April 9, 2011
The Privatization of Wall Street
The Wall Street Journal reported yesterday and today on SEC proposals to lift some existing restraints on private capital raising. See:
U.S. Eyes New Stock Rules (“[T]he likely changes would include raising from 499 the number of shareholders private companies can have without being required to open their books, and also making it easier for such companies to publicize share offerings.”)
SEC Boots Up for Internet Age (“Federal securities regulators are weighing demands to make it easier for fast-growing companies to use social networks such as Facebook and Twitter to raise money by tapping thousands of investors for very small amounts of shares.”)
Larry Ribstein is skeptical about these proposed changes being anything other than the SEC playing catch-up in a market that has already figured out how to get around the limitations without the SEC's help and, more importantly, that the changes don't address the real problems facing U.S. capital market competitiveness. His comments are well worth a read, and you can find them here. Particularly, Larry is concerned about the current regulatory climate in the U.S. incentivizing a move away from public financing:
The privatization of US markets could have important indirect effects. Broad public participation helps democratize capitalism. A move in the opposite direction could deepen Americans’ suspicion of capitalism as the playground of the wealthy. Also, the securities markets are the primary source of data about large companies. Closing these markets reduces transparency for everybody and not just investors.
Mike Sykuta responds here that, while "I believe Larry is on point for the big picture ... the proposed regulation changes don’t seem to be all bad."