[ by Melanie Gretchen ]

The SEC was advised to support the creation of a new stock exchange - one where trading is limited to shares of small companies.  The SEC Advisory Group on Small and Emerging Companies, which made the recommendation, said such an exchange would help small companies that currently have trouble raising capital in public markets. 

The idea of a new exchange for small companies also makes sense, given the 2012 passage of the Jumpstart Our Business Startups Act, a law intended to boost the number of IPOs.   Under the JOBS Act, smaller capitalized firms may roll out IPOs that have less regimented disclosure requirements and fewer restrictions on how firms can advertise for investors. 

The SEC Advisory Group offered this qualification in its recommendation - that the new exchange be limited to sophisticated investors - although that term was not defined at this time. 

The SEC is under no obligation to follow the advisory group's recommendations.  However, the SEC has had difficulty crafting new rules around the JOBS Act, and this has limited the effectiveness of the eased IPO regulations.

Stephen Graham, who co-chairs the advisory group, and represents emerging companies as a law partner with Fenwick & West LLP, had the following comment in support of a new exchange:

"The JOBS Act, at least in my view, definitely did not do enough.  The main reason why companies don't want to go public is liquidity in the stock," as well as disclosure requirements."

[Traders Magazine, 2/1/13]