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Members cite high compliance costs, urge IPO on-ramp and right-sized disclosures for smaller public companies
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Summary
Members and witnesses discussed rising costs of public listing and compliance, the decline in public-company counts, and possible steps — including extending IPO on-ramps and reexamining SOX burdens — to make public markets more attractive for smaller firms.
Committee members and witnesses debated whether regulatory and compliance costs have made public markets too expensive for small and medium-sized companies and discussed policy changes to reduce that burden.
Anna Pinedo, securities partner at Mayer Brown, told the panel that the shift away from IPOs reflects market-structure changes and higher disclosure costs since Sarbanes-Oxley and Dodd-Frank. Pinedo described how smaller public companies often “bear the cost of being public, but they're not reaping the benefits” such as analyst coverage and secondary-market liquidity.
Representative Hill questioned whether the SEC’s prior cost estimates are out of date; Pinedo agreed and cited SEC Office of Advocate for Small Business work showing higher going-public costs than older figures. Pinedo supported extending the IPO “on-ramp” for emerging growth companies and right-sizing disclosure and compliance burdens for smaller reporting companies.
Members discussed specific levers: adjusting thresholds for smaller-reporting-company status, SOX 404 attestation relief for low-revenue issuers, and incentives to restore equity research coverage and market-making for small caps. Witnesses stressed that successful reforms should preserve investor protections while lowering unnecessary compliance costs for firms that want to be public.
The subcommittee did not vote; members said legislative options and SEC engagement would follow the hearing record.
