H.R. 2940 (112^th): Access to Capital for Job Creators Act

GovTrack’s Bill Summary

We don’t have a summary available yet.

Library of Congress Summary

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress.

House Republican Conference Summary

The summary below was written by the House Republican Conference, which is the caucus of Republicans in the House of Representatives.

This summary can be found at http://www.gop.gov/bill/112/1/hr2940.

Background

This bill is part of a package of legislation intended to improve small businesses’ access to capital.  Specifically, H.R. 2940 would improve capital formation by expanding financing options.  The alternative method, a commercial bank loan, is increasingly difficult in light of tightened lending standards following the financial crisis of 2008-09.  These securities can fill that void if we modernize outdated regulations that do not work in 21^st Century capital markets.  Capital formation is necessary for business expansion and therefore job creation and sustained economic growth. 

Under current law, securities may be sold through private offerings, that is, sales that are made to a limited number of eligible investors rather than to the general public, without being registered with the Securities and Exchange Commission (SEC).  Issuers of securities through such offerings are prohibited from using general solicitation or advertising to market the securities.  According to the Committee on Financial Services, this prohibition on general solicitation and advertising has been interpreted to mean that potential investors must have an existing relationship with the company before they can be notified that unregistered securities are available for purchase. Requiring potential investors to have an existing relationship with the company significantly limits the pool of potential investors and severely hampers the ability of small companies to raise capital and create jobs.

Thus, by eliminating the ban on solicitations and advertisements by issuers and broker-dealers, H.R. 2940 would also enable offline and online forums that bring together investors with companies that need funding to play an increasingly important role in facilitating capital investment in small companies.

At a legislative hearing on H.R. 2940 held by the Subcommittee on Capital Markets and Government Sponsored Enterprises on September 21, 2011, Barry Silbert, Chief Executive Officer of SecondMarket, Inc., testified that "if only accredited investors are eligible to purchase unregistered securities, shouldn't we strive to maximize the pool of accredited investors that have access to the offering?”  Mr. Silbert also noted that the SEC and Congress "recognize that sophisticated, accredited individual and institutional investors have greater capacity for risk and do not require the enhanced protections provided to the average retail investor."

Rep. McCarthy has said H.R. 2940 will “help entrepreneurs and small business owners access the capital they need to be innovative, dynamic, and ultimately, become the thing our economy needs most right now: job creators.” 

Summary

The bill would amend the Securities Act of 1933 and direct the Securities Exchange Commission (SEC) to eliminate the restriction under Regulation D Section 506 prohibiting the solicitation or advertising of a securities offering by certain issuers.

The bill would require the SEC to establish rules to ensure that only “accredited” investors purchase such securities.

Cost

The Congressional Budget Office (CBO) estimates that implementing H.R. 2940 would have a negligible impact on the SEC’s workload, and any change in agency spending that is subject to appropriation would not be significant. Enacting H.R. 2940 would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply.

House Democratic Caucus Summary

The House Democratic Caucus does not provide summaries of bills.

So, yes, we display the House Republican Conference’s summaries when available even if we do not have a Democratic summary available. That’s because we feel it is better to give you as much information as possible, even if we cannot provide every viewpoint.

We’ll be looking for a source of summaries from the other side in the meanwhile.