Small Business and Securities Law: Senate Version

I have previously written about the legislation in the House to free small businesses from some of the restrictions of federal securities law. See here and here. The Senate is now starting to play catch-up.

1. Crowdfunding. Senator Scott Brown has introduced a bill to add a crowdfunding exemption to the Securities Act. S. 1791, available here, would exempt from Securities Act registration securities sold through a crowdfunding intermediary if (1) the offering amount is less than $1 million during any 12-month period and (2) no investor invests more than $1,000. The issuer would have to file a notice with the SEC and "disclose to investors all rights of investors, including complete information about the risks, obligations, benefits, history, and costs of offering." State registration requirements would be preempted. Senator Brown’s bill would also exempt crowdfunding intermediaries from being treated as brokers if they meet certain requirements. Senator Brown's bill is similar to, but certainly not identical to, the crowdfunding bill passed by the House.

2. General Solicitation. Senator John Thune has introduced a bill to elimination the prohibition against general solicitation and general advertising from Rule 506 of Regulation D. Thune’s bill, S. 1831, is available here.

3. Exchange Act Reporting Threshold. Senators Pat Toomey,Tom Carper, Mark Warner, and Mike Johanns have introduced a bill to raise the threshold above which companies have to file Exchange Act reports. Their bill, S. 1824, is available here. Currently, reporting is required for companies that don’t trade on an exchange if the company has $10 million in assets and a class of equity securities held of record by 500 or more persons. The bill would raise the number of recordholders from 500 to 2,000 and would also exclude securities received pursuant to an employee compensation plan exempted from Securities Act registration.

-Steve Bradford