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WASHINGTON, June 25 /PRNewswire/ -- The founder of the first company to successfully complete an entire end-to-end stock offering over the Internet says Congress must act quickly on behalf of hundreds of promising new companies that are giving up on the capital market because it often has become too costly and time-consuming to deal with the SEC's cumbersome registration process.
``Hundreds of companies, including my own, are giving up on the SEC registration process, because it has come to represent a major obstruction in our quest for capital,'' Gregory J. Halpern, CEO of Circle Group Internet, will tell a House congressional oversight panel tomorrow. ``Is the next Intel, Dell or Yahoo among them? We may never know.''
Mr. Halpern, who heads a funding and consulting firm for technology companies, says many emerging firms find themselves ``running a complex gauntlet through multiple departments within the SEC, the result of antiquated, time consuming, and expensive regulations.'' In the end, he adds, many small businesses either forego the process or drop out in frustration.
In his testimony, Mr. Halpern will outline the reasons he believes small businesses -- especially advanced small businesses that are technology-driven, capital intensive and based on rapid growth curves -- need a process that is more streamlined and provides additional guidance during registration.
``All businesses are not created equal,'' Mr. Halpern will tell lawmakers. ``There is a strong opportunity right now for the SEC to further develop the process for small business capital formation.''
The House Small Business Subcommittee on Oversight and Investigations hearing -- ``The Role of the SEC in Promoting Capital Formation: Help or Hindrance?'' -- is being convened to examine the regulatory burdens to capital formation and what the Commission can do to help eliminate them. The hearing will take place on Tuesday, June 26 at 9:30 a.m. in 2128 Rayburn House Office Building on Capitol Hill.
According to Mr. Halpern, advanced small businesses -- the emerging technology enterprises that created a sizable number of jobs during the recent economic boom -- have been those most affected by the SEC's cumbersome registration approval process. These businesses have greater and more complex capital needs and other unique challenges based on their rapid growth curves.
Although a process exists that is supposed to make the registration process simpler and friendlier for small businesses, Halpern says that many companies are required repeatedly to answer literally hundreds of questions -- many of which are subjective or judgmental. ``These questions deal not just with normal and appropriate full disclosure, but with our business models, management structures, investors, and even the professionals we've hired.''
As a result, Halpern says companies often are compelled to change the way they do business just to satisfy the process. ``What struck me most in our case -- beyond the time and costs involved -- was that those sitting in judgment often seem to have little or no understanding of business and would routinely fail even to respond to inquiries.''
The SEC regularly has failed to comply with the act of Congress imposed by the National Securities Markets Improvement Act of 1996 concerning ``competition, efficiency and capital formation'' in its rulemaking activities, observes Halpern.
Mr. Halpern stresses that he is not challenging the basic mission of the SEC, which is to protect investors and maintain the integrity of the securities markets. ``I merely want to take the mystery out of the process and make the Commission more sensitive and responsive to the special needs of small businesses in today's accelerated economy.''
During his testimony, Mr. Halpern will propose the formation of a ``Small Business Advocacy and Liaison Office'' within the SEC that will advise small companies on how to meet the regulations and requirements of the SEC in applying for access to the capital markets. It would act as an ombudsman for small businesses to monitor the processing of applications and provide fast, reasonable responses to issues that arise during the registration process.
Part of the proposed new office's mandate would provide for an annual review of the Commission's rules and regulations as they pertain to small businesses, especially those that fall under the advanced small business category.
In addition, Halpern said he will shortly announce plans to form a trade group called the Advanced Small Business Alliance, one of the roles of which will be to assist governmental agencies in complying with existing regulations and promoting change to support emerging companies.
About Circle Group Internet
Founded in 1994, Circle Group Internet is an Internet funding and consulting firm for emerging technology companies based in Mundelein, Illinois. Through its wholly owned NASD-Registered broker-dealer, CGI Capital, Inc., CGI offers companies various funding solutions. Circle Group also offers in-house digital design skills and business consulting solutions through CGI Total Media, Inc, and Consulting CGI, respectively. Among other ventures, CGI has founded a digital rights management company, Veridisc, which has developed a suite of tools for distribution of digital audio and video content for the entertainment and commercial software industries. In 1998, Circle Group Internet was the first company to complete an entire end-to-end stock offering over the Internet. For more information about CGI please visit http://www.circlegroupinternet.com/ .
SOURCE: Circle Group Internet
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