In a letter to SEC Chair Mary Schapiro, House Oversight Committee Chair Darrell Issa asked that the Commission consider whether its current regulations and actions contribute to the decline of capital formation. The letter was send in light of Facebook's recent attempt to raise additional equity capital while avoiding the burdens of SEC registration, and the SEC's subsequent examination into the strategy employed by Facebook
The letter highlights outdated laws that place an arbitrary cap on the number of shareholders permitted to own private entities. It questions whether quiet period restrictions are appropriate given modern communications, the trend toward improved disclosure and the need for transparency. In addition, it poses constitutional questions regarding the legality of restricting communications to investors under the quiet period. The letter also asks the SEC to answer whether the risk of diminished regulatory reach poses a conflict of interest that prevents the SEC from acting in the best interest of markets and investors.
The letter states that the SEC should take all possible steps to arrest the decline of capital formation, both public and private, and expand opportunities for domestic entities to raise capital within the U.S. It should investigate the causes of the decline in the competitiveness of the public markets. It should likewise consider whether the complex rules and restrictions that govern private capital formation are appropriate