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The explosive growth of private markets and the proliferation of “unicorns,” private startups valued at $1 billion or more, has pushed the U.S. Securities and Exchange Commission (SEC) away from the center of the action and towards the periphery. In 2021, the SEC announced plans to reassert its jurisdiction by forcing unicorns to go public. But those plans fizzled. By the end of last year, the legality of the maneuver had been called into question and key proponents had left the Commission, leaving the unicorn crackdown seemingly on ice.

Now the regulator is back with a new plan to reclaim its throne. In January 2023, one Commissioner proposed inventing a new mandatory periodic disclosure regime just for unicorns. Under this plan, the agency would amend Regulation D, the rule that allows unicorns and many other private companies to raise capital without going public, to require unicorns to disclose audited financial statements and to provide independent attestations regarding the issuer’s internal controls over financial reporting, both at the time of offering and on an “ongoing” basis thereafter—just as public companies are required to do under the Securities Exchange Act of 1934.

This paper questions the legality of this proposal. I show that the SEC likely lacks legal authority to impose ongoing disclosure obligations on private companies not linked to any particular offering or transaction or to condition particular private offering-related disclosure obligations on issuer size. For the second time in two years, an SEC Commissioner has proposed a regulatory overhaul to fundamentally redraw the lines between public and private companies. And for the second time in two years, that proposal appears to fall outside of the agency’s legal authority.