Recent Developments, Current Issues, and Upcoming Projects at the SEC

1. Recent Developments, Current Issues, and Upcoming Projects at the SEC Presentation by Gerald J. Laporte Chief, Office of Small Business Policy Division of Corporation Finance U.S. Securities and Exchange Commission July 8, 2011

2. Accredited Investor Net Worth Standard • DFA § 413(a) requires deduction of “value of primary residence” from $1 million natural person net worth standard for 4 years • Applies to Reg. D and Section 4(5) transactions • Background—Added in Senate bill as part of compromise to replace NASAA suggestion to adjust natural person accredited investor standards to reflect inflation • SEC interpretation issued immediately • SEC issued proposing release on Jan. 25, 2011 • 43 comment letters received • Some states have adopted conforming language • DFA § 415 requires GAO study of AI standard by 7/21/13

3. “Bad Actor” Disqualification • DFA § 926 requires SEC to adopt “bad actor” disqualification rules for Rule 506 offerings “substantially similar” to Rule 262 provisions plus SEA § 15(b)(4)(H)-like provisions • Background—Added in Senate bill as part of compromise to replace NASAA suggestion to repeal NSMIA • SEC issued proposing release on May 25, 2011 that adheres closely to DFA § 926 requirements • Comment period ends July 14, 2011 • Retroactivity is major issue

5. SEC Capital Formation Review • April 6, 2011 letter of SEC Chairman Schapiro to Congressional Chairman Darrell Issa • Review of restrictions on general solicitation and communications in general • Trading platform review included (secondary trading and primary offerings) • SEC Chairman intends to appoint advisory committee on small and emerging companies • Crowdfunding • Triggers for public reporting obligation

6. Triggers for Public Reporting Obligation • SEA §12(g) requires company to register class of equity securities and begin public reporting if class held by 500 or more holders and company has total assets exceeding $10 million • Designed in 1964 to provide information on companies traded over-the-counter • SEA § 15(d) also requires public reporting until company that made a public offering falls below 300 holders • Push for change comes from those who think SEC reporting obligations are too burdensome, those who think 1964 numbers need to be adjusted upwards, those who think SEC thinks accredited investors don’t need investor protection, small banks with high concentration of record holders, those who think companies ought not to be forced to go public until they are ready • Legislation pending on this • SEC staff is studying these issues

7. Regulation A Revival • History of Reg. A • Reg. A offerings historically have been jointly regulated by SEC and state securities regulators • Desire to raise Reg. A ceiling from $5 million • Hearing held late in 2010 • Issue picked up by House Republicans • SEC staff has provided technical advice, but has remained neutral on substance of legislation • Some supporters of legislation trying to limit state securities regulatory authority