As NASAA’s New President, I’m Starting a Campaign for ‘Smarter Regulation’

As Ohio securities commissioner, I protect Main Street investors by bringing disciplinary actions against licensed individuals who engage in dishonest or unethical practices. I also work with many Main Street businesses and their counsel, helping them to understand the various options for raising capital under state and federal law. 

Like my colleagues in other states, I have no interest in throwing up needless barriers to economic development.

Drawing upon our experience with small businesses that want to create jobs, states are committed to exploring new and innovative ways of fostering small business capital formation. But our experience with investors tells us that we also need to create an environment in which investors feel sufficiently protected.

The trick is to balance the legitimate interests of investors with the legitimate goals of entrepreneurs, and to adopt policies that are fair to both.

Under my presidency, NASAA is embarking upon a campaign for “smarter regulation” – regulation that takes advantage of technology to make the offering process more efficient for small businesses without sacrificing important protections for investors.   

A first step in this direction involves Regulation A+. 

When a company wants to raise capital by selling securities, the company must first register those securities with the government unless the securities are sold in a way that qualifies for an exemption from the registration process. Title IV of the JOBS Act requires the SEC to adopt a rule to provide an exemption for certain offerings up to $50 million. Because of its similarity to the current exemption under Regulation A, which is capped at only $5 million, this new exemption is commonly referred to as Regulation A+.

These offerings will be exempt from SEC registration under the new Section 3(b)(2) of the Securities Act of 1933, but they will be subject to registration at the state level unless the securities are listed on a national securities exchange or sold to a qualified purchaser as defined by the SEC.

Given the risky nature of investments in startups, and the fact that the states have traditionally been the primary regulator of small offerings, NASAA believes state oversight of these offerings is essential. However, we recognize the need to change some of our longstanding policies to make Reg A+ successful.