Congress approved legislation intended to spur investment in small businesses and help them access the capital markets, despite criticisms that it would weaken audit safeguards and investor protections.
The Jumpstart Our Business Startups Act received strong bipartisan support and backing from the Obama administration as a way to improve job creation at small businesses. The measure passed the House for the second time on Tuesday, this time by a vote of 380-41. After the House passed the legislation earlier this month, the Senate took it up and approved an amendment intended to add some protections for investors in so-called “crowdfunding” ventures. The Senate then passed the JOBS Act last week by a vote of 73-26 and sent it back to the House. The bill will now go to President Obama for his signature.
The legislation unites a variety of bills that had made progress in Congress in the past, but until now had not been signed into law. Among them, the bill aims to reduce the costs of going public by giving companies a temporary reprieve from certain Securities and Exchange Commission regulations, phasing in the regulations over five years to allow smaller companies to go public sooner. The bill would also create a new category of issuers called emerging growth companies, which would retain that status for five years or until they exceed $1 billion in annual gross revenue or become large accelerated filers. Another provision would remove an SEC regulatory ban preventing small businesses from using advertisements to solicit investors. The bill also removes SEC restrictions on “crowdfunding” so entrepreneurs can raise equity capital from a large pool of small investors who may or may not be considered “accredited” by the SEC. Companies would be able to pool up to $1 million from investors without registering with the SEC, or up to $2 million if the company provides the SEC with audited financial statements.
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