Center for American Progress

Executive Summary: How Exemptions From Securities Laws Put Investors and the Economy at Risk

Executive Summary: How Exemptions From Securities Laws Put Investors and the Economy at Risk

A new report from the Center for American Progress explains why Congress and the SEC should roll back public registration and reporting exemptions that undermine the basic bargain of the securities laws.

U.S. one-hundred-dollar bills.
U.S. one-hundred-dollar bills are overlaid in front of a building. (Getty)

The U.S. securities laws exist to ensure that businesses seeking to raise money from the public must first provide the public with sufficient information to make informed investment decisions.

Enacted after the stock market crash of 1929 led to the bankruptcy of millions of Americans and the economy’s collapse, the U.S. securities laws established a public disclosure and reporting framework to ensure that companies selling securities to the public are transparent and accountable. This framework succeeded remarkably well for nearly five decades and contributed to the growth and success of America’s capital markets. During that time, courts held that most companies were required under the law to comply with the public disclosure framework.

In the 1980s, however, Congress and the U.S. Securities and Exchange Commission (SEC) began creating and expanding exemptions from the public framework. As a result, companies could increasingly access capital from the public without providing basic transparency and without being subject to investor or public accountability.

Read the report

Today, the opaque private capital markets, where securities offerings are often sold and traded with little or no reliable information, are so vast that more capital is raised there each year than in the public capital markets. There are now more than 650 private startup companies in the United States valued at $1 billion or more—in some cases, much more.1

Huge private companies may have tens of thousands of shareholders, have thousands of employees, and sell products or services to millions of American consumers. Yet they are not obligated to provide basic information to the public about their financials, operations, or risks or to obtain an independent audit of their financials. The enormous growth of the private markets, combined with the lack of reliable disclosures, has overwhelmed federal securities regulators, who struggle to estimate the markets’ size, much less police them.

A subway train pulls into the Flushing Avenue station in Brooklyn.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

At the same time, the alarming size of the private markets, where companies do not have to provide reliable information about financials, operations, or risks, poses a looming threat to investors and the economy. Millions of Americans’ retirement and education savings are partially invested in dark private companies and funds. Without rules requiring fair disclosure of material and reliable information, the private markets are unfair, providing valuations of companies that are often seriously inflated and offering special treatment to some investors while, at the same time, charging hidden and excessive fees to others. The result is that capital formation is distorted. Without adequate and reliable information, capital cannot flow to its highest and best use at a time when America faces many global challenges, including a critical economic transition toward cleaner forms of energy.

To adequately protect Americans’ retirement savings, businesses in need of capital, and the economy overall from undisclosed risks—including fraud and the catastrophic harms of climate change—Congress and the SEC must restore the public disclosure and accountability framework by limiting or eliminating the exemptions from public disclosure and reporting. In addition, all large companies should be required to provide the public with basic transparency and be held accountable to the public.

These changes would restore investor protections, fairness in capital markets, and healthy capital formation.


  1. CB Insights, “The Complete List of Unicorn Companies,” available at (last accessed January 2023).

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Tyler Gellasch

Co-Founder, Myrtle Makena, LLC

Myrtle Makena LLC

Alexandra Thornton

Senior Director, Financial Regulation

Center For American Progress

Crystal Weise

Former Research Associate

Center For American Progress


A subway train pulls into the Flushing Avenue station in Brooklyn.

Inclusive Economy

We are focused on building an inclusive economy by expanding worker power, investing in families, and advancing a social compact that encourages sustainable and equitable growth.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.