Investment Products

SEC Should Call a Halt to Private Offering Proposals That Put Investors and the Economy at Risk, Investor and Public Interest Groups Warn

Washington, D.C. – Pro-investor and public interest groups are sounding the alarm that the Securities and Exchange Commission is rushing to judgement on issues that are critical to the nation’s economy without collecting adequate data, conducting a thorough analysis, or allowing sufficient time for public comment.  On issues of vast importance to all investors and our economy, not allowing sufficient time for the public to offer considered input is a gross disservice to investors and threatens the health of public markets on which our nation’s economy depends.

The comment period on the SEC’s sweeping concept release on exempt securities offerings closes today.  In the name of “harmonizing” the complex web of securities law exemptions, the SEC lays out a framework that would actually further expand the ability of companies to raise capital from the general public without meeting the basic transparency and accountability requirements of the federal securities laws. As such, it threatens to recreate conditions that led to the stock market crash of 1929 and contributed to the 2008 financial crisis.

Consumer Federation of America (CFA), Americans for Financial Reform (AFR), Better Markets, the Center for American Progress (CAP), and AFL-CIO called on the SEC to:

  • Call a halt to any expansion of the private offering exemptions, such as those outlined in the Concept Release, until the Commission can conduct a careful analysis of the impact of the proliferation and expansion of exempt offerings on the health of our public markets, investor protection generally, and other impacts on the economy and the public interest.
  • Identify gaps in the Commission’s knowledge of private markets, including the significant lack of data regarding the Regulation D market, that prevents it from analyzing the impacts of its policy proposal and develop a plan for closing those information gaps before proceeding with further rulemaking.
  • Re-issue the Concept Release disclosing the information learned from the above and provide an additional, ample comment period of no less than 90 days to allow for thoughtful public input into the Commission’s policy proposals.

“Despite mounting evidence of declining public markets and increased problems in private markets, the Commission hasn’t given serious attention to either issue in its concept release,” said CFA Director of Investor Protection Barbara Roper. “With its focus on harmonizing the existing exemptions, the Commission is rearranging deck chairs on the Titanic instead of fixing the hole in the boat. Worse, its proposals to expand retail investor access to private markets threaten to make that hole much, much bigger.”

“While the SEC bemoans the size and vitality of the public markets, it continues to enable the expansion of dark private markets, bleeding public investors of opportunities, transparency and accountability, and our economy of much-need capital formation,” said Dennis Kelleher, President and CEO of Better Markets.  “Many of these problems are of the SEC’s own creation.  Jamming through this far-reaching and ill-considered release will just make them worse.  The SEC should hit the pause button, collect and analyze the data, and provide the public with a meaningful opportunity to comment.”

“Under the original New Deal mandate of the SEC, the U.S. system of public markets became the deepest, most liquid, and most efficient securities markets the world had ever seen,” said AFR Policy Director Marcus Stanley. “But in recent decades, rather than building on this success, regulators have created a system of exemptions that has allowed the private offering market to expand to the point where it now accounts for much more capital than the public markets. Private markets do not have the disclosure requirements, corporate governance features, or liquidity of public markets, and their expansion has been harmful to both investors and the broader economy. But instead of re-examining and limiting private markets, the SEC concept release appears to point the way to still further ill-considered expansion of private markets. The Commission needs to turn back from this path, do the research to measure the actual effects of private markets, and act to limit their risks.”

“Why the SEC would aim to make corporations even less transparent and accountable to shareholders and the public is hard to fathom,” said Andy Green, Managing Director of Economic Policy at the Center for American Progress. “The yawning gap between corporate profits and worker wages, along with enormous challenges like climate change, shows that working families need companies to be paying more attention to environmental, social and governance matters. Instead of deregulating, policymakers should be boosting transparency, accountability, and oversight across all large companies.”


Barbara Roper, CFA, 719-543-9468

Christopher Elliott, Better Markets, 202-618-6433

Marcus Stanley, AFR, 202-466-3672