Congressional Testimony: Examining Private Market Exemptions as a Barrier to IPOs and Retail Investment

Abstract

This testimony, presented to the House Financial Services Committee, Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, focuses on the risks the growing number of large private companies present for investors, employees, consumers and society. This testimony (1) highlights the main objectives of the federal securities laws and the mechanisms Congress adopted to achieve these objectives, (2) explains the statutory bases for the principal exemptions from the securities laws registration and disclosure requirements, and (3) shows how regulatory exemptions that once sought to clarify and reinforce the principles embodied in the statutes have evolved to the point that they are no longer are linked to the statutory purpose. Finally, it highlights some of the unintended consequences that have flowed from fostering the proliferation of an unprecedented number of highly-capitalized private companies, also known as unicorns, with little information available to investors and the public about their performance, products, and operations.