SIFMA Encouraged by SEC Plan to Ease Path for Small Company IPOs

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The Securities Industry and Financial Markets Association supports a plan floated Tuesday by SEC Chair Paul Atkins for regulators to ease the path of small companies to go public.

During SIFMA’s annual State of the Industry member briefing, President and CEO Kenneth Bentsen said the association was “very encouraged” by Atkins’ goal of reducing the filing and regulatory burdens for smaller firms considering IPOs.

“We’ve been very supportive of previous efforts by Congress and previous administrations through things like JOBS Act, 1.0, 2.0, and the development of an on-ramp for emerging growth companies,” Bentsen said via a live video for members and the media. “I think some of the stuff Chairman Atkins talked about yesterday was taking that concept of the emerging growth companies and updating it to where we are today, going into things like reporting and giving a longer runway for those smaller companies to go public.”

The original JOBS Act, or Jumpstart Our Business Startups, was passed during the Obama Administration to help make it easier for smaller or new companies to raise capital and go public. 

During remarks on Tuesday at the New York Stock Exchange, Atkins stated that under current requirements, companies with a $250 million market capitalization have the exact reporting requirements as companies 100 times their size. 

“The SEC should give strong consideration to the thresholds that separate ‘large’ companies, which are subject to all of the SEC disclosure rules, and ‘small’ companies that are subject to only some of them,” he said. “The last comprehensive reform to these thresholds took place in 2005.”

He also advocated for reducing the requirements for already publicly traded firms, who, he said, are currently required to report on information that is not financially material to investors.

In the third quarter, the IPO market experienced its strongest run in terms of both the number of listings and assets raised since 2021, according to consultancy Ernst & Young. However, total listings are still far below that year, while private markets continue to grow in both volume and market focus, with asset managers making a push into the retail investor space. In addition, the number of public firms in the U.S. today (approximately 4,300) is significantly lower than the peak of over 7,000 in the 1990s, as many firms, even those with large valuations, have opted to remain private. 

Acting SIFMA Chair Ronald J. Kruszewski, the CEO and chairman of Stifel Financial, also agreed during the briefing with Atkins’ comments on regulation reduction, saying the reforms “were needed” in part due to the lackluster IPO market.

“When I talk to boards and talk to them about whether or not they want to go a private equity route or go a public route, the brand for public is very expensive, very complex, [and can be] highly litigious,” he said. “I was very encouraged by Chairman Atkins’ remarks, because what we need to do is make the young, innovative companies available to the general public so that the rising tide of American economic activity isn’t just in the private markets, it gets back to the public market.”

During a Q&A session, Bentsen elaborated on the work SIFMA is doing for policymakers who are interested in how private market investing can move downstream to everyday investors. He cited roundtables and meetings that SIFMA is spearheading for its members to consider areas such as private market reporting, transparency, valuation and liquidity. 

“We’re working with our members on both the buy and the sell side, as well as what regulators may do,” he said. 

Bentsen and Kruszewski were also asked about recent comments by President Donald Trump and Atkins regarding the potential elimination of quarterly earnings reporting requirements in favor of semi-annual reporting. 

Kruszewski said reducing reporting requirements would eliminate a significant amount of expenses for companies by reducing the “tremendous overhead” associated with reporting every 90 days. He added, however, that he would expect Stifel to continue reporting quarterly to meet shareholder demand for information, although it would reduce the workload associated with filing quarterly reports to the SEC. 

“It’s a nuanced thing,” he said. “A lot of people think quarterly reporting is changing behavior. I, for one, want to be cautious, because we have the deepest, most liquid markets in the world, and I don’t like fussing with that too much.”

During his formal remarks to members, Kruszewski focused on what he sees as a growing issue: younger people using advancements in investment tools to gamble on the markets, rather than making sound investments.

“Technology has opened the doors of finance wider than ever before, but has also brought the impulses of gambling into the world of investing,” he said. “The art of investing, frankly, is beginning to share space with the dopamine rush of speculation. What started with zero-day options ... has now expanded into prediction markets and prop bets.”

Kruszewski said these new investing options operate through regulatory loopholes and blur the line “between investing and entertainment.” He called on SIFMA and other industry players to focus on educating younger investors on the differences, as “one builds, the other burns.”

Bentsen referred to the SIFMA Foundation’s program that works in schools to teach students about responsible investing and the markets.

During his prepared remarks, the SIFMA CEO reiterated the various areas SIFMA will focus on next year. 

These included further defining how digital assets are categorized and traded, extending trading hours on the stock exchanges, and reforming communication requirements to investors to make them more digital and cost-efficient.