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SEC Commissioner Crenshaw Speaks at Small Business Forum

Good afternoon! Thank you Martha [Miller] for the warm introduction. It is wonderful to be here. I have truly enjoyed hearing from all of the panelists over the last several days. And I am particularly interested in today’s discussion focused on smaller public companies.

You may not know this about me, but I am the proud sister of an entrepreneur. My brother started his own business before the pandemic – and he is everything from the chief executive and chief financial officer to the IT and customer service departments to the expert on intellectual property issues. I know how challenging it is to start and run your own business. I also know successful small businesses are critical to our economy. In 2019, the Small Business Administration noted that small businesses were responsible for over 40 percent of U.S. economic activity.[1] Small businesses accounted for more than 60 percent of new private sector jobs from 2005 to 2019.[2]

Because small businesses are so important to the health of our economy, it is critical that the Commission and its staff hear from small business owners, investors and advisers about their experiences. We need your input on what is working and what is not. We need your ideas about regulatory changes that could promote greater equity in capital access. We need your feedback about the process for initial public offerings. And we need you to tell us about any other issues facing smaller public companies today, and the potential regulatory changes that could help them continue to grow and succeed.

In past forums and discussions on this topic, we have heard that there is a need to promote greater liquidity in secondary trading markets for securities of smaller public companies. I’m very interested in hearing whether market structure changes could help address liquidity issues and encourage greater investment in these companies. In 2019, the Commission issued a statement noting that concurrent trading of securities on multiple exchanges may be limiting liquidity for smaller public company stocks.[3] Would suspending unlisted trading privileges for these companies facilitate greater liquidity?

Prior small business forums have also addressed the 40-year-old regulatory framework for transfer agents – the entities that facilitate the transfer, issuance and cancellation of securities. Would a modernized regulatory framework allow smaller public companies, other issuers, and investors to work with transfer agents more effectively? If so, what disclosure requirements and internal controls are needed in today’s markets?

Finally, are there proxy process improvements that could create efficiencies for smaller public companies and their investors? I could continue to pose questions but you have a lot on the agenda today and I don’t want to stand in the way. Thank you all for being here and for allowing me to give opening remarks. I’m looking forward to today’s discussion.

ENDNOTES

[1] Press Release, “Small Businesses Generate 44 Percent of U.S. Economic Activity,” U.S. Small Business Administration Office of Advocacy (Jan. 30, 2019).

[2] Report, “Small Business Administration and Job Creation,” Congressional Research Service, at 8 (Jun. 15, 2020).

[3] The 2019 statement was issued with the intention of encouraging market innovations that could improve liquidity for securities traded in lower volume. The Commission expressed interest in potential market structure innovations that included “the potential suspension or termination of UTP and/or the possibility of exemptive relief from Regulation NMS and other rules under the Exchange Act.” See Commission Statement on Market Structure Innovation for Thinly Traded Securities, Rel. No. 34-87327, at 5 (Oct. 17, 2019); see also Division of Trading and Markets: Background Paper on the Market Structure for Thinly Traded Securities (Oct. 17, 2019).

These remarks were delivered on May 27, 2021, by Caroline A. Crenshaw, commissioner of the U.S. Securities and Exchange Commission, at the 40th Annual SEC Small Business Forum.

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