Next SEC Chairman Can Prime IPO Pump
NEW YORK ( TheStreet) -- "I don't think more than a few IPOs have happened over the past couple of years below 500 million dollars."
That observation by Robert Kaplan, Jr. -- a partner with Kaplan Voekler Cunningham & Frank -- about the dearth of small initial public offerings by small and mid-sized U.S. businesses, is the best argument for the Securities and Exchange Commission and its next Chairman Elisse Walter to speed up the agency's rulemaking to implement certain aspects the bipartisan Jumpstart Our Business Startups Act, or JOBS Act, signed into law by President Obama in April.
The JOBS act is meant to spur investment in smaller companies by easing securities registration requirements and reporting requirements, while also opening up fundraising away from traditional markets by allowing entrepreneurs to raise up to $1 million through crowdfunding.
Going public without registering
The JOBS Act expands the exceptions to Regulation A of the amended Securities Act of 1933, enabling small businesses to raise up to $50 million in capital through public offerings every 12 months, without registering with the SEC. The old limit was $5 million.
Kaplan Voekler Cunningham & Frank partner Thomas Voekler says "the JOBS Act is getting back to main street investing and getting smaller companies listed on an exchange. We're talking about small to mid-sized companies being able to raise capital, which has been closed to them. The hope is that the SEC can continue the forward press on getting these rules out, to reduce the regulatory burden to raise capital, hopefully on a more Main Street, regional focus."
Sounds great, right? The JOBS Act had very strong support from both parties in Congress, with the Senate voting in favor by 73 to 26, while the House of Representatives voted 380 to 41 in favor, but the SEC is dragging its feet on the implementation of the law.
The SEC is required to implement its final regulations per the JOBS Act within one year of the bill's signing, which makes sense, considering that the bill is meant to jumpstart a very slow economic recovery. However, for Regulation A, Kaplan says "the market is hoping to see the rules finalized by the second quarter of 2014."
"They are coming up with a deadline in December for implementing their rules on crowdfunding," Kaplan says, "but their timeframes can be exceeded on a fairly regular basis. As far as hard time frames, the SEC has a lot of flexibility in complying or not complying with those time frames."
Kaplan adds that "for crowdfunding, my guess is you will see some delay, since there was a December deadline for some regulations," and the transition of SEC leadership from outgoing Chairman Mary Schapiro to current commission member Elisse Walter, "will slow things down."