WASHINGTON — A bill that would make fundamental changes in how small companies can raise money from investors passed the Senate easily Thursday, but with changes that mean the measure must still be reconciled with a bill previously approved by the House.
The JOBS Act, whose acronym stands for Jump-start Our Business Startups, would designate a new category of “emerging growth” companies that could conduct initial public offerings of stock while being exempt from certain financial-disclosure and governance requirements for up to five years.
Smaller companies could raise up to $1 million under the bill by selling shares in small amounts to individual investors while not making them subject to disclosure regulations that affect publicly traded companies.
“This might be one of the most constructive things we do this year,” Sen. Pat Toomey, R-Pa., said shortly before the vote. “This is going to create more jobs and more growth in the economy.”
The Senate voted 73-26 to approve the measure after accepting one amendment that made slight changes to some of the disclosure requirements for small companies that sell shares. Arkansas’ Sens. John Boozman, a Republican, and Mark Pryor, a Democrat, both voted to approve the measure.
The bill, which passed the House earlier this month by a wide margin, will now be returned to the House for the two chambers to work out their differences.
Rep. Patrick McHenry, R-N.C., who worked on the House version, said in an interview that he thought the House could pass the revised bill next week and have it on President Barack Obama’s desk quickly. Obama has signaled that he would sign the bill.
Senators went through three days of aggressive jostling to get the bill approved, with Democrats first failing in an effort to strengthen disclosure requirements and then being defeated in an effort to attach a reauthorization of the Export-Import Bank to the bill.
Much of the opposition to the final bill came from Democrats, who voted against it after pushing to amend it to tighten protections for investors who put money into small companies.
Under the bill, companies with up to $1 billion in annual revenue would be free to ignore, for their first five years as a public company, regulations that were put in place after the dot-com bubble and the collapse of Enron. Among them are requirements to hire an outside independent auditor to attest to a company’s internal financial controls, and restrictions on how financial analysts interact with investment bankers in promoting a company’s stock.
In addition, the bill would open a new form of financing to companies. Known as crowd-funding, the practice would allow companies to solicit equity investments through the Internet to raise up to $1 million annually without registering their shares for public trading with the Securities and Exchange Commission.
The amended Senate bill would require companies to provide tax returns or financial statements to investors before the offering. In contrast, the House bill would allow companies to raise $1 million without providing any financial statements to potential investors.
Front Section, Pages 3 on 03/23/2012