US market regulator Securities and Exchange Commission is looking at whether disclosure rules for privately-held companies need to be rewritten in the wake of recent deals allowing investors to buy shares in Internet firms such as Facebook and Twitter.
"The review is at an early stage. . . and SEC officials looking at the recent deals haven't concluded that any of them run afoul of the 47-year-old rules governing private companies," the
Wall Street Journal has reported.
SEC rules require companies with 500 or more shareholders of record in a given type of stock to publicly disclose certain financial information.
The norms are aimed at protecting investors from risking money on entities that say little about their operations and performance.
Going by reports, social networking site Facebook would be getting $500 million from Goldman Sachs and Russia's investment firm Digital Sky Technologies.
"Facebook's agreement with Goldman Sachs Group Inc to create an investment vehicle that will allow some of the securities firm's richest clients to buy as much as $1.5 billion of equity in Facebook is causing the SEC to re-examine
a key dividing line between public and private companies," the daily said.
The report noted that the social networking site had fewer than 500 investors as of the end of last year, including current, former employees, venture-capital firms and private investors.
The publication said the 500-shareholder rule, issued in 1964, has been a headache for private companies that wanted outside investors and venture capital, but didn't want to disclose any financial information.
"Google Inc's decision to go public in 2004 was triggered partly because the Internet-search giant exceeded the 500-shareholder limit," it added.