House Considers Removing Obstacles to Raising Funds
Lawmakers in the U.S. House of Representatives quickly advanced four bills that would make it easier for small businesses to line up capital.
The quartet of bills makes technical changes to several securities laws, easing obstacles to raising funds. It's a rare burst of bipartisanship—three of the bills are from Republicans, one is from a Democrat. That's particularly notable because economic issues are so hotly contested.
What's in the bills: A measure, sponsored by Rep. Patrick McHenry (R-N.C.), allowing investments of up to $10,000 per investor from crowd-funding sites. The total investment via crowd-funding websites would be capped at $1 million, or $2 million if companies release annual audited financial statements.
Another bill, this one sponsored by House Republican Whip Kevin McCarthy (R-Calif.), would allow small businesses to use direct mail or advertisements to market their securities to potential investors. The SEC's current "general solicitation" ban essentially limits start-ups to marketing to investors they already know.
Rep. Dave Schweikert (R-Ariz.) introduced a measure allowing companies to rack up 1,000 shareholders before having to register with the SEC. The current cap is 500.
The House Financial Services Committee approved all the bills by a voice vote, with two sailing through without a single amendment. Next step: consideration on the House floor, which could happen as soon as next week. After that, the future is murky. The Senate is not considering any similar bills.
House Majority Leader Eric Cantor (R-Va.) hailed the bills as decisive action to boost the economy after their passage.
"We need to move past our differences and come together to create an environment for economic growth and job creation," he said in a statement. "I agree with President Obama that we can't wait—and the House isn't waiting."
Separately, the Securities and Exchange Commission has formed an advisory committee to "reduce the regulatory burdens on small businesses in raising capital in a manner consistent with investor protection," as a mid-September statement from the commission read.
The 17-member committee will have its first meeting Oct. 31.
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.