Michael Piwowar, commissioner of the U.S. Securities and Exchange Commission, speaks during a panel session at the Bloomberg Africa Business And Economic Summit in Cape Town, South Africa, on Wednesday, Feb. 24, 2016. Weaker demand from China and a slump in commodity prices have damped the outlook for economic growth in most African countries. Photographer: Waldo Swiegers/Bloomberg via Getty Images
Bloomberg Bloomberg via Getty Images
By Grace Donnelly
July 18, 2017

The relationship between the regulators and the regulated has been confrontational over the last eight years, said U.S. Securities and Exchange Commission’s Michael Piwowar on Monday.

The commissioner, a President Obama appointee who’s been at the SEC since August 2013, spoke on a range of topics at The Heritage Foundation in Washington, D.C.

Much of the discussion at the conservative think tank, whose blueprints the Trump team used as a model for the White House budget, centered on ways the current SEC chairman, Jay Clayton, and board are taking a more collaborative approach to working with corporate America.

Piwowar recently wrapped up what he calls a listening tour, with stops in Cincinnati, New York, Silicon Valley, and San Francisco to hear from business leaders. He emphasized the need for geographic diversity, noting that too many funding streams are concentrated in too few places.

He also addressed the low number of initial public offerings, saying that many companies would rather be acquired than go public.

“The regulatory environment does affect the decisions of firms on the margin as to whether to be public or not,” said Jay R. Ritter, Cordell Eminent Scholar at the University of Florida’s Warrington College of Business. “The recent decision to allow the confidential filing of registration statements for all companies prior to the IPO was a good move, in my opinion.”

The SEC hopes that instituting the confidential filing option for companies of any size ahead of an IPO, which went into effect July 10, could help increase the number of public firms.

“When the JOBS Act went through and it allowed for confidential filings for emerging growth companies, we had something like 80 biotech companies that went public within the first year,” Piwowar said, arguing that a regulatory shift could be part of the solution.

He also criticized the high cost of disclosures as a factor keeping companies from going public and said Congress should help depoliticize the SEC by repealing disclosures that have nothing to do with materiality.

In February the SEC opened up comments on the CEO pay ratio rule, one of the most controversial Dodd Frank measures passed in 2015.

Though CEO pay has been on the rise for the last 20 years, many argued that the pay disclosure rule overstepped the agency’s responsibility to investors and instead used its regulatory power to address concerns of social inequality.

“You see more and more special interests trying to turn the SEC into a social justice agency rather than having us be an agency which, as our statutory mandate, provides investors with material information,” Piwowar said.

Much of the conversation focused on how to give smaller firms access to capital and ease the burden of compliance costs, estimated at over $1 million per year for public companies. The SEC may introduce a small-business advocate by the end of the year, according to Piwowar.

Though some of the regulatory shifts discussed will require legislative action, Piwowar said the SEC is looking to businesses to identify the next changes the agency can make on its own to help encourage growth.

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