House To Vote On GOP Legislation Related to Small Business’ Access to Capital

This week, the House is slated to vote on a Republican legislative package to make it easier for small businesses to access capital. On February 28, House Majority Leader Eric Cantor (R-Va.) presented his Jumpstart Our Business Startups Act’s final version, which is comprised of six bills that would revise securities laws to make this capital flow happen. Included in this package is a bill calling for more shareholder reporting triggers for community banks. Meantime, Senate Majority Leader Harry Reid (D-Nev) has said he plans to push forward a similar package in the US Senate.

As both the House and Senate move forward with their legislative packages, Senator Scott Brown (R-Mass) is asking the Senate to push forward his bill, which would allow for a crowdfunding-related securities registration exemption. His bill (S. 1971) and Sen. Jeff Merkley’s (D-Ore.) S. 1970 similarly are pressing for letting issuers raise up to $1 million yearly through crowdfunding. However, Merkley’s bill establishes a part for states to play in regulating crowdfunding securities, while Brown’s bill does not. The Senator from Massachusetts believes a national framework is necessary, rather than making entrepreneurs comply with each state’s securities law mandate. Also, while Merkeley’s bill calls for giving investors a private right of action to file a civil suit against fraud issuers, Brown doesn’t believe this is necessary and sees current fraud laws as “solid” and merely in need of enforcement. He did, however, say that he and Merkeley share the same desire for investor protection.

Regarding the issue of the Securities and Exchange Commission’s capital formation efforts on small businesses, SEC Division of Corporation Finance Director Meredith Cross said it is hard right now for the regulator to evaluate their impact. Cross, who was part of a panel at the Practising Law Institute’s SEC Speaks conference on February 24, said her views are her own.

Cross said the division is prioritizing a number of actions for 2012, including completing its asset-backed securities and Dodd-Frank Wall Street Reform and Consumer Protection Act rulemaking, making headway in regards to proxy plumbing initiatives, and beginning the process of updating the Commission’s beneficial ownership reporting rules.

Right now the SEC is working on a number of capital formation initiatives. Staffers are also putting together a concept release that will seek public feedback on whether the general solicitation ban, which prevents issuers from using advertising or employing general solicitation to draw investors to private offerings should be reassessed.

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