SEC Approves Silicon Valley-Based Stock Exchange

May 20, 2019

On May 10, the SEC approved the Long-Term Stock Exchange’s application to become a national securities exchange, clearing the way for the San Francisco-based company to launch the nation’s 14th stock exchange, according to reporting by The Wall Street Journal. Writing on the LTSE website, founder Eric Ries says, “The approval furthers a journey LTSE began three years ago, when we set out to help companies build lasting businesses and empower long term-focused investors by creating an ecosystem in which businesses are built to last.”

The key feature of the LTSE is tenure voting, where the voting power of shares increases the longer investors own them. This feature, which aims to reward investors with the longest time horizons, has proven controversial. The Council of Institutional Investors (CII) submitted a comment letter to the SEC in which it supported the LTSE’s goal to “reorient companies and investors around long-term thinking,” but ultimately opposed the LTSE’s application, due largely to the issue of tenure voting. According to the CII, “The structure is likely to disproportionately empower founders/managers who have substantial stakes from IPO [sic], and who sometimes fall victim to myopia or conflicted behavior that can destroy value.”

According to The Wall Street Journal, “The company’s next step will be to win regulatory approval for its listing rules, a separate process from winning an exchange license.” In addition to tenure voting, other LTSE listing rules “are likely to focus on tying executive pay to long-term performance and barring companies from publishing quarterly earnings guidance.”

View All Ticker Posts