Micro Investment Bill IntroducedMarch 30, 2016
On March 23, Rep. Tom Emmer (R-Minn.) introduced the Micro Offering Safe Harbor Act (H.R. 4850) which would greatly simplify the process for small businesses making some securities offerings. The bill currently has seven cosponsors, all Republican, including House Committee on Small Business Chairman Steve Chabot (R-Ohio), and is currently pending in the House Committee on Financial Services. NSBA sent a letter to Committee Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Water (D-Calif.) urging the committee to approve the bill. The language in the legislation mirrors NSBA recommended changes to the securities laws made in a 2013 white paper.
This targeted legislation creates a safe harbor for small securities offerings which meet requirements clearly identified in the legislation. Under the legislation, offerings in which each purchaser has a substantive pre-existing relationship with the issues, where the issuer has less than 35 purchasers utilizing the exemption in the preceding 12 month period, or where the total amount raised during the preceding 12 month period is less than $500,000. This means that transactions meeting these requirements would be exempted from registration with the Securities and Exchange Commission (SEC). Additionally, the legislation also exempts transactions meeting the specified requirements from state registration requirements, commonly referred to as “blue sky laws.”
Small businesses are currently faced with high regulatory compliance costs when making small offerings that often render them not cost effective. This legislation would change the access to capital landscape for small businesses by allowing many small businesses to raise capital through securities offerings to family members and other close friends. Under this legislation, these types of transactions will exist under the legal framework of securities law and will allow more official recourse and structure to disputes that arise. They will also provide a more solid legal base for future offerings which the issuer undertakes.
NSBA supports this legislation and the changes that it would make to small business access to capital. Every small business at some point in time will need capital, whether as a startup or later on to grow the business. In a recent NSBA survey, over one in four small business owners indicated that they did not have adequate access to capital. It is absolutely essential that all small businesses have access to the capital they need to grow and add good jobs to the economy.