Should we exempt certain securities offerings from meeting registration requirements?
Bill Summary
This bill amends the Securities Act of 1933 to provide micro-exemptions for businesses engaging in transactions that involve the sale of securities that meet certain requirements: (1) each investor has a substantive pre-existing relationship with an owner, (2) there are 35 or fewer purchasers, or (3) the amount does not exceed $500,000) from needing to meet registration requirements. Sponsor: Rep. Emmer, Tom [R-MN-6]
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Opponents say
• “This legislation would create yet another unnecessary and unwarranted exemption from the Securities Act of 1933 to enable the sale of micro-cap offerings (those involving sales of securities valued at $500,000 or less in a single year) without appropriate regulatory protections.”
• This SEC does not have the resources to provide the oversight for these exemptions, which will likely result in questionable offerings to avoid regulatory scrutiny.
• This SEC does not have the resources to provide the oversight for these exemptions, which will likely result in questionable offerings to avoid regulatory scrutiny.
Proponents say
• Small businesses looking to raise capital should not have to seek specialized securities counsel and pay large sums on lawyers to launch their business (to sell stock publically, it’s estimated that registration with the SEC costs $2.5 million in fees). This impedes small business growth, which are often the source of most net job creation and innovation in the economy. < br/>
• This bill does not in any way remove or inhibit either the Securities and Exchange Commission (SEC) or the Department of Justice’s authority to prosecute securities fraud, but rather appropriately scales federal rules and regulatory compliance costs for small businesses, and provides alternative options for entrepreneurs to raise capital.
• The definition of a public offering in the Securities Act is not defined, and it is easy to cross the line between public offerings and private placement (non-public offerings), which is unfair.
• The definition of a public offering in the Securities Act is not defined, and it is easy to cross the line between public offerings and private placement (non-public offerings), which is unfair.
