House OKS bill to aid small busi­nesses

Bi­par­ti­san votes look past mis­giv­ings, eas­ing path for star­tups to raise cap­i­tal

The Washington Times Daily - - Business - BY JIM ABRAMS

De­spite warn­ings that less gov­ern­ment over­sight might open the door to more in­vest­ment scams, Congress on Tues­day sent Pres­i­dent Obama bi­par­ti­san leg­is­la­tion that he en­dorsed mak­ing it eas­ier for star­tups to raise cap­i­tal with­out run­ning afoul of fed­eral reg­u­la­tions.

The leg­is­la­tion, backed by Sil­i­con Val­ley and the high-tech in­dus­try, is on course to be one of the few achieve­ments this year for a Congress mired in par­ti­san di­vi­sions and primed for the fall elec­tions.

The strong 380-41 vote in the House over­shad­owed mis­giv­ings among some Democrats and Demo­cratic al­lies — in­clud­ing unions and con­sumer groups — that the bill backpedals on in­vest­ment pro­tec­tions put in place af­ter the dot.com ex­cesses and Wall Street melt­down and could lead to fraud and abuse.

The Se­nate passed the bill last week on a 73-26 vote af­ter at­tach­ing an amend­ment that tight­ened rules for seek­ing out in­vestors on the In­ter­net. All “no” votes in both the House and Se­nate came from Democrats.

The leg­is­la­tion com­bines a half­dozen smaller, bi­par­ti­san bills that ex­empt startup com­pa­nies from Se­cu­ri­ties and Ex­change Com­mis­sion re­port­ing rules in or­der to re­duce the costs and red tape of rais­ing cap­i­tal.

The cen­ter­piece pro­vi­sion would phase in SEC reg­u­la­tions over five years to al­low smaller com­pa­nies to go public sooner. Com­pa­nies that have an­nual gross rev­enues of less than $1 bil­lion would en­joy this “emerg­ing growth com­pany” sta­tus.

An­other pro­vi­sion fa­cil­i­tates the prac­tice of “crowd­fund­ing,” in which the In­ter­net is used to so­licit a large num­ber of smaller in­vestors.

House Repub­li­cans hailed the leg­is­la­tion as a jobs bill be­cause spurring cap­i­tal for­ma­tion would lead to small busi­nesses hir­ing more peo­ple.

“The jobs act is a vic­tory for un­em­ployed Amer­i­cans who are lit­er­ally cry­ing out for jobs. It is a vic­tory for small com­pa­nies and for en­trepreneurs who want Washington to re­duce the red tape that sti­fles in­no­va­tion, eco­nomic growth, and job cre­ation,” said Rep. Spencer Bachus, Alabama Re­pub­li­can and chair­man of the Com­mit­tee on Fi­nan­cial Ser­vices.

Democrats, who have crit­i­cized Re­pub­li­can op­po­si­tion to their ef­forts to stim­u­late the econ­omy and cre­ate jobs, re­ferred to the mea­sure as an “ini­tial public of­fer­ing” bill and said its ef­fect on job mar­kets would be mod­est at best.

Mr. Obama came out in sup­port of the bill when it first emerged in the House three weeks ago, say­ing it par­al­leled many of the ini­tia­tives he had put forth to en­cour­age small­busi­ness growth. The White House tem­pered that sup­port some­what af­ter SEC Chair­man Mary L. Schapiro and con­sumer ad­vo­cacy groups, in the wake of the orig­i­nal House vote, came out with con­cerns that it went too far in re­mov­ing SEC over­sight, open­ing the door to re­peats of the En­ron Corp. scan­dal or the mort­gage in­dus­try de­cep­tions.

Af­ter the Se­nate vote last week, White House press sec­re­tary Jay Car­ney said the White House was heart­ened by in­vestor pro­tec­tions on crowd­fund­ing added by the Se­nate and would “re­main vig­i­lant in mon­i­tor­ing this and other el­e­ments to en­sure the over­all bill achieves its goal of help­ing en­trepreneurs while main­tain­ing pro­tec­tions for in­vestors.”

Dow Nas­daq S&P 500 Rus­sell 2000 13,197.73 3,120.35 1,412.52

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