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"Thanks to Facebook, the U.S. government is reportedly close to changing long-standing rules governing private company stock. It's a move that could fundamentally change the startup, venture capital and IPO worlds.\nThe Security and Exchange Commission recently issued a letter to Representative Darrell Issa (R-CA), outlining potential changes its heavily considering to how the law treats shares of private companies.  \"The staff is taking a fresh look at our rules to develop ideas for the Commission about ways to reduce the regulatory burdens on small business capital formation,\" SEC Chairmain Mary Schapiro wrote to Issa, according to The Wall Street Journal.\nThe biggest change proposed in the letter is raising the limit on the number of shareholders a private company can have without being forced to disclose their financial information to the public.  Currently that number is set at 499 by the 1934 Securities Exchange Act.  It's a number that Facebook is trying to avoid surpassing so that it doesn't have to open its books, and it's also the number that drove Google's decision to go public in 2004.  According to Schapiro, the SEC can increase the limit without Congress's approval.\nBy changing this number, startups and fast-growing companies will have more time before they have to disclose sensitive financial information to the public.  It could have a dramatic impact on the IPO market by giving companies incentives to delay filing for IPO.  In addition, the SEC is considering relaxing the ban on general solicitation, which would make it easier for private companies to publicize private share offerings.  \nThe SEC is also investigating the use of \"special purpose vehicles,\" a tool used by banks to help rich investors acquire a piece of a private company without surpassing the 499 shareholder limit.  Special purpose vehicles received renewed attention after Goldman Sachs used one to help Facebook raise $1 billion from international investors.\nThe catalyst for these proposed changes seems to be Facebook's recent round of funding.  Because of SEC regulations, Facebook decided not to offer U.S. investors a chance to buy Facebook shares through Goldman Sachs, something that probably didn't go down well with the SEC.  There have been demands for decades to modernize the laws governing private company shares, but the attention on Zuckerberg and Facebook's rapid growth may be what triggers fundamental changes in the private and public markets."^^<http://www.w3.org/2001/XMLSchema#string>
<http://mashable.com/2011/04/07/sec-facebook-stock-rules/>