Letting Startups Avoid SEC Registration When Offering $75 Million in Securities (Instead of $50 Million) (H.R. 4263)

What is H.R. 4263?

(Updated May 20, 2019)

This bill would increase the amount of securities (like stock) companies can offer and sell over a 12 month period while being exempt from some disclosure and registration requirements under Securities and Exchange Commission (SEC) Regulation A+ from $50 million to $75 million. It would require the SEC to adjust the threshold every two years for inflation to the nearest $200,000.

Argument in favor

Letting startups avoid SEC registration when offering $25 million more in securities to investors than the current threshold allows will expand their access to capital and help them create jobs.

Argument opposed

Startups can already avoid SEC registration when offering up to $50 million in securities to investors. Raising that threshold is an unnecessary risk.

Impact

Businesses offering securities; investors; and the SEC.

Cost of H.R. 4263

The CBO estimates that enacting this bill would cost less than $500,000 for the SEC to change its rules.

Additional Info

In-Depth: House Republicans introduced this bill to increase emerging businesses’ access to capital investment, writing in its committee report:

“H.R. 4263 is consistent with the Department of Treasury’s recommendation in its October 2017 report on Capital Markets, issued pursuant to President Trump’s February 3, 2017 Executive Order 13772, that the Tier 2 offering limit be increased to $75 million because such would allow private companies to consider a “mini-IPO” under regulation A+ as a potentially less costly alternative to raise capital.”

Most House Democrats opposed this bill in committee, calling an increase in the threshold from $50 million to $75 million  “unnecessary, not supported by the data, and potentially harmful”

This legislation passed the House Financial Services Committee on a mostly party-line 37-21 vote and has the support four bipartisan cosponsors evenly divided between Democrats and Republicans.

Media:

• House Financial Services Committee
  
• CBO Cost Estimate
  
• Bloomberg BNA
  
• Law360