On March 23, 2016, three bills affecting access to capital markets were introduced in the U.S. House of Representatives.
H.R. 4850: Micro Offering Safe Harbor
Representative Tom Emmer of Minnesota introduced this bill that would add a new type of exempt transaction under section 4 of the Securities Act of 1933. Representative Emmer’s “micro offerings” would be characterized as non-public offerings in which:
- each investor has a pre-existing substantive relationship with an officer, director or 10% shareholder of the issuer;
- the total issue involves no more than 35 purchasers; and
- the total amount raised does not exceed $500,000.
It is not entirely clear how this new section would fit into the existing SEC regulatory framework under section 4 and the text of the bill does not provide the commission with any guidance on the matter.
H.R. 4854: Supporting America’s Innovators Act of 2016
This bill, introduced by Representative Patrick McHenry of North Carolina proposes to broaden the exemption from the definition of “investment company” under the Investment Company Act of 1940. The bill would exempt “qualifying venture capital funds” with less than 500 stakeholders. A qualifying venture capital fund would be a venture capital fund (as defined by Investment Company Act § 203(l)(1)) that does not purchase more than $10 million in securities of any one issuer.
H.R. 4852: Private Placement Improvement Action of 2016
Scott Garrett, Representative for New Jersey’s fifth congressional district introduced this bill that would direct the SEC to revise its rules under Regulation D in order to simply the filing requirements. Among the proposed changes are:
- eliminating requirement that filing a Form D is a prerequisite to the availability of the Rule 506 safe harbor;
- requiring the SEC to notify states of the information contained in Form Ds filed on EDGAR;
- prohibiting the SEC from requiring Issuers conducting Rule 506(c) offerings to file its general solicitation materials (but not prohibiting the SEC from requesting such materials in certain situations);
- exempting private funds from the requirements of Rule 156; and
- adding to the definition of accredited investor in Rule 501(c) to make “knowledgeable employees” of private funds accredited investors for Rule 506 purposes with respect to an offering of the private fund.