SEC Chairman Paul Atkins has proposed two new initiatives aimed at reforming the current framework for public companies, which has not changed in more than 20 years. The goal of the changes is to expand access to initial public offerings (IPOs) for a larger number of companies and private investors.
This step became the first official move within Atkins's "Make IPOs Great Again" program. Since the mid-1990s the number of public companies in the US has fallen by roughly 40%. According to Atkins, the trend was influenced by the increased volume of regulatory requirements — because of this many businesses prefer to move to private capital markets, where requirements and costs are much lower.
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What the new SEC rules propose
The first initiative, the Filer Status Proposal, raises the market capitalization threshold at which a company is required to disclose information in full — from $700 million to $2 billion. It has not been revised since 2005. In addition, the reform extends the "grace period" for new public companies: now, after going public, they will be able to remain in a lighter reporting regime for at least five years instead of one year. For companies with assets of up to $35 million it is proposed to extend the deadlines for filing annual and quarterly reports.
Currently 52% of public companies are subject to the heavier disclosure requirements. After the rules are adopted, their share will rise to 81%. The remaining ones will nonetheless account for 93.5% of total market capitalization. According to Atkins, these figures reflect a distorted balance between the development of the capital market and the protection of investors.
The second proposal, the Registered Offering Reform Proposal, removes the requirements regarding a company's operating history and the volume of shares in circulation for the expedited registration of securities. Such a mechanism gives companies the ability to raise capital quickly when needed.
Source: BeInCrypto
