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Treasury pushes to ease capital markets rules for smaller companies

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Treasury pushes to ease capital markets rules for smaller companies

The U.S. Treasury Department took a deregulatory stance in a 232-page report on capital markets, focusing on the need for more capital formation in public markets and the removal of what it described as regulatory burdens on smaller companies.

Released Oct. 6, the report outlined the Treasury Department's stance on capital markets, confirming a focus on loosening financial regulatory measures to bolster companies' ability to grow. The report's emphasis of deregulation piggybacks on similar points in its banking report.

"Improperly tailored regulatory burden can benefit the largest companies, which are better positioned to absorb the costs, and discourage competition from new entrants," Treasury wrote.

Treasury pushed the need to promote U.S. capital markets, which lawmakers and regulators have focused on since President Donald Trump took office. Concerns have spiked as fewer companies have entered the public markets, with observers blaming what they have called a burdensome initial public offering process and a lack of liquidity for smaller companies.

"If many successful new companies stay private, middle-class Americans may miss out on the significant returns they generate for investors," the report read. "Through creative funding tools such as crowdfunding, markets can help provide capital for these innovators to grow their businesses and create jobs."

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Treasury recommended that to give more investors access to private markets, which have become increasingly popular with the rise of venture capital and private equity, the "accredited investor" definition should be revisited. The report also said that Treasury believes a review of how investments can be pooled in private or less-liquid offerings needs to take place.

The report also focused on improving smaller companies' trading liquidity, enhancing regulatory measures in the derivatives market and increasing cohesion among global regulators, a recommendation that comes at a time when U.S. market participants have expressed concerns about the European regulatory measure Markets in Financial Instruments Directives rules, or MiFID II.