A panel of small business experts on Friday urged US securities regulators to encourage the creation of a new exchange to list smaller companies to make it easier for them to enter the public market. The recommendation by the Advisory Committee on Small and Emerging Companies to the Securities and Exchange Commission is not binding.
Still, policy suggestions from the group carry weight with regulators, who created the committee in 2011 to seek advice on regulations affecting private companies and public companies with a market capitalisation of less than $250 million. The 2012 Jumpstart Our Business Startups (JOBS) Act already contains provisions that aim to make it easier for smaller companies to go public by loosening securities regulations.
However, Stephen Graham, a partner at law firm Fenwick & West LLP and co-chair of the advisory committee, said the law does not go far enough to encourage initial public offerings by smaller companies. He said a new exchange offering such listings could make it more cost-effective.
"You really have to make it a lot cheaper to go public," he told reporters on the sidelines of the meeting. "I don't think the JOBS Act does that. I think the JOBS Act certainly changes in a fundamental way how IPOs are done, but I don't think it encourages IPOs." The committee envisions an exchange that would provide a regulatory framework "strict enough to protect investors, but flexible enough to accommodate innovation and growth," according to a draft of its recommendation.
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