by Lisa Allen
in Washington |
Published March 6, 2012 at 4:52 PM ET
Senate legislation that would ease capital formation for startup companies has bipartisan support, and Sen. Charles Schumer, D-N.Y., said the legislation will have a few differences with a similar package the House is expected to approve this week.
Schumer said the Senate package is being written with input from lawmakers of both parties and will be announced "within days."
At a hearing of the Senate Banking Committee, senators of both parties said bipartisan agreement on legislation to ease Securities and Exchange Commission rules is proving to be rare example of legislative harmony, with lawmakers of both chambers and the president all on board for a legislative push. He predicted quick action on legislation.
"Given the level of bipartisan support of many of these proposals, passage in the Senate seems not to be a question of if, but of when," said Schumer.
"The House package took a lot of bipartisan Senate proposals and put it together. There is no reason why the Senate shouldn't bundle these same proposals together. The Senate version will probably go a little further than the House version and I would hope we would also take up some needed precautions on investor protection."
The exact legislation that will be in the Senate package hasn't yet been determined.
The House package would change the current SEC limit that requires full registration with the SEC when a company reaches 500 shareholders--to 1,000 for most companies and 2,000 for community banks. Another House provision would create a new category of "emerging growth company" for companies with less than $1 billion in revenues and give them up to five years to fully register with the SEC. A third change would allow companies to more easily advertise to sophisticated investors. Other changes would allow companies to use the Internet for "crowdfunding" and allow a company to raise up to $50 million a year without having to file with the SEC, up from $5 million.
Senators suggested Tuesday, March 6, their companion bill could have differences. Several on Tuesday expressed concern that a House provision opening the door to crowdfunding over the Internet might make it easy for scammers to dupe unsuspecting investors. The Senate bill also might include a provision making it easier for startups to offer employees pre-IPO shares.
The committee heard calls for action from company officials on Tuesday.
"All our operating capital must come from investors," said William D. Waddill, senior VP for OnocMed Pharmaceuticals Inc. He said after raising money companies often divert capital from getting products to market in order to meet regulatory obligations. "All our operating capital must come from investors," Waddill said. He estimated his company would have to spend up to $4 million to meet SEC filing requirements if it went public.
Senators and other witnesses said that easing rules would quickly help to boost IPOs.
The committee also heard warnings that the Senate legislation needs to be focused on startups and avoid opening loopholes that could allow big companies to reduce the amount of information they make public.
"We don't want to establish a shadow IPO market of major companies," said Kathleen Shelton Smith, co-founder and chairman of Renaissance Capital LLC. "It's not in the interest of investors."