February 25, 2017 / 2:35 PM / 7 months ago

US SEC's Stein cautions on capital formation rules

WASHINGTON, Feb 25 (Reuters) - As the U.S. Securities and Exchange Commission gears up for an expected liberalization of the rules that govern how companies raise capital, the commission’s lone Democrat on Saturday urged the agency to tread carefully and avoid unduly harming investors.

In her first speech since Republican President Donald Trump won the White House, SEC Commissioner Kara Stein raised concerns about possible unintended consequences that could result if disclosure rules are whittled down.

“Capital finds it best uses when a wide range of participants can fairly weigh relevant, reliable information,” Stein said, in prepared remarks at the Practising Law Institute’s annual “SEC Speaks” conference.

“Does the move to opacity impact the effectiveness and efficiency of our capital formation process? Is there sufficient transparency or should we be considering a different foundational principle?” Stein asked.

Trump has promised broadly that he will work to scale back regulations that many corporations and fellow Republicans say stifle jobs and economic growth. Stein’s comments come as the SEC waits for the U.S. Senate to confirm Trump’s pick of Jay Clayton as the agency’s new chair.

Clayton, a dealmaking attorney on Wall Street, has privately conveyed ideas to Trump and the White House about ways to spur capital formation.

As chairman, he is expected to seek ways to ease regulations that some believe are stifling initial public offerings.

That could include rules on public company disclosure, accounting and compliance procedures, private capital-raising, and the paperwork filed when companies go public and register their securities.

Stein, a former staffer on the Senate Banking Committee, is known for advocating for views on investor protection that are cheered by progressive groups but at times have also put her at odds with other members of the SEC.

She forcefully advocated for the SEC, the country’s top securities regulator, to consider denying regulatory waiver requests by banks that have repeatedly broken the law.

In her speech Saturday, Stein raised concerns about how stock ownership is “becoming increasingly concentrated in the hands of a small group of large institutional investors” and whether that may “affect the willingness of companies to compete and invest in innovation.”

She also stressed the need to better understand why companies are staying private longer and whether private firms should have to follow “enhanced disclosure laws.” (Reporting by Sarah N. Lynch; Editing by Cynthia Osterman)

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