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High-Risk Cos. Seek Reg A+ Deals But Liquidity Is A Concern

February 25, 2016

Fenwick & West partner Stephen Graham, co-chair of the Securities and Exchange Commission's Advisory Committee on Small and Emerging Companies and managing partner of Fenwick's Seattle office, was interviewed recently by Law360 about the status of expanded Regulation A (or Reg A+) offerings, a capital-raising tool first made available in June 2015.

In a report just presented to the advisory committee – which recommends ways to help small businesses raise capital – Scott Bauguess, deputy director of the SEC's Division of Economic and Risk Analysis, told Graham and the other committee members that most of the interest in Reg A+ offerings to date has come from pre-revenue and other high-risk businesses in need of capital.

In addition, Bauguess said, "the success of Reg A+" – which is still uncertain – will in part "depend on whether the market provides enough liquidity to attract investors."

Asked about Bauguess’s findings, Graham told Law360 that a primary goal of the advisory committee is, in fact, to solve the liquidity problem for small and emerging companies. Graham added that regulation must be designed to limit complexity and increase certainty.

"It's important that liquidity continue to be an imperative," he said. "For me, that's pretty much the long and short of it."

Graham has served as co-chair of the SEC advisory committee since 2011. His appointment, which was renewed earlier this month, is effective until late September 2017.

The full article is available through Law360's website (subscription required).​