The Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, chaired by Rep. Scott Garrett (R-NJ), held its second in a series of hearings on Wednesday to review legislative proposals designed to reduce regulatory burdens so small companies can gain access to job-creating capital.
“As multiple witnesses have testified to this Committee over the years, our current equity market structure in many ways disadvantages small issuers, who often times find their stocks trading in illiquid markets with little to no research coverage. This has the ultimate effect of raising the cost of capital for these companies, impacting their ability to grow and hire new workers,” said Chairman Garrett.
Key Takeaways From the Hearing:
- Excessive and unnecessary regulation whose costs outweigh benefits is bad regulation that harms Americans, especially those with low and moderate incomes, who are already struggling in this economy.
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- Small businesses are the primary innovators and job creators of our economy, but the cost of regulation falls heaviest on them. In fact, businesses with fewer than 20 employees spend 45% more per employee complying with federal regulations than bigger businesses.
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- By passing the Jumpstart Our Business Startups (JOBS) Act in 2012, Congress took an important, bipartisan step toward easing the regulatory burden on small business seeking access to capital markets. The parts of the JOBS Act that have gone into effect are already helping small businesses and Emerging Growth Companies gain access to capital markets at a lower cost.
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- While the JOBS Act has made it easier for these companies to go public, the JOBS Act alone is not enough to entirely overcome the obstacles they face in trying to go public. Many small companies still cannot access the capital they need to grow their businesses and create jobs.
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- Targeted legislation that can improve liquidity for small companies, increases investor access to research , recognizes that not all public companies are large, sophisticated and well-known and requires the SEC to review its rules periodically will promote healthier capital markets.
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Topline Quotes from Witnesses:
“Taken together these draft bills and the other legislative proposals from the April 29, 2015 hearing would provide a basis to allow entrepreneurs to create new businesses, give investors more information and new ways to invest, and regulators the means to have better oversight of the capital markets. This is a public policy trifecta needed to give businesses the ability to grow and stay competitive while creating new jobs." – Thomas Quaadman, Center for Capital Markets at the U.S. Chamber of Commerce.
“Removing artificial regulatory impediments to small firm secondary markets makes it more likely that investment capital will flow to entrepreneurial enterprises. Inadequate access to capital is one of the central barriers to entrepreneurial success and a better functioning secondary market for small firms will improve access to capital for entrepreneurs.” – David Burton, Senior Fellow, The Heritage Foundation
