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SEC may consider opening private placements to more investors

SEC Chairman Jay Clayton said he may consider expanding the pool of investors who can take part in private placements.

Clayton said he thought it was "odd" that private placement rules only provide for "extremely limited" opportunities for ordinary investors, but accredited investors can lose all of their money in one deal. "That kind of binary approach to individual investing in private placements, maybe it makes sense, but it's certainly something we should examine," he said June 6 during the Sandler O'Neill Global Exchange and Brokerage Conference in New York.

Clayton added that the number of U.S. publicly traded companies has been shrinking while the number of private companies has been growing. He said the shift means that small investors have fewer investing opportunities since accredited investors have greater access to private companies.

"I don't like it from just a public policy point of view that we're increasing the market for the privileged and decreasing the market for the ordinary investor," he said.

Clayton has been trying to find ways to increase the number of publicly traded companies, and he wants to make the public markets more enticing to smaller companies. Clayton said some smaller companies want to put off going public until they are bigger because they view larger companies as having greater liquidity benefits.

"If we aren't improving the performance in smaller and midcap stocks, the attractiveness of the public markets continues to go down," he said.