WASHINGTON, April 11 (Reuters) - At least 175 companies have taken advantage of a new law that allows them to keep their draft initial public offering documents confidential, two top U.S. Securities and Exchange Commission officials told lawmakers on Thursday.
Lona Nallengara and John Ramsay, acting directors for the SEC’s divisions of corporation finance and trading and of markets, respectively, reported on companies using the Jumpstart Our Business Startups, or JOBS Act, in testimony prepared for a U.S. House of Representatives Small Business panel.
Signed into law roughly one year ago, the JOBS Act is a measure designed to spur small business growth by relaxing federal securities regulations to make it easier for companies to raise capital and eventually go public.
It received wide bipartisan support but has also faced staunch criticism from some Democrats and investor advocates who say it causes critical information to be withheld from investors and could expose them to fraud.
Many of the provisions of the JOBS Act went into effect right away when it was signed into law, but several key sections still require rulewriting by the SEC.
One rule, for instance, would lift a long-standing ban on general advertising for private placement offerings, making it easier for hedge funds and others to reach new investors.
Another rule would establish a new regulatory regime for intermediaries that offer crowdfunding, a capital-raising strategy that lets investors take small stakes in private start-ups over the Internet.
The SEC is far behind in completing the rules, and Republicans are unhappy at the agency for missing congressional deadlines.
“The longer we wait for action by the regulators, the more our engines of economic growth will continue to simply tread water, or worse yet starve, for lack of opportunity,” said Republican David Schweikert, who chairs the House Small Business Subcommittee on investigations, in prepared opening remarks.
The two SEC officials did not give any timetables for when rules may be completed.
Mary Jo White, who was sworn in on Wednesday as the SEC’s new chairman, has said JOBS Act rulemaking would be among her top priorities, but she has not yet revealed her thinking on how the rules should be crafted.
In addition to the confidential IPO filings, the SEC officials said banks are taking advantage of another provision in the law which changed the number of shareholders of record that trigger public financial reporting requirements.
To date, about 78 banks have deregistered with the agency, meaning they no longer need to publicly report.