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house Bill H.R. 2201

Should Small Businesses be Allowed to Sell Non-Public Stock Under Certain Circumstances?

Argument in favor

This bill would make it easier for entrepreneurs to launch startups, create jobs, and grow the economy. The exemption is tailored narrowly enough to protect investors.

Sean's Opinion
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11/06/2017
Any person who makes an investment without these safeguards is risking their own money. These businesses should be forced to disclose this information before being allowed to do so.
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wadepreston's Opinion
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11/09/2017
Innovation and effort are America’s best natural resources. They need access to capital in order to flourish and make our society better. There is no reason for the government to be involved in economic transactions between two willing private parties.
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Yehowshua's Opinion
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11/09/2017
With a $500,000 limit, I don't see why anyone would vote no. Clearly, small business and startups are the target. Apple , Microsoft and the likes are completely excluded... Unless they make a nasty loophole out of this.
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Argument opposed

This bill would expose investors to unnecessary risk by granting companies an exemption to sell securities without the normal safeguards.

Michael777's Opinion
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11/09/2017
Yet another scam bill created by the Republican Overlords benefit only big business interests over ordinary people by allowing companies to sell unregistered securities without important guardrails!
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Andrea's Opinion
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11/09/2017
This smacks of favoritism. Certain opportunities go to the super-rich or the "inside club." Let's make business transparent again.
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I.Got.an.Idea...'s Opinion
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11/08/2017
Sounds like some more unethical practices that has the potential to put many at risk, but increase the rewards for the very lucky few who have stacked the cards in their favor.
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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 November 9th, 2017
    Roll Call Vote 232 Yea / 188 Nay
      house Committees
      Committee on Financial Services
    IntroducedApril 27th, 2017

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What is House Bill H.R. 2201?

This bill would exempt certain micro-offerings from state regulation of securities offerings and federal prohibitions related to interstate solicitation. It would allow small businesses to offer non-public securities if: each investor has a substantive pre-existing relationship with an owner; if there are 35 or fewer purchasers; or the amount doesn’t exceed $500,000.

Current law prohibits the sale of securities that haven’t been registered with the Securities and Exchange Commission (SEC), although certain exemptions are allowed. This bill would enact an additional exemption.

Impact

Investors; small businesses; states; and the SEC.

Cost of House Bill H.R. 2201

The CBO estimates that enacting this bill would have a negligible impact on the budget.

More Information

In-DepthSponsoring Rep. Tom Emmer (R-MN) introduced this bill to help small businesses raise capital by adding a new exemption to the Securities Act that defines what “non-public offerings” are allowed:

“Entrepreneurs will be able to more easily launch their startups and existing businesses will have better prospects for growth. By simply clarifying an old law, more small businesses will raise capital through non-public offerings, easing the burdens of red-tape, onerous paperwork, and the threat of lawsuits. Congress has much more work to do to fully unleash the American economic engine and this legislation is one of many steps I will take to help Minnesotans achieve the American Dream. With labor force participation at an all time low and many families still having less income than they had before the 2008 economic collapse, it is my duty to do everything I can to get America's economy firing on all cylinders.”

House Democrats have expressed opposition to this bill on the grounds that it would “put investors at risk by allowing companies to sell unregistered securities without important guardrails that normally apply to such transactions.” In the bill’s committee report, they wrote:

“One particularly troubling aspect of H.R. 2201 is that unregistered securities purchased under the exemption would not be characterized as “restricted,” and could thus be sold off to other investors immediately. As history demonstrates, the failure to restrict resale of unregistered securities could expose investors to abusive “pump and dump” schemes.”

This legislation passed the House Financial Services Committee on a 34-26 vote and has the support of five Republican cosponsors in the House. This legislation was included as an amendment to the Financial CHOICE Act, which passed the House in June on a 233-186 vote.


Media:

Summary by Eric Revell

(Photo Credit: BrianAJackson / iStock)

AKA

Micro Offering Safe Harbor Act

Official Title

To amend the Securities Act of 1933 to exempt certain micro-offerings from the registration requirements of such Act, and for other purposes.

    Any person who makes an investment without these safeguards is risking their own money. These businesses should be forced to disclose this information before being allowed to do so.
    Like (36)
    Follow
    Share
    Yet another scam bill created by the Republican Overlords benefit only big business interests over ordinary people by allowing companies to sell unregistered securities without important guardrails!
    Like (42)
    Follow
    Share
    This smacks of favoritism. Certain opportunities go to the super-rich or the "inside club." Let's make business transparent again.
    Like (31)
    Follow
    Share
    Innovation and effort are America’s best natural resources. They need access to capital in order to flourish and make our society better. There is no reason for the government to be involved in economic transactions between two willing private parties.
    Like (27)
    Follow
    Share
    With a $500,000 limit, I don't see why anyone would vote no. Clearly, small business and startups are the target. Apple , Microsoft and the likes are completely excluded... Unless they make a nasty loophole out of this.
    Like (12)
    Follow
    Share
    Sounds like some more unethical practices that has the potential to put many at risk, but increase the rewards for the very lucky few who have stacked the cards in their favor.
    Like (10)
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    Share
    Great way to legally embezzle.
    Like (10)
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    This helps angel investment. Great!
    Like (8)
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    Unsecured investments helped to crash the economy before and this is just another way to screw the regular people.HELP THE RICH AND SCREW US!!!
    Like (8)
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    If the definition of “substantial existing relationship” with the small business owner means family members or close acquaintances then these investors must understand the risks they are taking. If the investment provides necessary liquidity for the small business and there is a buy back clause added so that the investor has a means to sell the stock later then why not allow the issuance of non-public stock for small businesses. Large corporations already offer restricted stock which is similar.
    Like (7)
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    There is a reason why securities are regulated. Time and time again the unscrupulous have taken advantage of the unsophisticated. Why should we endorse the potential for abuse?
    Like (7)
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    I can’t imagine why any small business would want to sell stock to outside investors, but to the extent such a bill would increase liquidity and access to capital, that’s a good thing.
    Like (6)
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    This helps rich people start small businesses. So they can launder each other’s dirty money. Update. Elephants passed it.
    Like (4)
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    With no regulation this bill is ripe for money laundering and fraud. As a small business owner I’d love the chance raise that kind of money but it’s ripe for fraud and money laundering.
    Like (4)
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    This bill is dressed up as a benefit for entrepreneurs but it's really another loop hole for those familiar with gaming the system to use. Vote no.
    Like (3)
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    All the negatives on here sure do know better than the free market on how to run the economy. The State doesn’t own or run my business, sorry fascist statists. Read “I, Pencil” sometime for goodness sake.
    Like (3)
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    Free market needs to be free
    Like (3)
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    Money Out Of Nothing, Chant With Me. ENRON ENRON ENRON ENRON!
    Like (3)
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    capitalism is great and all but we need to let it flourish as much as possible given the amount of advantages conglomerates and monopolies enjoy
    Like (3)
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    This bill would expose investors to unnecessary risk by granting companies an exemption to sell securities without the normal safeguards.
    Like (3)
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