Wednesday, October 8, 2008
Carving a New Path to Equity Capital and Share Liquidity, by William K. Sjostrom Jr., Northern Kentucky University - Salmon P. Chase College of Law, was recently posted on SSRN. Here is the abstract:
The Article advocates regulatory reforms designed to carve a new path to equity capital and share liquidity for private companies. Specifically, the reforms would allow private companies to generally solicit sophisticated investors and would foster the development of a liquid "sophisticated-investors only" (SIO) market for private company shares. The reforms are grounded in the fundamental principle of U.S. securities laws that sophisticated investors can "fend for themselves" and therefore require considerably fewer legal safeguards. As a result, the reforms would enhance capital formation by reducing regulatory burdens without compromising investor protection. The Article details the reforms and explains how they can be implemented under existing federal securities laws. It then considers the possibilities for new SIO markets if the reforms are adopted and theorizes about how the resulting securities regulatory void for SIO companies would be filled.