The US House of Representatives Financial Services
Committee has released a draft bill called the Small Company Capital
Formation Act of 2011. The first salvo in what we hope will be more
Congressional efforts to help small companies with capital formation.
The bill, just four pages long (!), basically
increases the amount you can raise in a Regulation A offering (see prior posts
for explanation of Regulation A) to $50 million, but in an interesting
way. It pretty much leaves Reg A the way it is now if you are raising up to $5
million, you can offer publicly, "test the waters" before, shares are tradable
thereafter once the SEC approves an offering circular, but no further reporting
requirements after that.
The bill says that if you are raising between $5 million
and $50 million, the SEC would be given the authority to require filing of
audited financial statements, disqualify companies with bad actors and require
the company to make periodic disclosures. It also proposes requiring that the
upper limit be re-examined every two years and gives the SEC the power to
What are the political prospects of this passing? Is this
good? Is this everything we'd want to see in such reform? Does the SEC like
this idea of organizing "disclosure lite"? I will report to you as this
develops, but take a look back at my prior posts on how this reform could go to
see other possible changes we hope they will consider.
additional insights on reverse mergers, SPACs, other alternatives to
traditional initial public offerings, the small and microcap markets and the
economy, visit the Reverse
Merger and SPAC Blog by David N. Feldman, Esq., Partner of Richardson
& Patel LLP.
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