Bill to boost startups wins Senate approval
WASHINGTON (Reuters) - The Senate voted by a wide margin on Thursday to pass a bill to boost small business growth, notching a rare election-year bipartisan victory though some Democrats and watchdogs warned the legislation would erode investor protections.
The "JOBS Act," which passed the Senate 73 to 26, would make it easier for small companies to raise capital and make initial public offerings.
The Senate version, which adds investor protections, will be considered by the House of Representatives as early as next week, according to House Majority Leader Eric Cantor.
The bill will then go to President Barack Obama.
The legislation has received broad bipartisan support, as both parties want to be seen backing business growth in an election year with unemployment still above 8 percent.
The House easily passed its own version of the bill earlier this month, and the White House backs it.
But the legislation recently hit speed bumps as a growing number of Democrats, regulators and investor advocates warned that the benefit to small businesses might come at the price of increased investor vulnerability to fraud.
The bill would make it easier for companies to solicit private investors and relax filing requirements associated with initial public offerings. It would also allow startup companies to engage in crowd funding, in which investors take small stakes in companies over the Internet.
"We are about to embark upon the most sweeping deregulatory effort and assault on investor protection in decades," Democrat Carl Levin said on the Senate floor before passage.
The Senate voted to add a measure to bolster investor protection that was sponsored by Democrat Jeff Merkley. The amendment would limit the amount of money less wealthy investors could pledge to crowd funding ventures.
It would also require "crowd funders" to post their offerings on third party websites, which would in turn have to register with the U.S. Securities and Exchange Commission.
"These improvements, though welcome, are far from sufficient," Levin said.
The White House issued a statement urging the House to adopt the changes and promising to be vigilant to "ensure the overall bill achieves its goal of helping entrepreneurs, while maintaining protection for investors."
But financial watchdogs issued warnings after the Senate passed the bill.
Calling the JOBS Act a "fundamentally flawed product of a rush to legislate," The North American Securities Administrators Association President Jack Herstein said the bill would "needlessly expose Main Street investors to greater risk of fraud by creating new jobs for promoters of Internet boiler room investment scams."
The group has been critical of the bill for giving state regulators too little authority to review crowd funding offerings.
The big audit firm-backed Center for Audit Quality teamed up with the pension fund-backed Council of Institutional Investors on Thursday to oppose provisions in the bill that would reduce the independence of entities that set accounting and auditing standards.
SEC Chairman Mary Schapiro raised similar concerns in a letter to lawmakers earlier this month.
But Republicans and Business groups hailed the bill's passage as an important step toward economic growth.
The U.S. Chamber of Commerce, the country's largest business lobbying group, and exchange operator NYSE Euronext issued statements supporting the bill.
(With Reporting by Suzanne Barlyn And Sarah Lynch Editing by Phil Berlowitz)