In my essay yesterday, “How Federal Accounting & Securities Regs Screw Up Your Chance to Invest in Facebook,” I noted how America’s counter-productive accounting, disclosure, and governance regulations are increasingly thwarting the ability of average Americans to invest in some of the leading capitalist innovators of the Digital Age. In this case it’s Facebook, but there are plenty of other innovative companies out there sticking with private shareholders so as not to trigger burdensome securities and accounting regs.  In my essay, I also noted how this represented another prime example of well-intentioned regulation having profoundly unintended, anti-consumer, anti-competitive consequences.  America’s convoluted and onerous securities regulations are choking off capital infusions into innovative companies and denying average investors a chance to own a share a piece of the American dream.

So, what does the Securities and Exchange Commission (SEC) plan to do about this fine mess?  Regulate more, of course!  As The Wall Street Journal reports today:

The Securities and Exchange Commission has begun examining whether disclosure rules for privately held firms need to be rewritten as a result of recent deals allowing investors to buy shares in Internet companies such as Facebook Inc. and Twitter Inc., according to people familiar with the situation.  The review is at an early stage, these people cautioned, and SEC officials looking at the recent deals haven’t concluded that any of them run afoul of the 47-year-old rules governing private companies. The rules require firms with 500 or more shareholders of record in a given type of stock to publicly disclose certain financial information. The requirement is designed to protect investors from risking money on companies that say little about their operations and performance.

Yes, but that requirement can also trigger an onslaught of new regulatory burdens, as the Journal story continues on to note: Continue reading →

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