Good afternoon and welcome to this year's Small Business Forum. Each year, the Forum provides an opportunity to identify areas and topics where the SEC's rulebook can be better adapted for small businesses. According to some sources, "[s]mall businesses employ nearly half of the American workforce and represent 43.5% of America's GDP."[1] They are the cornerstone of the American economy, and the Commission's rules should reflect this importance.

Since the change in Administration in January 2025, the Commission's regulatory priorities have been re-focused on capital-raising policy recommendations, particularly for small businesses. How can we reduce the costs and burdens for small businesses seeking capital, without compromising investor protection?

One issue underpins many small business capital raising topics: eliminating the duplicative qualification processes between federal and state authorities. In 1997, the Commission and state securities regulators acknowledged the need for "[e]fforts by federal and state regulatory authorities to craft a more efficient 'division of labor' with respect to securities offerings…."[2](emphasis added).

Nearly three decades later, this exercise remains incomplete. This is even more important for small businesses, who may be seeking to raise only a modest amount of capital - such as through a Rule 504 or Regulation A Tier One offering - and might have to qualify in all 50 states plus the District of Columbia in order to use general solicitation. The costs and time delays make such efforts often untenable.

The National Securities Markets Improvement Act of 1996 (NSMIA) [3] preempts state "blue-sky" registration for securities listed on the national securities exchanges-and also offerings under Rule 506(b) under the Securities Act of 1933.[4] The overarching aim of NSMIA was to promote efficiency and capital formation in the financial markets.[5] With regard to duplicative state regulation, NSMIA focused on whether the potential lack of uniformity in state law impacted cost of capital, innovation and technological development in capital markets - including any impacts on small businesses.[6]

Under NSMIA, regulatory predictability was a key concern for all offerings-not merely those subject to preemption. Congress tasked the Commission with studying the extent to which uniformity of state regulatory requirements for securities that are not covered by the NSMIA preemption provisions, which was completed in 1997.[7] But this effort should not have been a "one-and-done."

The interplay between federal and state securities laws should be a matter of continuing study by the Commission. It is both impractical, costly and unrealistic to expect an issuer to register a small securities offering in dozens of states. This is especially true given the lack of uniformity among states. However, states can play an important role in preventing fraud for offerings conducted in their jurisdiction.

Regulators should consider moving beyond a binary approach to preemption. For example, when an offering is qualified in the state of a company's principal place of business, should the offering still be reviewed by multiple other states? Why should not a notice filing in the other states be sufficient? Such a framework could promote more effective oversight among state regulators, reduce the time it takes to fully comply with offering regulations, and maintain effective investor protection.

I look forward to reviewing the Forum's policy recommendations and a read-out of today's sessions. Thank you to the team in the Office of the Advocate for Small Business Capital Formation for planning this event. I hope that you all enjoy the Forum.