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• Three basic categories of firm: private firms, an intermediate category of smaller firms,’ and public firms;

• Reasonable, scaled disclosure requirements; and • Specified secondary markets for the securities of these firms.°

The SEC needs to be reformed to achieve its important core functions more effectively, to improve transparency and due process, and to reduce unnecessary regulatory impediments to capital formation.® Under current law, the SEC Chairman has the authority to make almost all of the necessary changes.’ Unfortunately, financial regulators, particularly the SEC and the Financial Industry Regulatory Authority (FINRA), are poorly managed and organized.

With regulatory authority delegated by the government, both the Public Company Accounting Oversight Board (PCAOB) and FINRA have proved to be ineffective, costly, opaque, and largely impervious to reform. To reduce costs and improve transparency, due process, congressional oversight, and responsiveness, PCAOB and FINRA should be abolished, and their regulatory functions should be merged into the SEC. Furthermore, Congress should establish an independent board or commission and charge it with producing a detailed report within 18 months that examines the degree to which the regulatory functions of the various other so-called self-regulatory organizations (SROs), which are no longer self-regulatory in any meaningful sense, should be moved to the SEC.8

Discrimination based on immutable characteristics has no place in financial regulation. Offices at financial regulators that promote racist policies (usually in the name of “diversity, equity, and inclusion”) should be abolished, and regulations that require appointments on the basis of race, ethnicity, sex, or sexual orientation should be eliminated. Equal protection of the law, equal opportunity, and individual merit should govern regulatory decisions.®

Congress has given the SEC broad “general exemptive authority,””° but the SEC has used this authority only rarely. It should use this authority significantly more often to reduce the regulatory burden on issuers, particularly smaller entrepreneurs.

ENTREPRENEURIAL CAPITAL FORMATION Financial regulators should remove regulatory impediments to entrepreneur

ial capital formation." In the absence of the fundamental reform outlined above, the SEC should:

• Simplify and streamline Regulation A (the small issues exemption)” and

Regulation CF (crowdfunding) and preempt blue sky registration and qualification requirements for all primary and secondary Regulation A offerings.*