The SEC is studying whether growth of closely held companies is being hindered by limits on the number of shareholders they can have, SEC Chairwoman Mary Schapiro said Tuesday before a House panel.
The agency’s staff is reviewing a rule that requires firms with more than 499 shareholders to disclose financial information, as well as other restrictions on how private firms can solicit investors, Ms. Schapiro said in remarks for a House Oversight and Government Reform Committee hearing on the future of capital formation. The SEC is forming a committee on small and emerging firms to contribute to the review, she said.
The SEC sharpened its focus on how unlisted companies raise money after Goldman Sachs Group halted a planned offering of as much as $1.5 billion in Facebook to U.S. investors. Goldman Sachs said on Jan. 17 it pulled the offer because of concern that “immense media attention” could violate SEC rules limiting marketing of private securities.
The 500-owner limit, which applies to firms with more than $10 million in assets, was created to ensure that shareholders get sufficient information about their investments. While the law counts so-called owners of record toward that threshold, people who invest through a fund — the so-called beneficial holders — aren’t included.
Ms. Schapiro has asked staff to review both the number of shareholders that should trigger registration as well as how those holders are counted, she said in her statement.
