For years, business leaders and commentators have observed that the regulatory requirements to be met to finance companies in the United States have become overly burdensome and discourage entrepreneurship. As attention in the United States has turned to promoting economic activity, the dialogue related to regulatory burdens and their effect on capital formation, job creation and general financial security has taken on a new sense of urgency. Congress is listening and there are several significant legislative proposals that would ease the regulatory burdens of smaller companies.
Background
The exchanges between U.S. Rep. Darrell Issa, R-Calif., Chairman of the House Committee on Oversight and Government Reform, and Mary Schapiro, the Chairwoman of the SEC, earlier this year crystallize the concerns that are now at the center of this debate on capital formation reform. Mr. Issa’s March 2011 letter to Ms. Schapiro raised concerns regarding the potentially chilling effect of SEC regulations on capital raising by small and emerging companies. Mr. Issa cited statistics on the IPO market and asked whether the SEC had studied whether the decline in the number of IPOs, and especially IPOs for smaller companies, was associated with Sarbanes-Oxley or other regulatory burdens. He also asked that the SEC consider current restrictions on offering related communications, especially in light of technological advances.
