June 28, 2016
Cable Car Capital LLC ("Cable Car") is a state-registered investment adviser based in San Francisco. Cable Car regularly evaluates companies which meet both the current and proposed "smaller reporting company" definitions and appreciates this opportunity to comment. Cable Car does not support increasing the range of the exemption and, by contrast, would support removing the exemption altogether.
In the course of the investment research process, Cable Car and other similarly situated advisers do not generally distinguish between companies of different sizes when determining whether information would be useful to understand an issuer's business. Although market participants may classify issuers by size for reasons of convenience or investment mandate, there exists no arbitrary size below which investors would prefer to have LESS disclosure about a company. The smaller reporting company exemption exists solely for the expedience of issuers. It must be balanced against the expense of market participants who have less information from which to draw conclusions.
Certain of the exemptions, such as not requiring disclosure of the principal risk factors in securities filings, actively impede investor awareness and should be reconsidered, not expanded to more issuers. Unscrupulous promoters of certain shell companies and smaller issuers already take advantage of reduced related party and management compensation disclosures when effecting pump-and-dump campaigns and similar market manipulation efforts. The Commission should not expand the universe of potential vehicles for this behavior.
As a philosophical matter, Cable Car believes investor interests are almost always enhanced by increasing disclosures by companies that seek to distribute securities into public markets. Far from impeding capital formation, robust disclosures underpin investor confidence and encourage fully informed investment decisions that help ensure capital is allocated to its highest and best use. Thank you for your consideration.