April 27, 2010
My comment relates to the proposed changes to Regulation D. It is unreasonable to require small issuers to agree to provide information that would be required if the offering were registered on Form S-1. Small issuers will generally not be able to provide financial statements that comply with the internal control requirements of Sarbanes Oxley. This requirement alone will make it impossible to comply with any request for information made pursuant to the transaction agreement. Beyond the internal control issue, the information that would be provided in an S-1 registration statement is far too comprehensive and burdensome to be reasonably required of small issuers. I recommend that the new requirement be applicable only to offerings of a specified size. A $50 million threshold seems appropriate, since that is the point at which registrations are sometimes said to become cost effective. If that number seems too large to the SEC, then at the very least, the requirement should not be applied to offerings not exceeding $10 million. This is the number applicable for an exemption under the Trust Indenture Act. The market impact the SEC is concerned about does not apply to these smaller offerings, which typically do not make their way into the institutional investor market.