Turpin & Associates, LLC

H.R. 2930 : The Entrepreneur Access to Capital Act Passes Thru House, Gains Momentum as it Moves to The Senate Floor

 By Josh Turpin, November 11, 2011 

In the past bi-partisan support has been, to say the least, tough to muster up.  It has been found recently, however, within a bill recently passed through the House of Representatives with almost unanimous support.  H.R. 2930 or the "Entrepreneur Access to Capital Act," was passed on November 3, 2011.

This bill essentially allows "crowd funding," a term originating from the gathering of small amounts of money from a certain crowd who may be supporting a particular cause (i.e. artists, non-profits, etc.)  Prior to this bill being enacted, law mains it is illegal for investment offerings to be offered publicly. This has been enforced through the Securities and Exchange commission since the early 1930's.  The goal of previous legislation was to protect consumers from unscrupulous investment schemes with likes of the all-to-famous Ponzi.

Under current legislation capital is only available to larger entities which can afford to go public.  Investment bankers likewise only want to take a company public which warrants the efforts (i.e. large offerings).  It takes a lot of time, work, and money to take a company public due to current regulation.  It is argued that this legislation unfairly prevents both consumers and small businesses from being able to compete with their larger varieties.

In essence current litigation restricts two things:

1. The ability of a small business to raise capital for growth and expansion.  family.  This is due to a restriction on freely marketing the securities to the general public.
2. Investors from being able to take advantage of opportunities created by start-ups and emerging businesses.

First, unless registered with the S.E.C., securities cannot be offered to  anyone with whom they do not already have a relationship such as friends and family.  Since small businesses cannot afford this procedure their only source of capital is typically bank financing.  Not sure if you have heard the news but start-up bank capital looks like Death Valley in August...it's all dried up.

Second, this litigation makes it unlawful to sell these securities to anyone who is not considered an "accredited investor".   This is an investor who has, at a minimum, either $1 million net worth or a regular income of over $200,000 per year.  As you can imagine, this eliminates the vast majority of the population.  As the average consumer is restricted from even hearing of  available investment opportunities which might be right under their nose, they are unfairly denied the opportunity to buy stock in these companies.  Stocks which often provide tremendous up-side opportunity and relatively little risk if structured properly.  Further more current legislation prevents investors from having an active role in their investments.

Times change however and so too must laws.  H.R. 2930 will change this and level the playing field for both large and small business as well as the average consumer.  Historically understanding how things work was much more difficult for the average consumer. Society however, especially in the United States, has become increasingly savvy with the help of technology.  We are well into what I like to call the Information Age.  Within only minutes I can find very detailed information on nearly anything I desire.  Through social networking I can get the word out about a particular opportunity or pitfall to every person I know (and many I really don't) with a few clicks of a button.  Information and data travel at the speed of light.  In order not to get blinded,  we must be able to react just as quickly.

This bill was introduced by North Carolina congressman Rep. Patrick McHenry and has made its way swiftly through the approval process to becoming law.  McHenry sits on the House Financial Services Committee which handles federal legislation of such things such as securities, banking, insurance, and real estate.  McHenry prior to being elected to Congress he served as Special Assistant to the Secretary of the U.S. Department of Labor.  His goal with this bill echoes the reverberating chant which rings throughout the halls of the White House...."Create Jobs!"

With support already expressed from the White House, this bill now moves to Senate.  Assuming it makes it through unscathed it should go on to be signed by the President with no hesitation.