NSBA Urges Easing of SEC Small Biz RegulationJanuary 10, 2012
NSBA submitted comments to the recently formed Securities and Exchange Commission (SEC) Advisory Committee on Small and Emerging Companies. In those comments, NSBA endorsed a specific proposal to relax restrictions on general solicitation in private securities offerings to accredited investors. The Advisory Committee noted NSBA’s comments in its meeting and voted to recommend that the SEC modify current regulations so that small businesses may advertise seeking accredited investors. Thus, the Advisory Committee has recommended that the SEC accomplish by regulation what the Access to Capital for Job Creators Act (H.R. 2940)–passed by the House 413-11–would do by statute. H.R. 2940 is now in the Senate where no action has yet occurred.
NSBA also urged the Advisory Committee to:
- Endorse the Small Company Capital Formation Act of 2011 (H.R. 1070) passed the House by a margin of 421-1. The bill would effectively amend Regulation A by increasing the aggregate offering amount of all securities sold within the prior 12-month period to $50 million (from $5 million);
- Endorse the Entrepreneur Access to Capital Act (H.R. 2930) passed the House by a margin of 413-11. This bill would create a so-called crowd-funding exception that would, if audited financial statements are provided to investors, allow a company to raise up to $2 million provided that the aggregate amount sold to any investor in a 12-month period does not exceed the lesser of $10,000 or 10 percent of such investor’s annual income. This would enable small businesses to raise capital in small increments over the internet without having to comply with complex federal and state rules governing public offerings;
- Oppose raising the accredited investor threshold (currently defining accredited investors as those with either a net worth over $1 million or an annual joint income of $300,000 or more);
- Amend the Broker-Dealer rules to eliminate the uncertainty created by the SEC staff regarding finders and business brokers (current rules make paying, for example, a business colleague a referral fee for assisting to raise capital a major legal risk); and
- Endorse exempting small issuers from the strictures of Sarbanes-Oxley section 404 internal control reporting requirements.
NSBA’s Comments can be read here.
The recommendations approved by the SEC Advisory Committee on Small and Emerging Companies can be read here.