For most founders, regulatory discussions don’t appear on the radar until something goes wrong: a delayed offering, a compliance snag, or a legal gray zone no one warned them about. But often, the most impactful policy decisions aren’t sweeping legislation—they’re quiet structural revisions made in committee meetings that receive little attention outside legal circles.
That’s exactly what’s happening now. The SEC’s Small Business Capital Formation Advisory Committee is returning to two key issues: Regulation A and the regulatory treatment of finders. Both are deeply relevant for startups raising capital outside of traditional venture networks—and both could shift meaningfully in the coming year.
What the Committee Is, and Why It Matters to People Actually Raising Capital
If you’ve never heard of the Small Business Capital Formation Advisory Committee, you’re not alone. But if you’ve ever questioned why it’s so difficult to raise money without a full IPO or why certain introductions feel riskier than others from a legal standpoint, you’ve felt the effects of the gaps this committee is trying to address.
This is not a headline-chasing body. It’s a group of people with direct experience—startup operators, fund managers, securities attorneys—who advise the SEC on how regulation affects real-world capital formation. The committee doesn’t write rules, but its recommendations often form the blueprint for what the SEC eventually proposes.
Think of it as a structured channel for surfacing what isn’t working—not from the perspective of theory, but from the practical edge of where capital meets compliance.
This isn’t the first time the committee has taken on foundational topics. It helped inform the accredited investor reforms in 2020. It has pushed for better integration of small offerings across Regulation D, Regulation A, and crowdfunding regimes. And it’s one of the few settings where small firms have something close to a seat at the table.
This is where early-stage policy change starts—not with press conferences, but with feedback loops from people who’ve tried to use the system and found the system lacking.
Regulation A: A Useful Tool That Still Doesn’t Work for Most
Regulation A, updated most recently under the 2015 JOBS Act and again in 2020, is designed to give small companies a cost-effective alternative to a full IPO. It allows issuers to raise up to $75 million in public offerings (Tier 2) without registering as a public company, theoretically opening the door to a more democratized funding path.
But in practice, uptake has been low. Just a few hundred offerings are completed under Regulation A each year, disproportionately concentrated among companies with in-house securities counsel or on funding platforms that specialize in these filings. The problem isn’t the regulation’s existence—it’s its complexity, its uneven applicability across industries, and its burdensome overlap with state law and ongoing disclosure requirements.
Tier 2 offerings, while preempting state review, still require audited financials, semiannual reports, and ongoing compliance burdens that resemble—but don’t quite offer—the benefits of going public. Meanwhile, Tier 1 offerings (up to $20 million) are still subject to state-by-state qualification, rendering them inefficient for most serious fundraisers.
The committee’s likely focus:
- Whether Tier 1 can be made more useful through harmonization
- Whether Tier 2 disclosures can be streamlined without sacrificing investor protection
- Whether secondary market limitations for Regulation A shares are artificially depressing investor appetite
For comparison, Canada’s “Offering Memorandum” exemption permits relatively broad retail investment without public registration, and its use has steadily grown—particularly in real estate and industrial sectors. The U.S. equivalent in Regulation A has yet to see similar sectoral adoption, likely because it remains stuck between the cost of compliance and the absence of strong secondary liquidity.
The “Finders” Discussion: Clarifying What Already Happens in Practice
A “finder” is someone who introduces a private company to potential investors. In many parts of the economy, this role is essential—particularly for businesses without access to formal venture channels.
However, under current SEC rules, anyone who helps raise funds—even informally—is expected to register as a broker-dealer. The rules have not kept pace with how fundraising works at the margins. Many finders operate in legal ambiguity, where risk is offloaded to the issuer and the investor, and both parties proceed based more on trust than regulatory protection.
In 2020, the SEC proposed a conditional exemption that would allow limited finder activity without full registration. The draft created two tiers of finders:
- Tier I: One-off introductions, no compensation tied to outcome
- Tier II: More frequent activity, with limits on solicitation and compensation
This framework stalled. Investor protection groups raised concerns that such exemptions might open the door to bad actors, especially in markets with minimal institutional scrutiny. The committee’s upcoming discussion will re-engage this debate, now armed with four more years of informal finder activity, rising private market complexity, and renewed pressure from underserved geographies.
Critically, this isn’t a debate about whether finders exist. They do. It’s about how to integrate their work into a legal framework that balances access, transparency, and accountability.
Countries like Australia and the UK have implemented limited exemptions for introducers and non-licensed brokers, often using training, volume caps, or formal agreements to control risk. The U.S. has resisted this in part due to the fragmented nature of its capital markets and the legacy of enforcement-centric regulatory philosophy. But the need for alignment is growing.
Why These Two Topics Belong Together
At first glance, Regulation A and the finders exemption might seem like unrelated policies. One deals with exempt public offerings, the other with informal intermediaries in private placements. But in practice, they are two sides of the same problem:
- Founders outside traditional networks struggle to raise capital.
- Existing legal channels are too expensive, opaque, or incomplete.
- So they rely on informal actors (finders) or avoid public-facing exemptions (like Reg A) entirely.
The result is a paradox: regulatory frameworks meant to increase access are underused, while practices that fill the gap remain noncompliant. Fixing both together could offer a coherent, integrated pathway: legal intermediaries who connect companies to capital, and efficient exemptions that let that capital flow without public registration.
The Broader Economic Context
The capital landscape for early-stage companies is shifting. Venture firms are writing fewer checks, especially at the seed stage. Interest rates remain high, and many investors have turned their focus to safer, shorter-term assets. Founders are exploring other paths – revenue share, local syndicates, community rounds – but those only work if the regulatory frameworks supporting them are clear and workable.
Regulation A is one of those frameworks. So are the informal networks that “finders” operate in. Both exist to close the gap between ambition and access. But when the legal rules are opaque or out of step with actual practice, companies hesitate. And hesitation at this stage often means no growth, no hiring, and no product.
In parts of the country where capital is scarce, these decisions matter more. They shape who can build and who can’t. That’s why even incremental policy changes (especially the kind coming from this committee) can have lasting economic consequences.
What to Watch on July 22
The committee will:
- Finalize its current proposals for modernizing Regulation A
- Reopen discussion on the 2020 finders exemption proposal, with input from industry voices
- Consider principles and frameworks that could guide future SEC rulemaking
The meeting is public and webcast on the SEC website. Anyone interested in the rulemaking process can attend or read the minutes shortly afterward. The real test will be what the SEC does with these recommendations in the months that follow.
How Founders, Fund Managers, and Advisors Can Prepare
- Review your own use of Regulation A. Is it viable under current rules? Would simplification change that?
- Audit finder relationships. If you work with informal brokers or introducers, begin documenting roles, compensation, and communications.
- Engage with the process. Comments to the SEC carry more influence than most assume.
Structural Reform Begins with Procedural Attention
The issues under discussion won’t dominate headlines. But that’s the nature of infrastructure – legal, financial, and procedural. It often matters most precisely when it seems least urgent.
Bringing Regulation A and the finders framework into alignment with contemporary startup and small business needs would not require legislative heroics. It would require listening to those building capital networks from the ground up – and trusting them enough to give them clearer rules.
Smartria Can Help You Stay Ready
At Smartria, we help firms stay ahead of policy, not just react to it. Whether you’re preparing for a Regulation A raise or navigating evolving roles around fundraising intermediaries, our platform and regulatory expertise are built for small and mid-sized firms.
Learn more about how Smartria supports confident, compliant growth at smartria.com.
