Commissioner Caroline Crenshaw spoke to the Conference on Financial Regulation and recommended areas for additional disclosure requirements.
Where should the SEC be seeking more data? Crenshaw offered several examples.
The private markets. For the last several years, the SEC has loosened the rules for investor activity in the private markets.
For example, in 2020 the commission expanded the definition of “accredited investors” who are legally allowed to invest in lucrative private offerings (think hot tech startups before the IPO); and it allowed larger and more frequent private offerings. Now, Crenshaw said, “The amount of capital raised via exempt offerings now far outpaces the amount raised on the public markets … And yet, while these markets have been expanding, the information we are collecting about them has not. For the most part, we do not know who invested in these private market offerings or how their investments performed.”
So Crenshaw said the SEC should revive a proposal from 2013 to expand the Regulation D disclosures that private market players need to make.
Family offices. Well, we already covered that with the Archegos example, and the limited data the SEC collects about such investment firms right now. Crenshaw’s take: “We should also carefully assess whether the data reported under this framework are sufficient to allow us to detect the buildup and concentration of risk exposures.”
Insider stock sales. Crenshaw said the SEC should add a requirement under Rule 144 (which governs the sale of restricted securities) that corporate insiders must disclose when they sell restricted shares as part of a Rule 10(b)5-1 plan, and to disclose the date the plan was adopted. “This would allow the SEC to more easily detect abuse of 10b5-1 plans,” she said. Such abuse has been on the SEC’s radar for a while now.Another Crenshaw Speech on SEC Policy – Radical Compliance