Senator Tim Scott, the ranking Member of the Senate Banking Committee, has introduced legislation seeking to improve access to capital and assist the innovation and entrepreneurship sector of the economy. The Empowering Main Street in America Act of 2024 aims to “improve access to capital for entrepreneurs across the country, tailor regulations for small and newly public companies looking to grow and expand their operations, and create new avenues for hardworking Americans to invest in their community.”
The legislation was crafted in concert with Black investors and business founders, who discussed ways to improve minority communities’ access to capital.
Senator Scott is a successful entrepreneur himself, so he understands the struggle that smaller firms must endure to pursue successful ventures. Smaller firms are the bedrock of the economy, creating around half of all jobs in the US while driving wealth and prosperity.
The multifaceted legislation addresses many issues that Congress has sought to improve in the past. However, as the Senate is controlled by Democrats, these policies have been shot down in recent years.
Some key aspects of the bill include:
- A micro exemption where a firm may sell up to $500,000 in securities in a lightly regulated offering
- The Investment Company Act will see shareholders increased from 250 to 500 and the funding cap from $10 million to $50 million.
- For Regulation Crowdfunding (Reg CF), issuers raising $500,000 or less will not be required to submit an accounting review by an accountant.
- A mandated report to Congress on Reg CF semi-annually submitted by the “Ombudsman.”
- Safe harbor for finders is a long-time issue that the SEC has ignored for years. Finders are individuals who match investors with early-stage firms – helpful if you do not have a network of wealthy friends.
- Becoming an Accredited Investor could be accomplished by taking a test.
- Under Reg D, an individual could self certify as accredited. Currently, under Reg D 506c, or accredited crowdfunding, an investor must be qualified – repeatedly creating a substantial barrier to participation in these offerings.
- The wealth threshold for being deemed an Accredited Investor would be lowered to $500,000. Others would be held to a percentage of income or wealth cap.
- There will be a study on how retail investors are being harmed by being limited in their investments.
- A study on IPO fees – IE excessive and costly regulations
- A Semi-annual report on SEC regulation and enforcement actions. It also includes access to capital information.
There is more…
Many organizations have submitted their support for the broad legislation. The Angel Capital Association (ACA), Financial Technology Association (FTA), and Technology Councils of North America (TECNA) joined Carta, CAE, and Engine, stated:
“The Empowering Main Street in America Act (EMSAA) provides a strong foundation to expand access to capital for entrepreneurs in emerging ecosystems, increase investment and ownership opportunities for more people, and improve the regulatory process to ensure policy encourages responsible innovation.”
Republican Senate Banking Committee members have co-sponsored the Scott legislation, including Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), Katie Britt (R-Ala.), Kevin Cramer (R-N.D.), and Steve Daines (R-Mont.). Senator Jerry Moran (R-Kan.) is also a co-sponsor of the bill.
Earlier this week, Senator Scott participated in a small business event where he said that it is important for everytone to recognize when capital is elusive, communities do not grow and prosper.
“Communities without small businesses in their communities are the communities that are going to be left behind. And unfortunately, and disproportionately, that’s the African-American and Hispanic communities that are consistently left behind, because finding capital is so darn hard. If you’re starting a business from the ground up, without the relationships and the influencers in your oikos, in your natural space of influence, you find yourself lagging further and further behind.”
He also took the opportunity to criticize SEC Chairman Gary Gensler and his damaging approach to digital assets, describing the Chair and the SEC as “out of step with the average American.”
While the legislation holds a lot of common sense policies that should be approved, the leadership of the Senate Banking Committee under Ohio Democrat Sherrod Brown – will probably block it from ever showing up in the Committee – not to mention the full Senate. While Presidential candidate Vice President Kamala Harris has voiced her support of creating an opportunity economy, the last four years of the Biden administration have proved little to nothing has been done to help smaller firms and retail investors.
