While any relief still has a long (and uncertain) path before it would be effective, on October 26, 2011, the House Financial Services Committee approved four bills (with bipartisan support) that would remove regulatory federal securities law obstacles to capital formation.
H.R. 1965 would, for banks and bank holding companies, raise the SEC registration threshold to 2,000 shareholders and the deregistration threshold to 1,200 shareholders.
H.R. 2167, the “Private Company Flexibility and Growth Act,” would raise the SEC registration threshold for all companies to 1,000 shareholders and would exclude accredited investors and certain employees from the definition of “held of record” for registration purposes.
H.R. 2940, the “Access to Capital for Job Creators Act,” would permit general solicitation and general advertising for private offerings conducted under Rule 506, so long as all purchasers were accredited investors.
H.R. 2930, the “Entrepreneur Access to Capital Act,” would permit companies to conduct “crowd source” capital raises under a new exemption under the federal securities laws. The proposed exemption would permit offerings of up to $5 million in which each investor contributed no more than the lesser of $10,000 and 10 percent of the investor’s annual income. Any investors purchasing under this exemption would be excluded from the number of investors “held of record” for purposes of SEC registration.
Comparable attempts to raise the SEC registration threshold and otherwise alleviate the regulatory burden associated with capital raises have failed to gain traction over the last several years. We will continue to monitor the progress of these bills, but will also continue to advise existing public banks and bank holding companies on potential means to deregister from the SEC and “go private.”