Despite warnings that less government oversight might mean more investment scams, Congress on Tuesday sent President Barack Obama legislation he endorsed making it easier for startups to raise capital without running afoul of federal regulations.
The legislation, backed by Silicon Valley and the high-tech industry, is on course to be one of the few achievements this year for a Congress mired in partisan divisions and primed for the fall elections.
The strong 380-41 vote in the House overshadowed misgivings among some Democrats and Democratic allies _ including unions and consumer groups _ that the bill backpedals on investment protections put in place after theÂ dot.comÂ excesses and Wall Street meltdown and could lead to fraud and abuse.
The Senate passed the bill last week on a 73-26 vote after attaching an amendment that tightened rules for seeking out investors on the Internet. All `no’ votes in both the House and Senate came from the Democratic side.
The legislation combines a half-dozen smaller, bipartisan bills that exempt young companies from Securities and Exchange Commission reporting rules in order to reduce the costs and red tape of raising capital.
The centerpiece provision would phase in SEC regulations over a five-year period to allow smaller companies to go public sooner. Firms that have annual gross revenues of less than $1 billion would enjoy this “emerging growth company” status.
Another provision facilitates the practice of “crowdfunding” in which the Internet is used to solicit a large number of smaller investors.
House Republicans hailed the legislation as a jobs bill that by spurring capital formation would lead to small businesses hiring more people. “The jobs act is a victory for unemployed Americans who are literally crying out for jobs. It is a victory for small companies and for entrepreneurs who want Washington to reduce the red tape that stifles innovation, economic growth, and job creation,” House Financial Services Chairman Spencer Bachus, R-Ala., said.
Democrats, who have criticized Republican opposition to their efforts to stimulate the economy and create jobs, referred to the measure as an IPO or initial public offering bill, and said its effect on job markets would be modest at best.
Obama came out in support of the bill when it first emerged in the House three weeks ago, saying it paralleled many of the initiatives he had put forth to encourage small-business growth. The White House tempered that support somewhat after SEC chairman Mary Schapiro and consumer advocacy groups, in the wake of the original House vote, came out with concerns that it went too far in removing SEC oversight, opening the door to repeats of the Enron scandal or the mortgage industry deceptions.
After the vote, White House spokeswoman Amy Brundage said the White House was heartened by investor protections on crowdfunding added by the Senate and “will monitor closely the implementation of this important legislation to ensure it achieves its aims.” She said the White House applauds the two parties for working together and urged them to act on job-creating measures to rebuild roads and bridges, put teachers and first responders back to work and help responsible homeowners refinance.
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