WASHINGTON, Feb. 3 (UPI) — An advisory panel to the U.S. Securities and Exchange Commission recommended Friday a stock exchange be created exclusively for high-end investors.
The panel, the advisory committee on small and emerging companies, voted to urge the SEC to support setting up an exchange for small publicly traded companies that would be accessible only to wealthy investors who have a net worth of at least $1 million or income of $200,000 or more for at least two years, MarketWatch.com reported.
Companies included on the exchange may not be required to provide prospectuses or all disclosures necessary when retail investors are involved, the panel said.
The advisory panel’s co-chairman, Stephen Graham, told MarketWatch.com it is difficult for small private companies to “cross the line” and become publicly traded because of associated costs. He said such an exchange would serve as an intermediary into the broader market.
Commissioner Dan Gallagher said he wasn’t sure whether an exchange should be limited to high net worth investors. He said the SEC could tailor disclosure requirements to reduce costs.
“We need to focus on more on these types of markets for the average investor as well as sophisticated investor,” he said.
Charles Rotblut, vice president of the American Association of Individual Investors, told MarketWatch that wealth — or lack of it — wasn’t indicative of investment acumen.
“An accountant [who] does not have the wealth to be an accredited investor, but understands financial statements, would not be allowed to invest,” Rotblut said. “Having wealth does not mean you have the knowledge to always make intelligent investment decisions.”
The panel also recommended the SEC explore other alternatives, including creating a private secondary market in the shares of private companies to help raise capital for companies not wanting to offer shares on an exclusive exchange.
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