PUBLISHED:September 12, 2019

De Fontenay testifies before House subcommittee on sale of unregistered securities


Professor Elisabeth de Fontenay testified on Capitol Hill on Sept. 11 that easing restrictions on the sale of unregistered securities could be harmful to retail investors and the public securities markets.

De Fontenay at hearing table

De Fontenay provided oral and written testimony to a hearing of the House Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets.  She was one of several panelists invited to speak on proposals that would loosen federal securities regulations that restrict private investments to institutional investors and wealthier individuals during the hearing titled “Examining Private Market Exemptions as a Barrier to IPOs and Retail Investment.”

Retail investors can typically invest only in securities traded on public markets, where disclosure requirements are much stronger. However, the number of public companies is in decline, and capital has increasingly flowed into unregistered securities, de Fontenay noted.

“There is considerable room for disagreement over whether public companies and the public markets are subject to too much regulation,” she stated in her written testimony. “The same cannot be said for whether increasing retail-investor presence in the private markets would be good for investors or good for capital allocation.

“If Congress and the SEC are concerned about shrinking investment opportunities for retail investors, the solution lies not in throwing retail investors to the wolves in the private markets, but rather in ensuring a healthy pipeline of companies going and remaining public.”

De Fontenay teaches and writes in the areas of corporate finance, corporate law, and private investment funds. Her scholarship focuses on how market actors behave in the less-regulated spaces of the financial markets, including “The Deregulation of Private Capital and the Decline of the Public Company,” 68 Hastings Law Journal 445-502 (2017).

Read de Fontenay’s written testimony.

Watch video of the hearing.