From: http://www.bizjournals.com/
It’s not easy living with a schizophrenic.
Just ask banks. They’re living in a regulatory environment where some federal officials encourage them to lend more money to businesses, while others advise them to be more cautious.
This “regulatory uncertainty has a bigger consequence on capital formation than any single rule,” said David Hirschmann, president and CEO of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness.
Getting regulators on the same page would go a long way to helping more businesses access the capital they need.
“It’s not that you can’t find loans,” Hirschmann said, it’s that fewer institutions are willing to compete for your business.
A healthy financial system requires banks of all sizes, but regulatory uncertainty is pressuring smaller institutions to merge because “they need to have the scale to absorb all of the compliance costs,” said Tom Quaadman, a senior vice president at the center.
On Monday, the center issued its 2016 agenda. It addresses issues such as the Department of Labor’s fiduciary rule for retirement plan advisers, which Hirschmann called “unworkable and deeply flawed,” as well as growing efforts by political activists to advance their causes through shareholder proposals.
For small businesses, the agenda includes at least three proposals that could help make capital more available:
Analyze the impact of regulations on capital formation
All financial regulators should analyze the economic impact of their regulations, including their effect on capital formation. These studies should be published and subject to public comment, and regulators should adopt the least burdensome regulatory alternative that accomplishes their goals.
Regulators also should conduct another analysis two years after a regulation is issued in order to assess its impact and address any untended consequences.
The impact of existing regulations on liquidity also should be studied, according to the center.
Build on the JOBS Act to help emerging growth companies
In October, the Securities and Exchange Commission finally adopted rules that enable small businesses to raise capital through securities-based crowdfunding — more than three years after the Jumpstart Our Business Startups Act was signed into law.
The JOBS Act also allowed companies to offer up to $50 million in stock to the public without registering with the Securities and Exchange Commission, up from the previous threshold of $5 million. It also encouraged more companies to go public by exempting them from some Securities and Exchange Commission regulations in the first five years after an initial public offering.
In December, Congress used the highway bill to take a few additional steps to make it easier for emerging growth companies to raise capital.
The center contends that more could be done in this area, such as updating disclosure requirements so that investors get meaningful information without burdening startups and emerging growth companies with costly and unnecessary paperwork.
Put a small business advocate inside the SEC
Small businesses have been an afterthought at the SEC, which spends most of it time and energy looking at large publicly traded companies.
That’s one reason why the crowdfunding regulations languished for years.
Small businesses should have their own advocate inside the SEC with “the authority to promote reforms that will help small businesses attract the capital necessary to grow, innovate and create jobs,” the chamber contends. Legislation to create this position is pending in Congress, and it was endorsed in 2014 by then-SEC Commissioner Daniel Gallagher.
“Small business capital formation is too important an issue for us to ignore,” he said at the time.
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