Unicorns May Be Dragged Into Public Markets: SEC Roundup

Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of the nonprofit advocacy group Investor Choice Advocates Network.

A broker who holds shares in a private company on behalf of clients, or a fund that invests in one, counts as only one shareholder in the company.

The SEC is considering a rule that would look through brokers and funds so that each client or investor would count as a shareholder.

John Gulliver, executive director of the Committee on Capital Markets Regulation, talks with Morgan and Zaccaro about why this would mean many private companies would exceed the maximum of 2,000 shareholders for a private company and have to register as a public company.

Such an amendment to the definition of “held of record” for purposes of Section 12(g) of the Securities Exchange Act would have huge implications for private companies and the funds and brokers that invest in those private companies.

See the video above for the discussion with Gulliver.