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.
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