SEC Chairman Mary Schapiro has asked her staff to look into possible rule revisions to make it easier for companies like Facebook and Twitter to raise money, while avoiding costly reporting requirements.  Currently, private companies don't need to register (and disclose financial data) so long as they have fewer than 500 shareholders.  Such new rules might replace the process by which technology companies and other startups offer shares publicly through IPOs. 

Earlier this week, Ms. Schapiro informed Rep. Darrell Issa (R-CA) of the review.  Mr. Issa chairs the House Oversight and Government Reform Committee, which previously raised concerns that current rules discourage investment and limit economic growth.  In her written response, Ms. Schapiro said the SEC must walk a fine line, protecting investors from insider trading while making it easier for private companies to raise money.

Companies "should not be overburdened by unnecessary or superfluous regulations."  "At the same time, all offerings must, of course, provide the necessary information and protections to give investors the confidence they need to invest in our markets."

Many of these companies are startups in name only.  They have thousands of employees and estimated billions of dollars in yearly revenue.  But they've put off going public in part because they already have access to capital from deep-pocketed investors and venture capitalists.  Going public also requires a time commitment from top executives.  Facebook's 26-year-old CEO, Mark Zuckerberg, seems to prefer keeping his focus on the company's product development, rather than cashing out through an IPO or answering analysts' questions about earnings and revenue in quarterly conference calls.

For that reason, Facebook has been trying to put off reaching the 500-shareholder threshold.  For example, it has barred current employees from selling their shares.  Nonetheless, the firm recently indicated that it's likely to file its IPO plans by the end of April 2012.

Before the companies' IPOs, shares of privately held companies can be traded on private stock exchanges, such as SecondMarket, based in New York, and SharesPost, based in San Bruno, Calif. The shares are generally sold by former employees or early investors in these companies, and often there are more buyers than sellers. Only institutional investors or high net-worth individuals -- those worth more than $1 million -- can buy the shares.  

For further details, go to:    [Associated Press, 4/7]