WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy, issued the following statement in connection with Better Markets’ new Report, “Private Securities Offerings Should Be the Exception, Not the Rule”:

“Our public capital markets are the envy of the world, but the ever-expanding exemptions from the requirement that most securities offerings be registered public offerings are bleeding the public markets dry. Capital raising in the private markets now surpasses capital raising in the public markets. This has consequences for capital formation—the need to get capital to its most productive uses—as research shows that public markets allocate capital much more efficiently than private markets. It is also contrary to what Congress originally envisioned. Congress’s original framework made the default a registered public offering.

“This suggests that policymakers should be focused on revitalizing our public securities markets, but instead they appear poised to do the opposite. Congress now wants to make it even easier to raise money through private securities offerings. The problem is that the private markets lack the disclosure requirements that protect investors in the public markets. Private market assets are also illiquid and hard to value, which is why they are usually restricted to institutional investors and high net worth individuals who are deemed better able to ‘fend for themselves.’ Yet even these supposedly sophisticated investors sometimes lose hundreds of millions of dollars investing in private companies and funds. Exposing retail investors to the private markets is likely to lead to crippling losses.

“Proponents of expanding the private markets often say that retail investors should have access to the same opportunities as institutional investors and high net worth individuals. But that should happen in the public markets. The even playing field retail investors deserve is one where most capital raising occurs in the public markets and companies and funds provide all investors with the information necessary to inform their investment decisions.”

The Report is available here.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.