* Schumer, Toomey say bill would help boost economy
* Congress weighing raft of bills to ease capital raising
* Skeptics warn of erosion of investor protections
By Alexandra Alper
WASHINGTON, Dec 1 Two U.S. senators introduced
legislation on Thursday that would reduce the costs of going
public for small and medium-sized companies by exempting them
from certain regulatory requirements.
Democrat Charles Schumer and Republican Pat Toomey said the
exemptions would end either after five years, when the company
reached annual revenues of a $1 billion, or had acquired $700
million in publicly traded shares.
Eligible companies could delay hiring an outside auditor to
verify the company's internal controls under the bill and could
postpone stockholder votes on executive compensation.
Another provision would require audited financial
statements for only two years prior to an initial public
offering, instead of the current three years.
"During difficult economic times, it is critical that we
give growing innovators the breathing room that they need to
access public markets," Schumer said in a statement.
The legislation is part of a flurry of bills moving through
the House of Representatives and the Senate that would give
growing companies easier access to capital. Lawmakers are
trying to strike the right balance between easing regulatory
burdens and ensuring that investors are protected from
Last month, the House passed four bills aimed at making it
easier for small companies to raise capital. President Barack
Obama has expressed enthusiasm for similar measures.
The Securities and Exchange Commission is separately
reviewing its regulations to see if they unduly restrain
emerging companies' growth.
But several witnesses at a Senate banking hearing on
Thursday expressed concerns that some of the legislative
proposals would make investors too vulnerable.
"Without some changes... one of these bills could well be
titled 'The Boiler Room Legalization Act of 2011'," said John
Coffee, a Columbia University law professor.
He was referring to a bill proposed by Republican Senator
Scott Brown to allow crowdfunding -- where investors take small
stakes in companies over the internet.
That bill would exempt private companies that used
crowdfunding from costly filing requirements, so long as they
solicit no more than $1 million annually. Investors could
pledge up to $1,000 each.
A similar bill has already passed in the House.
Jack Herstein, president of the North American Securities
Administrators Association said at the hearing that small
business investment can be a positive economic force.
But he added, "such investment also has the potential to
become a costly failure that undermines market health and
discipline, and places middle income investors at an extreme
risk if done without appropriate oversight."
He said he was particularly concerned that Congress should
not bar state regulation of securities offerings.