
2. What reforms to the traditional initial public offering process – if any – would improve the process for smaller potential public companies?

9. Some evidence suggests that Regulation A is underused. From July 2022 through June 2023, Reg. A offerings raised only $1.5 billion while traditional initial public offerings raised $17 billion and Reg. D offerings raised almost $3 trillion.[9] Is Commission pre-emption of state blue sky laws for secondary transactions of Reg. A Tier 2 securities necessary to make Regulation A a viable path? Should the Commission consider other reforms?

Thank you, and enjoy the discussion. I look forward to your recommendations.