Department of Treasury Report Calls for Financial Markets Reform

Department of Treasury

On October 6, the U.S. Department of the Treasury released a report outlining ways to streamline and reform the capital markets. Nasdaq’s ongoing engagement with regulators resulted in the culmination of our ideas in a blueprint to revitalize the markets, and we are pleased to find many similarities in the Treasury report.

The report’s inclusion of proposals in our blueprint can help to address the decline in publicly-traded companies, reform today’s outdated regulatory environment, and end the current one-size-fits-all market structure. We are encouraged to find many of our recommendations related to equity capital formation and equity market structure included in the Treasury report, specifically the following:

  • Minimum Ownership Amount Increase - The $2,000 holding requirement for shareholder proposals should be substantially revised.
  • Proxy Advisory Firm Transparency - Further study and evaluation of proxy advisory firms, including regulatory responses to promote free market principles if appropriate, should be conducted.
  • Emerging Growth Company Classification - The length of time a company may be considered an Emerging Growth Company (EGC) should be extended to up to 10 years, subject to a revenue and/or public float threshold.
  • Expanded “Test-the-Waters” Provisions - Companies other than EGCs should be allowed to “test the waters” with potential investors who are qualified institutional buyers or institutional accredited investors.
  • Securities Litigation Cost Reduction - States and The Securities and Exchange Commission (SEC) should continue to investigate the various means to reduce costs of securities litigation for issuers in a way that protects investors’ rights and interests, including allowing companies and shareholders to settle disputes through arbitration.
  • Consolidated Liquidity - The SEC should allow issuers of less liquid stocks to consolidate liquidity for their securities and select the exchanges and venues on which their securities will trade.
  • Optimal Tick Size - The SEC should evaluate whether to allow issuers to determine the tick size for trading of their stock across all exchanges and whether to additionally limit potential tick sizes to a small number of standard options to manage complexity.

We applaud the Treasury Department’s efforts to foster capital formation and job growth. We look forward to working with them on our shared goals to ensure the vibrancy of the financial markets.

Related Links

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.