In response to advocacy by the NAM and the Kentucky Association of Manufacturers, the Securities and Exchange Commission has granted privately held companies temporary relief from a punishing new rule interpretation that would have required them to expose confidential financial information to the public.
The background: In 2020, the SEC finalized a rule designed to increase disclosure obligations for companies issuing over-the-counter equity securities (“penny stocks”). The following year the SEC published a new interpretation of the rule, to take effect in January 2023, which broadened the disclosure requirement to include private companies issuing corporate bonds.
- Late last month, following an emergency petition for interim relief from the NAM and the KAM, the SEC granted a two-year stay of the new interpretation—so private companies will not face the new public disclosure obligations until January 2025.
- Corporate bonds can only be purchased by large institutional investors (which already have access to issuers’ financial information), not retail investors, so the risks of fraud that spurred the 2020 rule are nonexistent in this market.
A victory—for now: “This is a win for private and family-owned manufacturers raising capital for job-creating investments and planning for growth,” NAM Senior Director of Tax and Domestic Economic Policy Charles Crain said.
Damaging effect: The NAM recently released a study showing the significant economic damage that would result from forcing private businesses to disclose confidential and proprietary financial information publicly. Among the key findings:
- The U.S. economy would lose 30,000 jobs per year in the early years after the new interpretation takes effect, rising to 50,000 lost jobs per year after five years and 100,000 lost jobs per year after a decade.
- Companies would face decreased liquidity and higher capital costs, including an increase in borrowing costs of up to 13%.
What we’re doing: The NAM and the KAM have filed a petition for rulemaking calling on the SEC to reverse course by clarifying—either by rule or exemptive order—that corporate bond issuers are not required to make public financial disclosures.
- The NAM and KAM have also asked Congress to protect manufacturers from the damage the new interpretation would cause.
The last word: “A two-year delay is a step in the right direction, but the SEC must act to permanently reverse this novel and misguided rule interpretation,” Crain said. “Especially at a time of rising interest rates, the bond market needs stability and manufacturers need low-cost and efficient access to capital.”
Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.
With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.
“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”
The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.
The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.
Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.
The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org