With companies staying private longer, individual investors are being locked out of a big chunk of the market. Jay Clayton, chairman of the U.S. Securities and Exchange Commission, wants to change that.
“If growth opportunities have shifted — not all the way, but to a substantial extent — into private markets and ordinary investors don’t have access to them, that’s not good,” said Clayton, speaking at the CNBC Institutional Investor Delivering Alpha Conference on Thursday.
Clayton stressed that there’s value in having individuals investing alongside sophisticated institutions, such as pensions, in the same companies in the public markets. The commission is considering how to replicate that in some fashion in the private markets.
“It’s hard to give individuals access to private markets,” he said during the first interview of the conference. “Can we have a fund structure to ensure that ordinary investors are getting the same deal?”
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Clayton said he is concerned that public markets are being used more for liquidity than actually raising growth capital from investors. He said the SEC is asking why founders are delaying IPOs, considering issues such as whether public investors, in contrast to investors in private markets, pressure companies for short-term results and whether it is too costly to go public.
Still, the SEC chairman noted that private companies in the technology sector — where companies are tending to stay private for far longer than in the past — is not necessarily representative of all private businesses.
Commenting on direct listings, Clayton said he’s more focused on good disclosure. “Who are we to judge as long as investors have access to fair information?” he said.