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House Passes Bills that Loosen Regulation and Encourage Capitalization

Published December 15, 2012

Four bills that reduce regulatory red tape and could make it easier for small businesses to raise capital have passed in the U.S. House of Representatives and are waiting in the Senate for approval. Two of those bills deal specifically with fundraising. House members proposing these bills said less regulatory restriction and better access to capital is the best way to help small companies grow.

H.R. 2940 proposes allowing small private companies to solicit investors through advertising. The SEC’s ban on solicitation is said to shrink the pool of investors in small companies. H.R. 2930 would change SEC rules to allow for “crowdfunding,” where companies pool smaller investors. Two other bills propose to help grow the economy by changing SEC thresholds to allow more companies to maneuver outside of the regulatory agency’s jurisdiction.

The House also passed H.R. 1070, which makes it easier for a small company to go public. The Small Company Capital Formation Act would allow companies to have an offering threshold of $50 million without having to register with the SEC instead of the current $5 million mark. Another bill, H.R. 1965, would change regulations on small bank holding companies making it easier for them to register or deregister by raising the shareholder threshold from 500 to 2,000.

One other bill that proposes a change to a SEC threshold recently passed the Financial Services Subcommittee. H.R. 2167 would make it so that a company would need 1,000 shareholders before it had to register with the SEC instead of just 500. The committee said the lower threshold was an impediment to capitalization.

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