July 13, 2016
I do not claim to have read the 300+ pages of the Concepts document but I do wish to make a few comments that may be applicable to the discussion.
I am an individual investor and I am interested in companies both large and small, especially the smallest companies.
a) Too many small companies becoming non-SEC reporting because they have less than 300 registered shareholders
b) Non-SEC reporting companies have no regulations to share any financial information with their shareholders. This is not right, it shouldn't be either a large set of rules to follow (SEC reporting) or no rules at all (non-SEC reporting).
Many companies have become non-SEC reporting by using the exclusion that they have less than 300 registered shareholders. This rule should be changed to registered and/or beneficial shareholders. In the modern era of electronic brokerage trading the vast majority of shares are held in "Street Name". The DTC often imposes a $500 fee on shareholders who wish to have their shares in certificate form, so very few do so. This means more and more companies are eligible to become non-SEC reporting even though they have many more than 300 separate shareholders. So, the rules should be changed to
a) Count bothe registered and/or beneficial shareholders
b) Companies must have stiff penalties imposed if they "go dark" when they don't fit the new rules
c) companies that are already dark should be given 1 year to become reporting again if in fact they have more than set shareholder level under the new ruling
I understand that SEC reporting in its current state can be very onerous and expensive for small companies, so perhaps there should be a new division line, for example maybe you must be SEC reporting if you have more than 500 registered/beneficial shareholder combined. If you have less than 500 combined then you can be non-SEC reporting to the full extent but then there should be a minimum amount of information that must be given to shareholders annualy (Consolidated Financial statements, proxy, share ownership information, etc). This must be mandatory.
In other words, we need a smaller set of financial information reporting rules for very small companies that have publicly traded shares. Those who are non-SEC reporting should NOT be allowed to exist without any reporting rules. The requirements could be set to minimal levels but they must be mandatory and the companies must be obligated to inform all shareholders (registered and beneficial) alike.