Some New Financial Legislation is Moving Along

Some New Financial Legislation is Moving Along

Four bills made their way through the Capital Markets and Government Sponsored Enterprises Subcommittee of the House Financial Services Committee.

The Private Company Flexibility and Growth Act, introduced by Rep. David Schweikert, raises the shareholder threshold for mandatory registration with the SEC from 500 to 1,000 shareholders. I'm surprised it's not called the Google/Facebook Act. The 500 shareholder limit is most famous for forcing Google to go public and is close to forcing Facebook to do the same.

The Access to Capital for Job Creators Act removes the regulatory ban that prohibit general solicitation and advertising in private placements. There were two amendments to the bill during the mark-up session. Maxine Waters (D-CA) included and amendment that the revised SEC rules allowing a general solicitation under Regulation D must require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors using methods determined by the SEC. Scott Garrett (R-NJ) included an amendment that Section 4(2) of the Securities Act be revised to add the language: "whether or not such transactions involve general solicitation or general advertising."

The Entrepreneur Access to Capital Act permits "crowdfunding" to finance new businesses by allowing companies to accept and pool donations up to $5 million without registering with the SEC. It would limit individual investments to the lesser of $10,000 or 10% of an investor's annual income. An amendment requiring a notice filing with the SEC was rejected as was an amendment that would have barred felons from being involved.

The Small Company Job Growth and Regulatory Relief Act would expand the exemptions available to small companies from the Section 404(b) auditor attestation reporting requirements to small and mid-size companies with a market capitalization of less than $500 million. The exemption is currently at the $75 million cap set by the Dodd-Frank Act. During the mark-up, the House panel amended the bill to lower the market float from $500 million to $350 million.

Will these go anywhere? The votes seemed to very partisan with Republicans voting yes and Democrats voting no. That does not bode well for moving up the chain through the house, through the Senate and on to the President's desk.  However, President Obama has already indicated an interest in the crowdfunding idea.

These are not the grand, sweeping changes of Dodd-Frank. These are small tweaks to the regulations on the capital markets.


For additional commentary on developments in compliance and ethics, visit Compliance Building, a blog hosted by Doug Cornelius.

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