The SEC is reviewing some age-old rules on start-up investments, considering ways to make it easier for private companies, namely Facebook, to remain so.  According to the Wall Street Journal, Federal securities regulators are reconsidering current constraints on share issues by private companies, looking to do the following:

• Raise the limit on the number of shareholders a private company can have before being required to publicly share financial details and statements (the current number is 499).
• Relax general solicitation rules on private placements, which would make it easier for private companies to share offerings with the public (workaround, workaround!).

The move could have lasting affects for companies going through private sectors, like venture capital firms, for start-up funds, and vastly change the way companies go about their public offerings, if they decide to go that route at all.  Facebook in particular has been avoiding the public eye for as long as possible, even turning away U.S. investors looking to buy Facebook shares through investor Goldman Sachs.

This 499 magic number is under a great deal of critique from both ends of the spectrum, especially as special purpose vehicles from financial institutions can circumvent this shareholder limit.  As private companies and their backers seek ways to keep a tight reign over share holdings, Facebook’s IPO holdout has stirred a hefty amount of controversy for venture-backed operations and market transparency.

Fortune points out a rather important distinction for companies like Facebook and Zynga, that are seemingly being forced to go public.  “Remember, a company need not become publicly-traded if it trips the shareholder limit. It simply must report as if it were a public company,” Fortune reports.  “That may sound like a distinction without a difference, except that it means a Zuckerberg or Pincus would not be slaves to bank analysts, hedge funds, etc. All of this talk that Facebook and Zynga will be forced to go public in 2012 is simply untrue. It’s still a choice.”

The larger issue, however, is central to how venture capitalists work.  Publicly, VCs may have to play along with the SECs attempts towards a more flexible approach to doing business.  As the entrepreneurial community continues to appeal to VCs, the SEC’s considerations are a matter of creative control for fianciers and founders.  And it all leads back to bubble talk.  The question of whether or not the tech scene is in the midst of another bubble will always be a matter of perspective, but the trust of the public is a necessity, regardless of a company’s private offerings.

Andy Kessler toils over the subject in his latest book, Eat People, and he should know all about it–he’s been around for a few bubble cycles.  We had him on the Extraction Point not too long ago, discussing the fundamentals behind bubbles.  See below, or click here to watch John Furrier’s interview with Kessler on SiliconAngle.tv.