PRESIDENT OBAMA ENDORSES REP. SCHWEIKERT’S BILL . . . AGAIN
Washington, D.C. – Rep. David Schweikert (R-AZ), Vice Chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, applauded the president’s Startup America Legislative Agenda sent to Congress today. This Agenda includes Rep. Schweikert’s H.R. 1070, Small Company Capital Formation Act, a bill to raise the offering limit under Regulation A from $5 million to $50 million:
“I am excited that after endorsing my capital formation legislation last year, President Obama has sent his agenda to Congress today. In President Obama’s Startup America Legislative Agenda he advocates for responsible measures that will help grow small business access to capital with investor protections,” said Rep. Schweikert.
“The president’s willingness to push for policies that will help companies grow, invest, and create jobs is extremely encouraging. I wish him better success than I have had in encouraging Harry Reid’s Senate to pass this bill immediately.
“I encourage the president to also consider my other capital formation bill, H.R. 2167. At a time when so many small businesses are in need of capital, this is a commonsense proposal that will make our capital markets more vibrant and competitive.”
BACKGROUND ON H.R. 1070:
The Small Company Capital Formation Act reduces regulation and makes it easier for small businesses to raise capital and test the waters for a future initial public offering.
H.R. 1070 reduces burdensome regulation on small business by increasing the SEC Regulation A exemption from $5 million to $50 million.
Regulation A, on the books since 1933, exempts small companies from the SEC’s filing requirements for less than $5 million. Though Regulation A has periodically increased from its initial ceiling of $100,000 in 1933 to the current $5 million ceiling in 1992, it has not been increased to reflect the rising costs associated with bringing a small company public over the last two decades. Increasing the Regulation A threshold will lower the cost of raising capital for small businesses.
The Small Company Capital Formation Act ensures that this ceiling is raised when necessary and as economic conditions warrant by requiring that the SEC revisit this ceiling every two years. Should the SEC find that the ceiling needs to be higher, this bill provides them with the authority to increase the limit.
The Senate version of this bill was introduced in September by Sens. Toomey (R-PA) and Tester (D-MT).
BACKGROUND ON H.R. 2167:
Many small businesses are forced to file as a public company because of an obscure regulation that requires companies with 499 shareholders and $10 million in assets to file with the SEC.
This current shareholder threshold rule was originally adopted in 1964 and has not been modernized since.
This regulation causes undue pressure on our markets because it restricts the number of shareholders and assets these companies can have. In turn, this severely limits the growth stages for companies, which need time and flexibility to develop. Without regulatory relief, these small businesses will not grow or they will be acquired by larger firms. Both of these outcomes lead to fewer jobs and less innovation.
H.R. 2167, Private Company Flexibility and Growth Act, removes these barriers to capital formation for small companies by raising the shareholder threshold from 500 to 1,000 shareholders.
NOTE: In his joint session to Congress addressing jobs in November, President Obama endorsed H.R.1070 saying we needed to “cut away the red tape that prevents too many rapidly growing startup companies from raising capital and going public.” Shortly after, the White House released a Fact Sheet and Overview of the president’s jobs agenda that included H.R. 1070, Small Company Capital Formation Act.
The copy of President Obama’s Startup America Legislative Agenda, released today, can be found here.