SEC Small Business Forum Publishes Annual Report On Capital Formation

The Securities and Exchange Commission has published its annual report derived from its 45th Small Business Forum.

Hosted by the Office of the Advocate for Small Business Capital Formation, the report is based on a meeting held this past March. While frequently the recommendations provided by participants make a lot of sense, few typically become actual rules or updates.

Of note, the Office of the Advocate has not actually had an Advocate since October 2025 as the position is vacant.

The report, available below, includes the following recommendations for the Commission to act upon:

Early-Stage Capital Raising

• Expand the accredited investor definition to include additional measures of sophistication (e.g., an investor test and experience-based qualification). This aims to broaden access, especially outside high-cost areas where fewer people meet income/net-worth thresholds.
• Modernize regulation of crypto assets that are securities, including secondary trading. Linked to the Commission’s Project Crypto efforts and recent interpretive guidance.
• Create a new federal friends-and-family exemption that preempts state blue-sky laws to simplify very early raises.
• Expand regional, federal, and state resources for small-business funding support (including non-dilutive capital) and create a centralized portal for non-dilutive capital options.
• Raise the Regulation Crowdfunding annual limit from $5 million to $20 million.

Growth-Stage Companies and Smaller Funds

• Create a new private fund exemption to support small or regional funds focused on community-based investing.
• Preempt blue-sky laws for off-exchange secondary trading in companies that provide robust, publicly accessible, timely information (e.g., Regulation A Tier 2-level disclosures).
• Streamline the private-to-public pathway by making previously restricted shares more readily available for public trading under Rule 144.
• Ease compliance costs and regulatory burdens for emerging fund managers with under $100 million in AUM.
• (tie) Advance the INVEST Act (congressional legislation addressing accredited investor rules, private funds, and related access issues).
• (tie) Increase the investor limit under Section 3(c)(1) funds beyond 100 investors (would require congressional action).

Small Cap Companies and the Public Markets

• Improve OTC public trading transparency by requiring more disclosures on short selling, institutional holdings, insider/affiliate holdings and transactions, paid stock promotion, and transfer-agent information about the security.
• Allow at-the-market offerings for all small public companies and Regulation A Tier 2 companies that are current in their filings.
• Expand Form S-3 eligibility so more issuers can use it for offerings regardless of public float (tied to the Commission’s May 2026 Registered Offering Reform proposal).
• Revise Regulation A to simplify reporting requirements for small issuers and improve capital access.
• Pursue regulatory reforms to reduce unnecessary cost and liability barriers to becoming and remaining a smaller public company (linked to proposals expanding EGC accommodations, simplifying filer status, and related disclosure scaling).