House OKS bill to aid small businesses
Bipartisan votes look past misgivings, easing path for startups to raise capital
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