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Paul Hastings Michael Zuppone Addresses Regulators at the SEC Government-Business Forum on Small Business Capital Formation

December 01, 2014

New York, NY- Paul Hastings, a leading global firm, announced today that Michael  Zuppone, partner and chair of the Securities & Capital Markets practice, presented recommendations for Secondary Market Liquidity for Securities of Small Businesses at the "SEC Government-Business Forum on Small Business Capital Formation," held Thursday, November 20, 2014 by the U.S. Securities and Exchange Commission (SEC).

Mr. Zuppone’s presentation about how the market structure presents challenges for the trading of stocks of small companies was well received by the SEC.  SEC Chairwoman, Mary Jo White observed during the forum that investor liquidity challenges could constrain the positive potential that the changes to the offering process could have for small business capital formation. Commissioner Daniel M. Gallagher noted that while a robust, liquid secondary market has benefits of its own, it also promotes the health of the primary offering market, which directly benefits small business issuers.

“To develop a more hospitable market there needs to be a change in the SEC’s regulatory policy,” said Mr. Zuppone. “The SEC needs to signal to market participants that it is open to revisit Regulation NMS as it relates to a new trading market. The development of a liquid trading market for Regulation A+ Tier 2 Issuers will be impeded unless resale trading benefits from preemption of Blue Sky qualification and registration laws.”

During his presentation Mr. Zuppone made two recommendations to the panel.  First, he recommended that the SEC should permit smaller emerging growth companies (defined as companies with less than $250 million in revenues) to migrate to the periodic and current reporting system implemented for Regulation A+ Tier 2 issuers. Second, he recommended that the SEC adopt rules to preempt state blue sky law regulation of the trading in the stocks of companies reporting pursuant to Regulation A+ Tier 2 reporting system, 

The SEC hosts an annual forum called "SEC Government-Business Forum on Small Business Capital Formation," that focuses on the capital formation concerns of small business. This gathering has assembled annually since 1982, as mandated by the Small Business Investment Incentive Act of 1980. A major purpose of the Forum is to provide a platform to highlight perceived unnecessary impediments to small business capital formation and address whether they can be eliminated or reduced. Each forum seeks to develop recommendations for government and private action to improve the environment for small business capital formation, consistent with other public policy goals, including investor protection.



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