The SEC and Small Business

Time for a little editorial comment:  Does anyone out there believe, like me, that the SEC really doesn’t like small businesses, meaning reporting companies that trade OTC rather than on listed markets?  Or companies filing S-1’s or doing reverse mergers to trade on the OTC markets rather than on listed markets?

Let’s put aside for the moment that with respect the two parts of the JOBS Act that could really help these kinds of companies, Crowdfunding and 506 General Advertising and Solicitation, the SEC has simply ignored the Congressional mandate set forth in the Act and we still have nothing on these legally required mandates.

Let’s look at what for me is the most significant recommendation of the SEC Advisory Committee that affects my clients and potential clients:  Provide an exemption for smaller reporting companies from the requirement to submit financial information in XBRL format for periodic reports and other public filings.

XBRL financials are darn expensive.  And they really complicate the K and Q filing process and getting these reports filed on time.  I’d like to know if anyone, even one person-one time, has ever used XBRL tagging in analyzing my types of small business clients, OTC trading companies.  I’d like to know how this XBRL tagging really helps investors in these companies.  Seriously.

So when the Advisory Committee says:

When adopting new disclosure rules, the Commission should consider whether such rules place a disproportionate burden on smaller reporting companies in terms of the cost of, and time spent on, compliance with such requirements, and if so, provide for exemptions from or phase-in periods for such new rules for smaller reporting companies

Then let’s look no further than the expensive and in my humble opinion idiotic requirement of XBRL financials for smaller reporting issuers.

So if you want to get rid of these kinds of filers, or discourage smaller businesses from becoming public companies, XBRL would seem to be a great way to do it.  Impose ridiculous and unnecessary costs that benefit no one and take money away from these companies that they could use to say – PROVIDE JOBS – and maybe these kinds of companies will go away.

Just saying.

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