On April 6, Mary Schapiro, chairwoman of the Securities and Exchange Commission, sent a letter to Rep. Darrell Issa, chairman of the Committee on Oversight and Government Reform, responding to a March 22 letter from Issa concerning capital formation issues. In her letter, Schapiro indicated that the SEC would consider revising the rules that govern the way in which small businesses are able to tap into equity markets in the new era of crowdfunding, social media and other new communications media that did not exist when the current SEC rules were established.

Issa’s letter discussed a number of perceived problems encountered in recent securities offerings, including the January decision by Goldman Sachs and Facebook Inc. to offer shares in a $1.5 billion private offering only outside the U.S. In her letter, Schapiro indicated that the review is intended to give the SEC “a fresh look at our rules to develop ideas for the commission about ways to reduce the regulatory burdens on small business capital formation in a manner consistent with investor protection.” In addition, Schapiro indicated that the SEC’s review will be focused on (1) communications in connection with securities offerings; (2) capital formation and the regulatory environment; (3) initial public offerings; (4) the shareholder threshold for public reporting; (5) new capital raising strategies; and (6) investments in startups.

Restrictions Under Current SEC Rules

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