Critics are concerned about House lawmakers’ attempt to create a new version of the JOBS Act, or Jumpstart Our Business Startups Act. Republican lawmakers want to ease more regulatory obstacles for smaller companies, reports Reuters. However, some are concerned that their plans will further reduce protections for investors which were already reduced by the 2012 JOBS act.
House seeks to change SEC rules
The proposals would change rules set forth by the Securities and Exchange Commission for both private and public companies. Republicans in the House are hoping to merge most of the seven proposals into a new version of the JOBS Act. Some of the measures from the 2012 bill are already in effect, like the one which allows companies with less than $1 billion in revenue annually to file draft documents for an initial public offering with the SEC in secret. That part of the rule has already been in use by companies, like Twitter Inc (NYSE:TWTR), which initially filed its IPO papers in secret.
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Other parts of the 2012 bill, like enabling companies to raise smaller amounts of money through crowd-funding platforms online haven’t gone into effect yet because the SEC is still finalizing the rules. It is because of these delays that lawmakers have begun to aim for more changes so that small businesses would have lower regulatory costs.
How far should Congress go for JOBS Act 2.0?
So far, the Senate has shown little interest in enacting a JOBS 2.0 bill. In addition, it is historically difficult to get a bill which makes any kind of sweeping changes passed during an election year. It’s likely that Republicans and Democrats will be divided in their views of how far they should go in changing the rules for startups because they don’t want to tip the balance too far away from investor protection.
The concern is that the more regulatory changes lawmakers change, the less information investors will have access to when deciding whether to invest in a company.
Some JOBS 2.0 proposals could be better supported
Some of the proposals lawmakers considered this week are fairly likely to have support from both sides of the aisle. Both Republicans and Democrats have supported a proposal which would change what is said to be a mistake in the Dodd-Frank Act. It would exempt advisers who provide advice to both small business investment companies and venture capital firms from registering with the SEC. Currently, if a firm advises one of the two types of investors, then it is exempt, but those who advise both kinds of firms are not.
One of the more controversial proposals would lower the threshold for making smaller companies which are public “well-known seasoned issuers.” This would make it possible for them to qualify for a less expensive process to raise a set amount of money through securities deals without the SEC reviewing the offering documents.