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house Bill H.R. 1219

Should Fewer Venture Capital Funds be Subject to SEC Regulations?

Argument in favor

Allowing more VC funds to be free from SEC regulations will help those VC funds spend more on helping small businesses and startups and less on complying with regulations.

Tafinzer's Opinion
···
04/06/2017
Representative Collins please vote yea. Venture capitalists are private investors investing their own money for their own gain. Any regulations that deter this activity also quench possible prosperity for the business being invested in. We need less oversight in these areas. Investment risk should be that of the individual and not regulated.
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StartingOut's Opinion
···
04/05/2017
The less regulation, the more the people must step forward to fill the gap. The more our citizens step forward and fill the gap, the stronger their individual rights become, and our society will prosper with them. For too long citizens have given their rights away through regulation at the benefit of being taken care of and babied. This should not continue, we need to be a strong and united nation with citizens that are powerful, capable of attaining anything they wish through risk and the free market. If there's a problem, fix it yourself instead of relying on politicians that may have their own interests at heart.
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Michael's Opinion
···
04/03/2017
This bill makes it slightly easier for a smaller organization of 250 persons or less to have a venture capital fund that has less than $10,000,000 in contributions. This seems to free up some space for certain funds to operate for employees, allowing some employees with mutual fund access to work in smaller investment organizations. I support this measure. NOTE: This has nothing to do with "innovation," it simply allows some investors to invest not more than $10mil into a company in its entirety. Full text available here: https://www.congress.gov/bill/115th-congress/house-bill/1219/text
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Argument opposed

This bill allows VC funds to escape SEC regulations that ensure that investors in the fund and businesses receiving funding are protected from potential abuse by the fund managers.

Lucinda's Opinion
···
04/06/2017
Quoting the North American Securities Administrators Administration (NASAA) “The bill would not only allow another investment vehicle to operate without regulatory oversight, but also allow an investment adviser that is not licensed or examined to manage funds ..." Really? Does anyone here really want more unlicensed fund managers managing your money?
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Zachary's Opinion
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04/03/2017
Why would we want greedy corrupt investors to be less regulated?
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Linda's Opinion
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04/06/2017
Why would we remove ANY of the current regulations? We need more protections... not less
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What is House Bill H.R. 1219?

This bill changes how Venture Capital (VC) funds are defined. Specifically, it increases the number of investors that a VC fund can have before being classified as an investment company from 100 to 500. Investment companies are required to register with the Securities and Exchange Commission (SEC) and are subject to numerous regulations under the Investment Company Act of 1940.

Additionally, the bill redefines VC funds as groups that invest less than $10 million in a single company. Funds that invest more than $10 million in a company aren’t exempt from regulations and registering with the SEC.

The Investment Company Act of 1940 requires investment companies to do 5 things:

  • Register with the SEC;

  • Have a board of directors, of which 75% of the members are independent from the company;

  • Limit their use of certain investment strategies;

  • Maintain a certain percentage of their money for investors who want to leave the company;

  • Disclose their structure, financial condition, investment policies, and objectives to investors.

Impact

VC funds that have less than 500 investors; VC funds that invest more than $10 million in one company; businesses seeking funding from VC funds; the SEC.

Cost of House Bill H.R. 1219

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Rep. Patrick McHenry (R-NC) said in a press release introducing this legislation that his bill would help small startups survive:

“Small businesses drive our economy and create jobs, but have suffered the most in recent years.  With small business lending down, we need to pursue policy that encourages greater innovation in capital formation and allows American to invest in each other. The Supporting America’s Innovators Act does that and I’m proud to join with a bipartisan, bicameral group to introduce this important bill.”

However, the North American Securities Administrators Administration (NASAA) stated in a letter opposing this bill during the last Congress that it would allow too many VC funds to escape regulations and SEC oversight: 

“The bill would not only allow another investment vehicle to operate without regulatory oversight, but also allow an investment adviser that is not licensed or examined to manage funds raised from a pool of investors that would be five times the size of that currently permitted (i.e., 100 to 500).”
This legislation was passed by the House Financial Services Committee on a 54-2 vote, and currently has the bipartisan support of four cosponsors -- including three Democrats and one Republican.

Media:

Summary by: Chris Conrad and Eric Revell

(Photo Credit: Flickr user Simon_sees)

AKA

Supporting America's Innovators Act of 2017

Official Title

To amend the Investment Company Act of 1940 to expand the investor limitation for qualifying venture capital funds under an exemption from the definition of an investment company.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
  • The house Passed April 6th, 2017
    Roll Call Vote 417 Yea / 3 Nay
      house Committees
      Committee on Financial Services
    IntroducedFebruary 27th, 2017

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    Representative Collins please vote yea. Venture capitalists are private investors investing their own money for their own gain. Any regulations that deter this activity also quench possible prosperity for the business being invested in. We need less oversight in these areas. Investment risk should be that of the individual and not regulated.
    Like (48)
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    Quoting the North American Securities Administrators Administration (NASAA) “The bill would not only allow another investment vehicle to operate without regulatory oversight, but also allow an investment adviser that is not licensed or examined to manage funds ..." Really? Does anyone here really want more unlicensed fund managers managing your money?
    Like (177)
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    Why would we want greedy corrupt investors to be less regulated?
    Like (140)
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    Why would we remove ANY of the current regulations? We need more protections... not less
    Like (104)
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    Who is asking for less regulation on any financial activity? Respect your voters - keep these checks in place.
    Like (52)
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    The old story of letting the market control how business operates, and who wins or loses. Do we really believe the market has a conscience and knows right from wrong. I'm sick and tired of the socalled adults in our country stealing from others while using the market as an excuse and these same adults complaining that the young people of today have no respect for adults and only care for themselves. We all need to look in the mirror.
    Like (46)
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    The less regulation, the more the people must step forward to fill the gap. The more our citizens step forward and fill the gap, the stronger their individual rights become, and our society will prosper with them. For too long citizens have given their rights away through regulation at the benefit of being taken care of and babied. This should not continue, we need to be a strong and united nation with citizens that are powerful, capable of attaining anything they wish through risk and the free market. If there's a problem, fix it yourself instead of relying on politicians that may have their own interests at heart.
    Like (26)
    Follow
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    This bill makes it slightly easier for a smaller organization of 250 persons or less to have a venture capital fund that has less than $10,000,000 in contributions. This seems to free up some space for certain funds to operate for employees, allowing some employees with mutual fund access to work in smaller investment organizations. I support this measure. NOTE: This has nothing to do with "innovation," it simply allows some investors to invest not more than $10mil into a company in its entirety. Full text available here: https://www.congress.gov/bill/115th-congress/house-bill/1219/text
    Like (22)
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    WOW.....what happened in 2007? Oh yeah, that's right. We escaped the worst depression in U.S. history brought on by corporate America. And you want to free up regulation? Do you recently suffer from head trauma?
    Like (22)
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    Less regulation on VCs helps the wealthy in this country while leaving middle class, small business owners at a disadvantage. This change would merely serve to perpetuate economic inequality.
    Like (21)
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    Regulations are not simply attempts to prevent investors from making money, they should be designed to prevent them from being defrauded or defrauding others. It's time to abandon this idea that our elected government is there to block our progress, rather than to reflect our will in protecting society and the rights of all citizens
    Like (20)
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    Absolutely not! If anything we need more regulation!
    Like (15)
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    This allows normal people to invest less, keeping the rich and powerful from controlling the VC returns 100%. It allows more freedom for innovation because it takes the people that know people and those that don't and puts them on an even playing field.
    Like (11)
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    Get the federal regulations out of the way. That's not to say there shouldn't be systems of standards and safety mechanisms - just let them be private and voluntary, and let the buyer beware. Consumers can choose to transact at a comfortable level of risk. Don't impose some arbitrary maximum risk on people. Let us take care of ourselves.
    Like (10)
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    Where is your explanation of a yea or nay vote?
    Like (9)
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    Another win for small business and starter ups. Increasing the amount of investors is not only a plus for the small business it supports fluidity and economic growth
    Like (9)
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    As I see and understand this, this regulation is to help small businesses who have been suffering over the past few years from the oppressive regulations initiated by the Obama Administration. So why don't the dim wits in congress get rid of all the ridiculous regulations Obama initiated and leave this regulation which has been successfully in effect since 1940 alone. We need less regulation not another one or changes to regulations that are effective.
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    Average retail investors are not going to be investing in VC companies and not should they. VC firms are for people with enough money who won't mind losing part or all of it. As long as the company discloses its operations and SEC requirements, there is no reason to hold this back.
    Like (7)
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    This helps address the broad trend change in investment strategy to support small business startups. Strong bipartisan support.
    Like (7)
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    Regulations are in place for a reason. An increase from 100 to 500 is significant. We are just starting to make some economic gains, please don't ruin it by removing regulations for venture capital funds under 500.
    Like (6)
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