Giving Small Business a Voice at the SEC
This idea owes its visibility, if not its genesis, to a speech by now-former Commissioner Daniel Gallagher. He lamented small business’ underrepresentation in legislative and regulatory matters, leading to more onerous and expensive regulations that prevent small businesses from accessing the capital they need to grow and energize the economy. Among the reforms Gallagher proposed was a small business advocate to serve as the sector’s voice inside the SEC and an advisory committee of outside experts who are knowledgeable about the unique challenges faced by small businesses.
Unlike large companies, many smaller firms cannot afford lawyers to analyze regulations, draft comment letters, request no-action relief, or advise on complex compliance requirements. A dedicated small business advocate could help to ensure that SEC staff are provided those insights. This need is likely to grow more acute in a post-JOBS Act world, as technology makes it feasible for smaller companies to turn to the securities markets.
While, to its credit, the SEC has created an Advisory Committee on Small and Emerging Companies, it is not a permanent body and there is no internal office with the statutory authority to investigate, analyze and opine on regulations or help small businesses resolve problems in the way the SEC’s Investor Advocate can. This bill would create that capability.
The bill will clearly evolve if it gains traction in the House. It’s unclear what form it will finally take or even whether it will survive. However, it deserves a close look by Congress because it presents an opportunity to help the SEC become more educated and responsive to a class of businesses that risks being underserved. The Milken Institute does not formally endorse this bill, but I applaud it for beginning an important conversation.