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Remarks to the Annual Government-Business Forum on Small Business Capital Formation

Chairman Jay Clayton

Nov. 30, 2017

Thank you, [Bill and Sebastian].  Welcome everyone to the 36th annual Government-Business Forum on Small Business Capital Formation.  We have made it a priority to reach out to investors and small businesses across the country—including in Texas—and I am delighted that this year’s Forum is being held in Austin.  The Texas capital is known for its lively music scene, but the crowd is gathered here today because Austin is known as the “rock star” of small business cities.[1]  Austin has received a number of accolades in recent months, including being named the number one place in America to start a business, the top city for “small business vitality,” and the top city for launching a technology startup.[2]  

We were excited to take this year’s Forum outside of the nation’s capital, and we have received a warm welcome and generous support from the Herb Kelleher Center at the McCombs School of Business at The University of Texas at Austin.  I want to extend our sincere thanks to them for co-hosting this event in the Great State of Texas.  I also want to express my gratitude to all of our panelists and moderators and to the staff of the Division of Corporation Finance, as this Forum would not be possible without all of you.  

This annual Forum provides an opportunity to hear directly from the small business community about their experiences raising capital, interacting with investors, and navigating our regulatory system.  It also provides an opportunity to receive their recommendations on how to improve small business capital formation and the regulatory environment for these companies. 

The Forum furthers several of the principles that I believe should guide the SEC.  The Commission has a tripartite mission—to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.  One of my priorities is for the Commission to focus on facilitating capital-raising opportunities for all companies, but importantly, small- and medium-sized businesses.  Small businesses contribute significantly to U.S. job creation.  In fact, America’s 30 million small businesses generate 62 percent of new net jobs.[3]  And hearing views directly from the small business community provides us with greater insight into how our capital markets may better facilitate capital formation—without compromising important investor protections.  This enables us to better work with other regulators to enhance the opportunities for small businesses in all areas of the United States to grow and create jobs.

Enhanced small business capital formation also provides the seeds for more diverse investment opportunities for Main Street investors, or as I call them, “Mr. or Ms. 401(k).”  At a time when greater responsibility is shifting to Main Street investors to save for their own retirement, I believe serving the long-term interests of Mr. or Ms. 401(k) — including providing more investment opportunities — is an important guiding principle for the SEC.  Providing more opportunities for investors to diversify their investments in companies at an earlier stage in their development allows Main Street investors to participate in the growth opportunities these companies offer.

There are many new capital raising options available to small and emerging companies, and you will hear from our panelists, who have first-hand experience with them.  At the SEC, we are actively looking at additional measures to facilitate small business capital formation and ways to remove obstacles or reduce regulatory burdens, again without compromising important investor safeguards.

I have noted my concern that our public capital markets are relatively less attractive to growing businesses than in the past.  I believe a key to restoring vibrancy in our public markets is recognition that a one size regulatory structure does not fit all.  Recently, Congress and the SEC have taken significant steps to further develop a capital formation ecosystem that includes a scaled disclosure regime.  Now, for example, a small company may begin with a Regulation A mini-public offering of up to $50 million, then move to a fully registered public offering as a smaller reporting company, and eventually develop into a larger, more seasoned issuer.  This is a potentially significant development and I believe there remains room for improving our approach to the regulation of capital formation over the life cycle of a company — to be clear, improvements that also serve the best interests of long-term retail investors. In the coming months I anticipate that the Commission will consider adopting rules to expand the definition of “smaller reporting company” to permit additional companies to avail themselves of scaled disclosure requirements.

I am very pleased to announce that the SEC’s Office of Small Business Policy recently updated the small business website on sec.gov.  I encourage small businesses and their advisors to visit the new website, which provides easily accessible and user-friendly resources on the various capital raising options available to small businesses, including exemptions from registration.

Additionally, we are taking steps to fill the position of the Advocate to head the Commission’s new Office of the Advocate for Small Business Capital Formation.  The Advocate will be a powerful voice for small businesses across the country, providing assistance, conducting outreach to better understand their concerns and recommending improvements to the regulatory environment.  The Advocate also will be responsible for organizing this annual Forum and will become a member of our Small Business Capital Formation Advisory Committee.  I anticipate that the Commission will select the Advocate in the near future. 

These are just a few examples of our efforts to facilitate companies’ access to capital while protecting investors.  But we can and will do more to advance our capital formation mission.  Today’s panel discussion and recommendations will be useful to us as we continue that work.  Thank you again for participating.


[1] Pollard M. and Frauenheim E., Why Austin is the Rockstar of Small Business Cities, Fortune (Oct. 10, 2016), available at http://www.fortune.com/2016/10/10/austin-small-business/

[2] Id.

[3]  U.S. Small Business Administration, Office of Advocacy, Frequently Asked Questions About Small Business (August 2017), available at https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2017-WEB.pdf.

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