Overview
Title
Submission for OMB Review; Comment Request; Extension: Form 1-E, Regulation E
Agencies
ELI5 AI
The Securities and Exchange Commission (SEC) wants to keep using a form that lets certain small companies tell them they're allowed to skip some rules when selling shares. They need approval to do this, and people can share their thoughts about it until early January.
Summary AI
The Securities and Exchange Commission (SEC) has requested an extension from the Office of Management and Budget to continue collecting information using Form 1-E under the Paperwork Reduction Act. This form is used by small business investment companies and business development companies to notify the SEC of their exemption from registering securities under Regulation E. The information collected helps the SEC determine if an offering qualifies for this exemption. There is a public comment period from December 3, 2024, to January 2, 2025, for this request.
Keywords AI
Sources
AnalysisAI
The document at hand is a notice published by the Securities and Exchange Commission (SEC), requesting an extension from the Office of Management and Budget (OMB) to continue using Form 1-E. This form facilitates small business investment companies and business development companies in notifying the SEC of exemptions from registering securities under Regulation E. The request is part of the Paperwork Reduction Act process, and it includes a public comment period from December 3, 2024, to January 2, 2025. Notably, the SEC uses this collected information to assess whether the securities offering qualifies for an exemption.
Summary of the Document
The SEC seeks to extend the use of Form 1-E, arguing its necessity in allowing certain investment vehicles, such as small business investment companies and business development companies, to claim exemptions from full registration under federal securities laws. This regulatory mechanism, known as Regulation E, permits such entities to avoid the onerous process of full securities registration, provided they can demonstrate compliance through documentation, including offering circulars filed with the SEC.
Significant Issues and Concerns
Several issues emerge from this document. Firstly, the SEC estimates that only one issuer will file forms in a given year, reflecting a very small sample size. This could lead to questions about the validity of the estimated 200 annual burden hours required for compliance. Secondly, these burden hour estimates are specifically for PRA purposes and do not arise from comprehensive studies or surveys, questioning their accuracy.
Moreover, the historical data indicates that no forms have been filed since 2017, which brings into question the current relevance and necessity of continuing this particular information collection process. The document does not explain why this might be the case, which could be crucial for stakeholders assessing the need for continued regulatory submissions under Form 1-E.
Impact on the Public
For the general public, this document underscores the intersection between regulatory processes and small business financing. The extension of Form 1-E submission requirements may indirectly affect investment opportunities and capital raising mechanisms for small businesses. However, given the sparse historical filings, the direct impact might appear negligible.
Impact on Stakeholders
Stakeholders specifically impacted include small business investment companies and business development companies. The continuation of this form allows them to forego the more arduous task of full securities registration, potentially enabling more flexible and cost-effective fundraising. Conversely, these entities might also find themselves questioning the utility of maintaining readiness to comply with a regulatory process that has seen no active filings in recent years.
For the SEC, this extension serves to ensure that there remains a structured framework under Regulation E, with outcomes aiding the Commission in maintaining oversight and facilitating informed exemptions. However, the lack of recent activity could be seen as a call for evaluating alternative approaches or justifications for maintaining the form's necessity. Overall, the document reflects typical procedural activities of a federal agency but raises points worth pondering about the ongoing relevance and cost-benefit balance of this regulatory tool.
Issues
• The document provides an estimate of 200 annual burden hours for compliance with Form 1-E and the offering circular, based on only one issuer filing these forms. This seems like a very small sample size and may not accurately reflect the broader industry burden.
• The estimation of burden hours is stated to be for the purposes of the PRA and does not appear to be based on a comprehensive survey or study, which might result in inaccurate estimates.
• The document specifies that one issuer filed forms in 2013-2014 and another filed forms in 2015-2017, but no forms have been filed since 2017. This could indicate a lack of current relevance or need for Form 1-E, raising concerns about the necessity of extending the information collection.
• There is no abstract provided in the metadata, which might affect the reader's understanding of the document's purpose and content.
• The notice text does not include an explanation of why no new forms have been filed since 2017, which may be relevant for the assessment of the need for extension.