House of Representatives Passes Accelerated Access to Capital Act

The House of Representatives passed the Accelerating Access to Capital Act on September 8th, 2016 by a vote of 236-178. This act was designed to help small companies gain access to capital, through three important pieces of legislation.

H.R. 2357: Accelerating Access to Capital

This act proposed that the SEC revise Form S-3 within 45 days. Securities will be eligible to be registered pursuant to General Instruction I.B.1. of the form if:

  • The market value held by any non-affiliates is $75,000,000+.
  • One class of common equity securities have been listed/registered on a national securities exchange by the registrant.

This will remove the requirement from I.B. 6 paragraph C.

H.R. 4850: Micro-Offering Safe Harbor

The SEC currently prohibits the sale of any securities that have not been registered with the SEC. This act would allow securities meeting certain criteria to be exempt from the registration requirements and state regulations. Securities are exempt if any of the following conditions are met:

  • Pre-Existing Relationship: Every purchaser had a prior relationship with either an officer, director or shareholder of the issuer.
  • 35 or Fewer Purchases: During a 12-month period there can be no more than 35 purchasers of securities from the issuer being sold under the same exemption.
  • Small Offering Amount: The issuer cannot sell securities relying on the same exemption that exceed $500,000 during any 12-month period.

The House of Representatives expect that only a small number of securities will need to be covered by this exemption; meaning, this regulation would not significantly increase any issuer’s costs.

H.R. 4852: Private Placement Improvement

This act was proposed in an effort to eliminate complicated and unnecessary regulations on small businesses for when they attempt to raise capital through private offerings under Regulation D. Because Regulation D offerings make up over half of all private offerings, this will hopefully implement changes that will be beneficial to all issuers using Regulation D.

Issuers filing under Regulation D are now required to file a single notice of sales (still containing the information required by Form D) for each new offering of securities.

If this bill is enacted into law, the SEC would be responsible for the following:

  • Not require issuers to file any other notice of sale except for the initial Form D notice,
  • Notify states of the Form D filing,
  • Clarify that the Form D is not a condition to relying on the Form D exemption, and
  • Not require issuers to file their advertising materials with the SEC.

This piece of legislation severely limits the SEC’s capability to limit the risks to investors, and weakens the few investor protections already found in Rule 506.

Shelby Wayment
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