Coalition Letter in Support of the “JOBS Act 4.0” Capital Formation Package

By SBE Council at 5 April, 2022, 11:06 am

Dear Chairman Brown, Ranking Member Toomey, and Members of the Committee,

We the undersigned write in strong support of the JOBS Act 4.0 capital formation package and would like
to thank Ranking Member Toomey and the Members of the Senate Banking Committee for their
leadership on this important issue. Capital markets play a vital role in the U.S. economy, providing many
small businesses, entrepreneurs, and startups with the access to capital they need to innovate, grow, and
create jobs.

Financial regulations should be crafted with the understanding that market participants are best positioned
to make their own financial choices, and regulators should focus on protecting against bad actors and
fraud. Creative destruction, risk-taking, potential for failure, and consumer choice are all necessary parts
of an advancing economy.

Many small businesses, startups, and entrepreneurs rely on the ability to raise the capital needed to start
and grow their business. A vibrant business and startup ecosystem contributes to higher economic growth,
job creation, wages, and investment. Consumers also benefit from the innovative services and
technological advances they provide. As American businesses and families face higher prices and costs of
living, regulations that hamstring economic activity should be especially concerning.

While U.S. capital markets are the largest in the world and account for over 70 percent of financing for
non-financial firms in the U.S. (1), in many ways they are failing businesses and investors. This is in large
part due to poorly drawn securities laws and financial regulations at the state and federal level. There has
been a remarkable decline in companies going public (2), and the costs imposed by the current regulatory
regime have made it less attractive to do so. But private securities markets are also in need of serious
reform. According to Securities and Exchange Commission (SEC) data, in 2018, $1.4 trillion was raised
through public, registered offerings compared to $2.9 trillion in offerings made through the SEC’s
exemption framework (3). While private markets provide important opportunities for businesses and
investors, current regulations often limit those opportunities to affluent investors and certain exemptions
have fallen short of their intended goals.

Instead of reining in regulations that have stunted investment and capital formation, the SEC has doubled
down on imposing burdensome and costly regulations on American businesses and investors. The [capital
markets agenda] addresses many of those regulatory burdens head on, making it easier for businesses and
investors to participate in U.S. capital markets.

Among the many commendable pieces of legislation introduced, we would like to highlight that this
capital formation agenda would help businesses access capital by:

• Creating a micro-offering exemption to help small businesses and entrepreneurs gain
access to capital without having to face burdensome and costly mandated disclosures or
offering filings. (S. 3939 Small Entrepreneurs’ Empowerment and Development
(SEED) Act, Senator Tim Scott)

• Making capital formation through crowdfunding more viable, benefiting issuers,
investors, and funding portals. (S. 3967 Improving Crowdfunding Opportunities Act,
Senator Moran)

• Expanding capital formation by exempting certain secondary offerings of Regulation A
securities from state regulation. (S. 3966 Facilitating Main Street Offerings Act,
Senator Moran)

• Bringing an end to the uncertain and overbearing regulations faced by finders, allowing
them to work better with small businesses and entrepreneurs to raise much needed
capital. (S. 3922 Unlocking Capital for Small Businesses Act, Senator Cramer)

• Repealing unnecessary and burdensome disclosure requirements enacted under DoddFrank. These politically-charged disclosures place substantial costs on companies, and
fail to protect investors or maintain fair, orderly, and efficient markets. (S. 3923 DoddFrank Material Disclosure Improvement Act, Senator Cramer)

We applaud Ranking Member Toomey the Members of the Senate Banking Committee for putting
forward these critical pieces of legislation and urge Congress to swiftly pass these important reforms.

Sincerely,

Brent Wm. Gardner
Chief Government Affairs Officer
Americans for Prosperity

Bryan Bashur
Executive Director
Shareholder Advocacy Forum

David McIntosh
President
Club for Growth

Adam Brandon
President
FreedomWorks

Garrett Bess
Vice President
Heritage Action for America

Daniel Garza
President
The Libre Initiative

Karen Kerrigan
President & CEO
Small Business and Entrepreneurship Council

John Berlau
Director of Finance Policy
Competitive Enterprise Institute

Grover Norquist
President
Americans for Tax Reform

1 https://www.sifma.org/resources/news/10-facts-about-the-us-capital-markets-2021/
2 https://corpgov.law.harvard.edu/2017/05/18/looking-behind-the-declining-number-of-public-companies/
3 https://www.sec.gov/rules/concept/2019/33-10649.pdf