Good morning.  Welcome to the annual Government-Business Forum on Small Business Capital Formation.  I would also like to thank Sebastian and his team for all their work in putting the forum together.

Since 1982 this forum has provided a means for the public to engage on issues that are impacting small businesses and capital formation throughout this country.  This forum, therefore, necessarily involves consideration of two critical components of small business capital formation–the small businesses themselves and the investors who support them.  How are initiatives geared towards facilitating capital formation working in practice?  

Who is benefitting from these initiatives and is any group being left out? 

Last year, we adopted Regulation A+ and Regulation Crowdfunding.  Three weeks ago, the Commission adopted revisions to the intrastate offering exemption in Securities Act Rule 147, created a new offering exemption under Rule 147A, and revised Rule 504 of Regulation D by raising the aggregate offering limit from $1 million to $5 million in a 12-month period.  Rule 504 was also revised to include bad actor disqualification provisions.  All of these initiatives were adopted with the purpose of increasing the options available to small businesses to raise capital.  These initiatives also incorporated the Commission’s considerations of investor protection, market integrity and market confidence.  How do we provide opportunities for small businesses while instilling market confidence so that investors are willing to provide capital to small businesses? 

It has been more than a year since the adoption of Regulation A+ and six months since the effective date of Regulation Crowdfunding.  By some accounts, the new capital raising options have not been widely adopted.

Other data suggest those using the new options are concentrated by sector and geographic region.  Why is this?  Is there a problem with supply—i.e., not enough small businesses want to utilize these capital raising options?  Or do we have a demand problem—i.e., not enough investors who are willing to put capital into this space?  Alternatively, do we have a problem with outreach, support and, education? 

Ultimately, we have to ask how our rules should work for all small businesses and their investors.  These are not simple questions with simple answers.  We need to think broadly and creatively.  We need to avoid jumping prematurely to conclusions without the data needed to support such conclusions.  Additionally, we need to think about how we build and promote confidence in the market so that much needed capital can flow to businesses trying to expand and grow.  Today, we will start out focusing on what is happening in the current landscape for capital formation.

If preliminary results suggest geographic, sector, or demographic concentration of businesses using the new capital formation options, then perhaps we should query what more needs to be done to ensure equality of opportunity for all small business owners.   

How do we ensure that the small business owner in Tennessee is as aware of the options available for her start-up as her male counterpart in California?  What more can be done to support the diverse groups of current owners and would be business owners, which may include the African American woman seeking to fund a hair product idea or the Armenian immigrant seeking to open a small restaurant?  

As such, I invite you to consider recommendations that focus on data collection and more outreach.  Also, I encourage you to consider recommendations that would continue to instill confidence in our markets. 

When investors are protected, investor confidence and willingness to invest will likely be maintained or rise, which positively impacts the funding environment for small businesses.  

Thank you.