SEC Commissioner Daniel Gallagher urged the commission on Wednesday to fulfill its mandate to promote capital formation. The SEC should institutionalize an enhanced small business focus, Gallagher said in his prepared remarks, because its current small business mandates are “generally treated as afterthoughts on the ‘back end’ of the rulemaking process.”
Gallagher challenged the SEC to enhance its ability to review and update existing regulations that have been on the books for decades. He added: “We almost never consider how heavily the weight of the entire corpus of rules bears down on registrants. Only rarely do we remove any of our rules even after they have long since ceased to serve their purpose or have become obsolete or worse.”
In making his recommendations, Gallagher suggested that the agency create an Office of the Small Business Advocate, modeled after the SEC’s Office of the Investor Advocate. It would report to the commission and “take charge” of the SEC’s Advisory Committee on Small and Emerging Companies and the Government-Business Forum.
The portion of the commissioner’s remarks on regulatory process maps closely to issues we at the Milken Institute Center for Financial Markets (CFM) are exploring through our new FinTech: 21st Century Market and Policy Developments program. We are considering alternative regulatory approaches that would enhance coordination and regulatory agility while allowing regulators to more effectively satisfy their investor protection and capital formation objectives. These models might rely on increased use of pilot programs, aggregation and analysis of data and outcomes, and more frequent iteration in the rule-making process. Already, we are seeing some of these methods deployed through the Consumer Financial Protection Bureau’s Project Catalyst, as well as the SEC’s implementation of its Tick Size Pilot Plan.
With respect to specific medium-term recommendations for promoting capital formation in private markets, Gallagher suggested:
Among his list of recommendations for the public markets, Gallagher included:
Daniel Gorfine is the director of financial markets policy and legal counsel in the Washington office of the Milken Institute. He focuses on entrepreneurship, capital access, and financial market issues.
Jackson Mueller is a policy research analyst at the Milken Institute’s Center for Financial Markets. His focus is on capital formation policy and financial markets education initiatives.
This post was originally featured on the Milken Institute’s blog, Currency of Ideas, available at: http://www.milkeninstitute.org/blog/view/660