S.E.C. to Study Easing Rules on Shares of Private Companies

WASHINGTON — The chairwoman of the Securities and Exchange Commission has ordered a staff review of the regulations that guide how small companies raise money from investors, as it considers relaxing the rules.

The review opens the door to changes that supporters say could make it attractive for more new technology companies like Facebook and Twitter to consider selling shares to the public.

S.E.C. staff members will study whether changes should be made in rules that prohibit a company from making a broad solicitation for investment from the public without providing basic financial information or other disclosures, according to a letter from the S.E.C. chairwoman, Mary L. Schapiro, to a Congressional committee.

In addition, the agency will look at whether to raise, from 499, the maximum number of shareholders that a company can have and still remain exempt from public-company filing requirements, the letter said. And it will examine the restrictions on communications by companies that are preparing to undertake initial public offerings.

Also under consideration are what rules should apply to new capital-raising strategies and modern communications methods, given the rapid changes in business and financing models spurred by the Internet and the role that social media can play in spreading company news.

Ms. Schapiro outlined the areas of review in a 25-page letter, which contained 82 footnotes. The letter, dated April 6, was addressed to Representative Darrell E. Issa, the California Republican who is the chairman of the House Committee on Oversight and Government Reform. The letter’s contents were first reported Friday by The Wall Street Journal.

The letter was a response to Mr. Issa’s March 22 letter to the S.E.C., in which he asked for answers to 32 multiple-part questions about how small companies raise financing and why the American markets had suffered a decline in initial offerings.

The review, Ms. Schapiro said, is intended to give the agency “a fresh look at our rules to develop ideas for the commission about ways to reduce the regulatory burdens on small business capital formation in a manner consistent with investor protection.”

Mr. Issa, in a statement Friday, said he was pleased with some aspects of the response.

“The S.E.C.’s apparent agreement on the need to examine the 499-shareholder cap on private companies is encouraging,” Mr. Issa said. “Lifting or refining this rule could significantly improve the ability of companies to raise capital without creating risks that the S.E.C. should be concerned with.”

Mr. Issa said he remained concerned, however, “that many other unneeded barriers to gathering capital created by the S.E.C. over the years aren’t being addressed and my efforts to get explanations still haven’t received answers.”

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