WASHINGTON, D.C.--Senator John Thune today introduced the Access to Capital for Job Creators Act (S. 1831) to reduce regulatory burdens facing small businesses by updating Securities and Exchange Commission (SEC) regulations, making it easier for businesses to raise capital. The House of Representatives passed this legislation on November 3rd with a broad bipartisan vote of 413-11. The House legislation was introduced by Majority Whip Kevin McCarthy (R-Calif.).
"Small businesses are the engines of our economy, but government red tape is currently preventing these businesses from creating even more jobs," said Thune. "This common sense bill would enable small businesses in South Dakota and throughout the country to better access much needed capital so they can make investments and add additional employees. The Access to Capital for Job Creators Act passed in the House of Representatives with overwhelming bipartisan support and Senate Majority Leader Reid should allow consideration of this bill immediately."
Thune's legislation would remove the SEC provision that currently prevents small businesses from attracting capital from accredited investors nationwide. At present, any business looking to sell securities must either register with the SEC or meet certain qualifications under Regulation D of the Securities Act of 1933 in order to be exempt from SEC registration. Becoming registered is often a burdensome process for small businesses due to the significant amount of paperwork and audits required. Oftentimes, the SEC's review of a small business' application can last from 20 to 60 days. Under Rule 506 of Regulation D, certain companies may be exempt from registration if they meet specific conditions, including a prohibition on "general solicitation."
The general solicitation provision is a roadblock for small businesses looking to obtain needed capital because it requires investors to have a pre-existing relationship with an issuer or intermediary before the potential investor can be notified that unregistered securities are available for sale. This provision severely hampers the ability for small companies to obtain needed capital from investors, and as a result, many businesses are limited to only the universe of investors with which they clearly have pre-existing relationships. Thune's legislation would remove the solicitation prohibition and allow businesses to attract capital from accredited investors nationwide.