Securities Regulation Daily Wrap Up, SEC NEWS AND SPEECHES—SEC acting chair proposes easing obstacles for startups and retail investors in remarks, (Feb 24, 2025)

By Rebecca E. Hoffman, J.D.

The acting Commission chair also suggested redefining filer categories for public companies’ scaled disclosure requirements, to lower costs for companies and shareholders.

Regulation Crowdfunding (Reg CF) has not done enough to make securities offerings affordable, and thus further regulatory change is needed to help small companies get the capital they need to grow, acting SEC chair Mark T. Uyeda said, during the R. Franklin Balotti Keynote Address at the Florida Bar’s 41st Annual Federal Securities Institute and M&A Conference in Tampa on February 24, 2025. He also advocated for regulatory amendments that will allow retail investors to invest more easily in private companies.

Uyeda observed that “77 percent of small business owners reported being concerned about their ability to access capital,” according to a 2024 annual report from the Office of the Advocate for Small Business Capital Formation. That office’s earlier reports recommended changes in addition to Reg CF, and Uyeda said that he has asked SEC staff to investigate applying those recommendations, to pave the way for entrepreneurs to obtain the capital they require.

Uyeda urged that such regulations should not be overly complex or cost prohibitive, as the current regime can be. “Should more than 10 percent of the funds raised by an entrepreneur who may still be working out of his garage go towards paying compliance and legal fees? Or is a portion of that money better spent executing the business plan to build a product or provide a service?” Uyeda said.

Retail investment in private companies. Another priority for Uyeda is enabling retail investors to participate in private markets. Under Rule 506(b), offerings are unlikely to include non-accredited investors, because such sales require additional disclosures. Rule 506(c) only allows general solicitation if sales are made to accredited investors. The acting chair has directed SEC staff to explore changes to the accredited investor qualifications. Another possibility might be a “sliding scale approach” that would allow an individual to invest small amounts in private companies even if that individual could not qualify for accreditation.

Uyeda also suggested that if companies are more likely to accept investments from individuals through pooled investment funds, then changes within the Investment Company Act might also help to increase retail investor participation.

On-ramp for IPOs. Another way to help entrepreneurs might be to heighten the appeal of IPOs, which have “drastically declined” in number over the past two decades, Uyeda observed. He noted that the JOBS Act created emerging growth companies (ECGs) and an IPO “on-ramp” that would ostensibly make disclosures less burdensome. However, some of the rules since then did not provide on-ramp relief. “Appropriately tailoring the Commission’s wide-reaching disclosure requirements for newly public companies may, on the margin, incentivize more companies to go public,” and venture funds would be more likely to provide capital, Uyeda said. He has asked SEC staff to explore redefining EGCs and providing additional on-ramps.

Disclosure classifications. According to Uyeda, scaled disclosure—whereby a smaller company has a proportionally smaller disclosure burden—also needs tweaking. The “filer categories and associated disclosure obligations are needlessly complex and do not provide sufficient scaled disclosure benefits,” he said. Also, under current requirements, a smaller company falling within certain parameters may qualify as an accelerated filer that would have to shoulder the cost of an auditor to attest to the company’s evaluation of its internal control over financial reporting.

“[T]he Commission should be considering whether to re-align the Commission’s filer categories to reflect the size and makeup of public companies today,” Uyeda said. “Following any potential re-alignment, the Commission should also review its disclosure requirements and identify rules that should apply only to the largest companies.”

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