Rep. Anna G. Eshoo (D-Palo Alto) voted to pass H.R. 3606, the Jumpstart Our Business Startups (JOBS) Act. Within this broader bill, is H.R. 1070, the Small Company Capital Formation Act, which increases the SEC Regulation A offering limit from $5 million to $50 million.
"I'm proud to have brought the Regulation A offering limit issue to the House Financial Services Committee when I gave testimony in December, 2010. Increasing the Regulation A limit will help small companies capture more capital in the early stages of business formation and bolster American innovation." Said Rep. Eshoo. "Small businesses play a critical role in job creation, but they need the tools to do what they do best."
The Regulation A threshold has been stuck at $5 million since 1992. At such a low level, the benefit of a Regulation A offering is extremely limited. In fact, only seven companies took advantage of it in 2010.
"We need to act today, to provide small businesses and startups, especially those in the high-tech, sustainable energy, and life science fields, where startup costs routinely exceed $5 million, with more access to capital." said Rep. Eshoo. "I'm hopeful that the bipartisan Regulation A provision will be signed into law this year."
Regulation A was enacted during the Great Depression to facilitate the flow of capital to small business and provide regulatory relief for small firms that want to sell shares of company stock. These "mini offerings" have been used to help small companies raise capital and test the water for future initial public offerings.
In December 2010, Rep. Eshoo testified before the House Committee on Financial Services about the need to increase the offering limit under "Regulation A." To read her testimony, please click here.
Rep. Eshoo also led the Bay Area Congressional delegation in a February 2011 letter to President Obama , and March 2011 letter to Chairwoman Mary Schapiro urging the Administration to exercise its authority under Section 28 of the Securities Act to raise the Regulation A offering limit.
President Barack Obama included this legislation in his bipartisan American Jobs Act and said in his joint session to Congress addressing jobs that, "We needed to cut away the red tape that prevents too many rapidly growing startup companies from raising capital and going public."
In November 2011, H.R 1070 passed the House as a stand-alone bill 421-1. The JOBS Act passed the House 390 to 23.