A new SEC proposal to expand exempt offerings in the private market is a “dangerous change” that would weaken investor protection.
Better Markets has called on the SEC to safeguard public markets and protect retail investors and market integrity by retracting recent actions that would make securities markets less transparent and less accountable and expose investors to bad actors and financially unstable firms.
The most recent proposal is a radical expansion to exemptions for companies that want to raise capital through the issuance of securities without providing minimal information about their financial condition or growth prospects.
In its comment letter, Better Markets wrote that the decrease in public companies (from 8,000 in 1997 to 4,000 in 2020) is a serious public policy failure but the solution the SEC is contemplating would result in even fewer public companies to invest in; more companies with illiquid securities; and real harm to retail investors.
In fact, the proposal would expose financially unsophisticated retail investors to significant risks of investing in companies that have funding challenges and don’t disclose information about their financial condition.
“The SEC’s proposal would enable foreign companies to raise hundreds of millions of dollars a year from U.S. investors without providing audited financial statements,” says Lev Bagramian, senior securities policy advisor with Better Markets. “These proposals—marketed in the name of increasing investment opportunities for retail investors—would, more often than not, enable intermediaries to reap huge commissions by peddling unsuitable investment products to unsuspecting investors and allow companies and their executives to plunder the hard-earned savings of ordinary Americans with no real benefit of sensible and sustainable economic growth.” Read more here.