Public markets are one of Democracy’s most powerful engines for economic vitality. They provide transparency into the beating heart of capitalism, fuel for economic growth, and spread opportunity in a way no private system ever has. Ordinary citizens can own a share in corporate prosperity. Public markets offer businesses permanent capital, liquidity, and access to a diverse investor base. America’s stock markets are global leaders, with the rise of S&P 500 Index funds transforming the world’s savings into equity capital for the nation’s largest companies.
Sadly, the very transparency that defines public companies has made them easy targets for politicized rulemaking, often disconnected from investor protection, market efficiency or capital formation. Complex regulations designed for the largest enterprises have driven up the operational burdens and compliance requirements imposed on small and mid-size companies. The result has been a steady decline in the number of public companies.
In 2009, the U.S. had 10,598 SEC-reporting issuers. Today, we have 7,902. Nowhere is the drop more severe than in the small-company segment: SEC-reporting issuers trading OTC fell from 4,953 to 1,537.[1] The rising costs of public capital raising, combined with the increasing capabilities of venture capital funding and private equity ownership, have made opaque private markets the easier capital formation option for companies outside the major indexes.
The encouraging news is that these challenges are not structural inevitabilities. Targeted, modern reforms can strengthen the public markets without compromising the transparency and investor protections people trust. The strategy is simple: reduce the burdens and increase the benefits to ensure America’s public markets are an attractive and competitive option for companies of every size.
[1] https://www.sec.gov/data-research/statistics-data-visualizations/reporting-issuers/number-reporting-issuers-calendar-year-2004-2024
Streamline Disclosure for the Digital Era
Much of today’s disclosure regime is a relic of an analog age, when lawyers and accountants produced mountains of paperwork. SEC Chairman Paul Atkins warned for years that swollen filings and escalating litigation risk drain management attention without improving investor outcomes. His recent proposals [1] to streamline disclosures, simplify proxy rules and reduce litigation expenses, are long overdue. A $250 million public company does not need to file the same reports as a firm 100 times larger.[2] Tailored requirements, shorter, clearer, and designed for digital analysis, can reduce cost and increase usability. The right question is not how much to disclose, but what information does an intelligent investor need to make a rational decision. Stronger transparency is not “less disclosure,” it is better disclosure.
We already know this approach works. Digital disclosure systems and real-time data, pioneered by OTC Markets, demonstrate how technology can make smaller companies more transparent, more investable, and more discoverable.[3]
[1] https://www.sec.gov/newsroom/speeches-statements/atkins-120225-revitalizing-americas-markets-250
[2] https://www.barrons.com/articles/ipos-disclosures-sec-atkins-5a8433f4?gaa_at=eafs&gaa_n=AWEtsqegKlrAU2PyTyKi8DOIKdIVbngEffnIdbS5mK13L16zohJFh0q3Ku7ryyEohLk%3D&gaa_ts=692f509c&gaa_sig=ys1hMzJVp1V70gBRWuu8VPeucmG5ZkwPEiSmgNiVE4gTELggnY0sSYiO2PNq6eR9_NnmgEEDfBTqaOw0zs2m3g%3D%3D
[3] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5357679
Improve Capital Raising in Public Markets
As entrepreneurs and innovators look to public markets to fund growth, they are blocked by our securities regulations. Only large, established enterprises enjoy efficient tools like shelf registrations or ATM offerings[1] that connect capital hungry companies directly into secondary market liquidity through ordinary broker’s transactions. Sharing the wealth of these well proven, faster and lower-cost capital raising capabilities with smaller reporting issuers, including Reg A+ Tier 2 companies, would give SEC reporting companies a transparent and low-cost alternative to private funding4.
Currently, fresh IPO’s, smaller exchange listed firms, and OTC companies are essentially forced by regulators to raise capital in the private markets, at discounts to public market prices and with heavy dilution for existing shareholders. These expensive and opaque financings are detached from market prices and toxic to capital formation[2].
Public companies must be able to raise capital efficiently and affordably. Expanding ATMs to all SEC reporting issuers make public markets a more credible and competitive alternative to Venture Capital and private placements. The SEC can change the paradigm by connecting capital needs with secondary liquidity and, done right, restore America’s public markets as the world’s best source of growth capital.
[1] https://www.mayerbrown.com/-/media/files/perspectives-events/publications/2020/06/wtd–atm-offerings.pdf
[2] https://blog.otcmarkets.com/2023/10/24/reversing-market-perceptions/
Attract Profitable Companies to Public Ownership
Investors benefit when profitable companies are encouraged to offer shares publicly, grow sustainable revenues and share profits with shareholders. The broader economy is more resilient when equity capital strengthens balance sheets and reduces reliance on leverage. For smaller but profitable companies, dividends are among the clearest and most credible signals they can send to attract long-term investors. Yet our tax code works in the opposite direction, subsidizing debt through interest deductibility while penalizing equity returns. It’s fair to ask why a system that claims to value stability and long-term investment continues to favor leverage over shareholder dividends.
Ending the preferential treatment that allows interest payments to be deducted while dividends are double taxed would be a meaningful start. A targeted income deduction on the first $100 million of U.S.-sourced earnings paid to public company shareholders as dividends could help level the field. Limitations could ensure a U.S. nexus, particularly given that larger firms often reduce tax rates by moving intellectual property and the resulting profits offshore. It would make owning shares in profitable public companies a more attractive deal for investors and counter the tax advantages enjoyed by private-equity buyers.
We should also ask why Congress and the IRS have prevented public companies from using efficient pass-through corporate structures. Outside certain exceptions such as energy MLPs and REITS, these popular corporate forms are effectively banned from being publicly traded. Allowing greater flexibility for public C corporations to designate dividends as regular income, capital gains, or return of capital would better align taxation with debt and pass-through investments.
Learning from the Crypto Experiment
The explosion of new crypto projects illustrates how quickly innovation can scale outside traditional securities regulation. More than 10,000 token projects emerged not through blockbuster IPOs, but through decentralized finance ecosystems that allowed ideas to incubate, attract users, and prove demand before facing the full weight of regulation. Only after achieving meaningful scale and traction did the most successful crypto projects migrate to major U.S. platforms. Unsurprisingly, the crypto industry now aggressively lobbies to preserve these DeFi “fermentation chambers” from being prematurely subjected to the full securities regulatory regime.
Seasoned market participants understand that a world with no regulation is not sustainable nor desirable. Crypto offers plenty of examples where fraudsters run free. The takeaway is not complete deregulation, but rather regulatory calibration. The current securities laws framework needs to be rightsized and modernized so that traditional securities markets and emerging tokenized markets operate under comparable, risk-based standards. Regulation should distinguish between early-stage experimentation and systemically relevant activity, encouraging innovation to develop transparently and responsibly rather than forcing it offshore or underground.
Assign Regulatory Reporting and Oversight to the Right Regulator
Federal preemption of state Blue Sky laws and the elimination of duplicative state-level registration requirements[1] for all SEC-reporting companies are obvious first steps. A single federal filing framework would remove the complexity of fifty different rulebooks and tie together secondary markets.
Another necessary reform is transferring margin regulation from the Federal Reserve to the SEC. The Fed has not updated the 50% margin requirement for securities for over 50 years, nor published an OTC Margin list in over 25 years. Restricting broker lending solely to exchange listed stocks pushes activity in unlisted, tokenized and private securities into unregulated entities. Congress has already recognized this problem in the crypto context by proposing Blue Sky preemption and placing margin authority with the CFTC instead of the Fed.
[1] https://blog.otcmarkets.com/2025/09/05/advocating-for-national-blue-sky-recognition-secondary-trading-exemptions-reach-41-states/
Weedkiller Alone will not Grow a Garden
At the same time, smaller public companies have suffered under the SEC’s recent regulation-by-enforcement approach, alongside much of the crypto sector. As with blockchain projects, anything labeled “microcap” has come to carry disproportionate regulatory risk. The result has been a quiet but pervasive “de-broking” of lawful small issuers, often regardless of their individual compliance with the securities laws.
Expansive interpretations of broker-dealer and bank anti-money laundering responsibilities have choked liquidity, reduced investor access, and hollowed out the lower end of the public markets. Regulation by enforcement is a fast, blunt tool that allows regulators to sidestep public notice, comment, and economic analysis. In the AML context, enforcement pressure predictably falls on the largest, most regulated institutions and the deepest pockets, rather than the actual perpetrators of fraud. Strong enforcement is essential, but it is no substitute for clear rules. When policy is made through lawsuits and settlements instead of open rulemaking, uncertainty replaces accountability. Banks and brokers respond rationally by blocking entire categories of activity, even when those activities are lawful.
Efficient regulation sets clear standards for fair conduct, operational integrity, and disclosure that empower investors to assess risk for themselves, backed by enforcement against bad actors, not bystanders. That is how markets function, trust builds, liquidity forms, and problems are addressed before they explode.
Foster a Dynamic Ecosystem
Public markets work best when they function as an ecosystem, not a single gate. From OTC Markets[1] through Nasdaq to the NYSE, each tier plays a role in capital formation, price discovery, and investor choice. Regulation should reinforce that continuum by offering graduated benefits[2], responsibilities and access as companies mature, with more disclosure, more liquidity, and broader investor participation in exchange for higher achievement. That’s how you encourage companies to grow up in public, rather than forcing them to remain private or go elsewhere.
Recent experience also shows the danger of mistaking prestige venue branding[3] for investor protection. Markets work best when risks are disclosed clearly and upfront, and when it is obvious where an investment sits on the spectrum from established to speculative. Exchange listings do not magically eliminate risk, as struggles with low-priced securities[4]and smaller IPOs[5] have shown. Investors can be blinded by the prestige of a name, while underlying business quality and disclosures remain weak. Good regulation prioritizes transparency, standards, and conduct, so the market pricing process can do its job. When policy gets that balance right, investors can protect themselves and the public markets become stronger at every level.
Public markets don’t need reinventions. They need modernization, from top to bottom. Increase tangible benefits, right-size the rules and reduce unnecessary regulatory burdens. Companies that consume capital, and those that create it, will have a better shot at sustainable success if their shares are publicly traded. This is how we restore America’s public markets as a competitive and compelling option for companies of every size.
[1] https://blog.otcmarkets.com/2021/06/21/exploring-the-fundamentals-how-the-otc-markets-work/
[2] https://blog.otcmarkets.com/2022/03/17/creating-equitable-public-markets-for-todays-equities/
[3] https://blog.otcmarkets.com/2024/01/12/blue-chips-or-red-flags-the-exchange-myth/
[4] https://www.wsj.com/finance/stocks/nasdaq-penny-stock-proposed-rule-change-74677b00?
[5] https://www.wsj.com/finance/stocks/nasdaq-has-become-the-market-of-choice-for-dubious-penny-stock-ipos-a01cae19?
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