Bloomberg News

Obama Signs Bill Easing Securities Laws for Startup Firms

April 05, 2012

President Barack Obama signed a measure easing securities laws for closely held firms and newly public companies.

“America has always had the most daring entrepreneurs in the world,” Obama said at a signing ceremony at the White House. “Some of them are standing with me today. When their ideas take root, we get inventions that can change the way we live. And when their businesses take off, more people become employed,” he said.

The new law “is one useful and important step” to ensure that start-ups and small business have access to financing, Obama said.

Elements of the plan, which received bipartisan support in the Democratic-led Senate and Republican-led House, were outlined by Obama in his economic proposals to spur job growth in September.

Guests at the Rose Garden ceremony included Steve Case, former chairman of America Online Inc. and now chairman of Startup American Partnership Board; members of Congress, Mark G. Heeson, president of National Venture Capital Association; Timothy Rowe, chief executive of Cambridge Innovation Center, which is a community of more than 500 startup firms ranging from computer to coal-gasification companies.

The law “shows we can set aside our differences and work together on areas of common ground to grow the economy and get people back to work,” said House Majority Leader Eric Cantor, a Virginia Republican, who attended the event.

Bipartisan Action

The measure is the second bipartisan piece of legislation enacted this week, after the president signed a measure April 4 strengthening the ban on insider trading by members of Congress and other government officials.

The Labor Department is preparing to issue its monthly jobs report tomorrow. The department is projected to show a gain of 205,000 jobs in March, according to a median forecast of economists surveyed by Bloomberg. The jobless rate is projected to hold at a three-year low of 8.3 percent.

In a further sign of an economy in recovery, the department today reported that claims for U.S. unemployment benefits fell 6,000 to 357,000 in the week ended March 31, the lowest level in four years.

Proponents say the legislation would allow closely held firms to more easily raise capital and present more opportunities for startup companies to go public.

Investor Protections Eased

Helping startup companies “is more concerned with getting Washington out of the way than getting it more involved,” Senate Republican leader Mitch McConnell of Kentucky said in a statement. “This bill is exactly the kind of thing Americans have been asking for -- greater freedom and flexibility.”

Even with the support of Obama and more than 150 Democrats in the House, the measure was slowed by Senate Democrats who voiced concerns about rolling back investor protections, many of which were enacted after the collapse of the dot-com bubble.

Obama, in response to concerns, said he would instruct the Treasury and Justice departments, along with the Small Business Administration, to monitor implementation of the law and report regularly to him on their findings.

It will be done “in a way that retains necessary investor protections,” spokesman Jay Carney told reporters today.

Access to Capital

“By increasing access to capital and reducing onerous regulations, entrepreneurs and small business owners will have more ability to take risks, grow and create jobs,” according to a statement by Cantor, who said he spent time this week meeting with entrepreneurs in California’s Silicon Valley.

The House initially passed the bill, H.R. 3606, on March 8 by a vote of 390-23. The Senate passed the measure with an amendment on March 22 by a vote of 73-26. The House agreed to the Senate change on March 27, clearing the measure with a vote of 380-41.

The law undoes a ban on closely held businesses soliciting investments, increases the number of investors they can have, and exempts newly public companies with less than $1 billion in revenue from some reporting requirements of the Dodd-Frank and Sarbanes-Oxley laws.

The measure also permits so-called crowdfunding, a mechanism where startup companies use social networking platforms such as Facebook Inc. (FB:US) and Twitter Inc. to raise capital.

To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net


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