Bill that aids small business advances
WASHINGTON — Legislation to help startup companies raise capital by reducing some federal regulations won easy passage in the Senate on Thursday despite warnings from some Democrats that less government oversight would mean more abuse and scams.
President Barack Obama supports the measure, which stands to be one of the few bipartisan bills to pass Congress during this politically contentious election year.
Sen. Pat Toomey, R-Pa., a leading sponsor of the legislation, said it might be the most pro-growth measure that this body will consider, perhaps this whole year.
Democrats did manage to pass one amendment to increase investor protections, so the legislation will require another House vote. The House passed the measure — which originally was co-sponsored there by Rep. John Carney, D-Del. — two weeks ago on a 390-23 vote. The Senate vote was 73-26, with all the no votes coming from Democrats.
House Majority Leader Eric Cantor, R-Va., said he would schedule a House vote next week.
The legislation combines six smaller bills that change Securities and Exchange Commission rules so small businesses — defined as those with less than $1 billion in gross revenue — can attract investors and go public with less red tape and cost. It eases rules on advertising and permits startups to use the Internet and other social media to solicit a large number of small-scale investors.
The measure met resistance in the Senate after SEC Chairman Mary Schapiro and numerous consumer and investor groups expressed concerns that it dismantles some of the protections put in place after the Enron scandal and the excesses of the dot-com era. Senate Democrats demanded that investor protections be added to the bill.
The Democratic leadership decided to move ahead after deciding on two amendments that addressed some, but not all, of the investor protection concerns. That wasnt enough for some Democrats.
We are about to embark upon the most sweeping deregulatory effort and assault on investor protection in decades, Sen. Carl Levin, D-Mich., said.
The centerpiece of the bill is a measure to reduce costs for companies seeking to go public by phasing in over five years SEC regulations that apply to emerging growth companies.
The measure would remove SEC regulations preventing small businesses from using advertisements to solicit investors, raise from 500 to 2,000 the number of shareholders a company or community bank can have before it must register with the SEC and allow smaller companies to sell up to $50 million in shares, compared with $5 million now, without filing some SEC paperwork.
It also encourages the practice of crowdfunding, in which the Internet is used to raise capital from a large number of smaller investors.