U.S. Startups Fight SEC Over Fundraising Disclosures

SEC proposal for advance disclosure runs counter to startups’ less predictable fundraising efforts.

Startup companies that celebrated the passage of a U.S. law allowing them to solicit investors more more openly say regulators may undercut that move by requiring detailed disclosures of their fundraising.

An 80-year-old ban on advertising private investments ends today, allowing businesses to make public pitches to certain investors. At the same time, the Securities and Exchange Commission is weighing whether to require companies to file advance disclosures of those efforts. Failing to file could trigger a one-year disqualification from selling shares.

More Information

The form increases the amount of information companies must disclose, including additional details on how they will use the money. A company that fails to file the form could be banned from conducting a similar offering for a year.

‘Grandma and Grandpa’

“The investor I am concerned about is the one who flicks on his computer, and whoever has the slickest website can sell directly to that person,” Abshure said at the SEC meeting. “I’m talking mom and pop, grandma and grandpa, retail investors.”

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