The SEC's Small Business Capital Formation Advisory Committee will convene on July 22, 2025, to revisit two of the most important—yet perennially underdeveloped—components of the U.S. private capital markets: Regulation A and the regulatory treatment of "finders." Both topics go to the heart of one of the SEC's toughest policy challenges: how to responsibly expand capital access for small and emerging businesses without sacrificing investor protection.
The meeting, which will be held at SEC headquarters and webcast publicly, is part of an ongoing effort to reimagine how founders—particularly those outside Silicon Valley or Wall Street circles—can effectively raise capital without stumbling into legal pitfalls. In addition to discussing improvements to Regulation A, the Committee will hear directly from practitioners, including Gary Ross of Ross Law Group and Kelley Arena of Golden Hour Ventures, on the nuanced but critical role of "finders" in capital formation.
Regulation A: Unlocked Potential, Uneven Execution
Regulation A—often dubbed a "mini IPO"—was overhauled by the JOBS Act and further expanded in 2021 to permit offerings of up to $75 million in Tier 2 offerings. Despite the promise, adoption has been lopsided. Costs remain high. State-by-state friction, marketing complexity, and regulatory uncertainty deter many otherwise promising issuers from embracing it as a practical path to capital. As a securities lawyer who routinely advises growth-stage companies, I've seen firsthand how the administrative and compliance burden of Reg A can outweigh its benefits—especially when other exemptions, like Rule 506(c), offer simpler, if narrower, paths.
My two cents? If the SEC is serious about leveling the playing field, Reg A needs more than a facelift—it needs structural simplification, a clearer pathway to secondary liquidity, and consistent post-offering compliance support that doesn't require issuers to spend like a public company to behave like one.
The Finder Conundrum: Regulatory Gray Area, Real Market Demand
The latter half of the meeting will tackle a long-debated topic: the regulatory status of finders—individuals who introduce startups to potential investors and, in many cases, expect to be compensated if funding closes. Under current law, this territory is murky at best and perilous at worst. Section 15(a) of the Exchange Act requires broker-dealer registration for anyone "effecting transactions in securities," a definition the SEC has historically interpreted quite broadly.
This has led to an uneasy limbo: companies routinely use finders in practice, but the legal framework offers little certainty. The SEC's 2020 proposal for a limited exemption—providing a narrow safe harbor for certain Tier I and Tier II finders—was a step in the right direction, but it stalled without formal adoption.
From my perspective, failing to provide a coherent and workable finder exemption disproportionately harms the very companies the SEC claims to champion. Emerging businesses with limited networks are often left choosing between paying lawyers to navigate a legal minefield or risking regulatory scrutiny down the road.
A sensible, enforceable carve-out—perhaps with caps on compensation, clear disclosure obligations, and investor sophistication thresholds—would acknowledge reality without opening the floodgates to abuse.
Where We Go From Here
The SEC's renewed focus on Regulation A and finders is both necessary and overdue. If structured well, reforms in these areas could significantly democratize capital access and give smaller issuers a fairer shot at growth. But the devil will be in the details.
Legal clarity, operational efficiency, and pragmatic safeguards must be the pillars of any reform effort. Entrepreneurs and investors alike need clear rules—not more ambiguity masked as flexibility.
As a practitioner in this space, I'll be watching closely—and will continue advising clients to approach these regulatory edges with informed caution and strategic precision. I encourage anyone involved in startup financing to tune into the webcast and engage in the discussion.
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