Late last month, Senator Tim Scott, the ranking Member of the Senate Banking Committee, introduced new legislation that aims to support smaller businesses and entrepreneurs while providing smaller investors with access to more opportunities. The Empowering Main Street in America Act of 2024 seeks to improve access to capital—a vital aspect of helping the innovation-driven economy while boosting wealth and prosperity.
The legislation includes a wide range of improvements for smaller firms, like a micro-exemption, clarity on finders, and democratizing the definition of an Accredited Investor—a rule that currently disenfranchises the majority of the country.
In response to the bill, Sherwood Neiss, principal and co-founder of Crowdfund Capital Advisors (CCA), forwarded a letter to Senator Scott thanking him for his leadership in pursuing a more “equitable economic future.” CCA is a specialist in securities crowdfunding. The group tracks all offerings, providing insight into the activity of this sector of finance. Neiss believes the legislation builds upon the “bipartisan success” of the JOBS Act that legalized online capital formation. Neiss said the legislation will provide critical support for smaller firms.
In the letter, Neiss stated:
“The Empowering Main Street in America Act of 2024 is a crucial piece of legislation that builds on the success of the JOBS Act and further expands access to capital for small businesses, especially for those led by women and minority entrepreneurs. By maintaining strong investor protections, promoting transparency, and encouraging community-driven investment, this bill will help create a more inclusive economy where all entrepreneurs have the opportunity to succeed.”
Noting that the bill will benefit all small businesses, Neiss added that the Empowering Main Street Act will disproportionally help women and minority entrepreneurs who experience significant challenges in accessing capital.
“In venture capital markets, only 2% of funding goes to women and minority founders, a stark disparity that reflects systemic barriers in traditional financing channels. By comparison, Reg CF has allocated 23.5% of its total funding to women and minority founders over the past year, demonstrating the platform’s more equitable capital distribution.”
Reg CF or Regulation Crowdfunding is one of several securities exemptions that enable online capital formation. Neiss shared that in the past year, 40.7% of all Reg CF campaigns had at least one woman or minority founder, with women achieving an impressive 66.6% success rate.
The legislation garnered feedback from several crowdfunding insiders.
Doug Ellenoff, Managing Partner of the law firm of Ellenoff, Grossman, and Schole (EGS), a longtime proponent of investment crowdfunding, shared with CI:
“While many of the proposals have been circulating for many years without either Congressional or SEC embrace, there are several microfinance proposals presented here that are original or derivative in nature to previous efforts that could prove to be of particular import to new emerging entrepreneurs and their communities if adopted.”
MicroVentures founder and CEO Bill Clark voiced his support as well. MicroVentures is a broker-dealer that enables online capital formation under the full stack of securities exemptions, including Reg CF, Reg D, and Reg A+. Clark said:
“Senator Tim Scott’s Empowering Main Street in America Act marks an important moment in democratizing investment opportunities. By introducing a pathway for individuals to become accredited investors through a simple test and lowering the wealth threshold to $500,000, this legislation will help break down barriers that have hindered access to investment opportunities. This move not only paves the way for self-certification under Reg D but also ensures that a broader spectrum of Americans can participate in the growth of innovative companies.”
Clark is also President of the Association of Online Investment Platforms (AOIP), which Neiss and Ellenoff are members of.
While the legislation is full of common sense legislative changes, in the highly polarized Congress, it is questionable it will be debated in the Senate Banking Committee, which is Chaired by Senator Sherrod Brown – a policymaker not known for his support of smaller firms and securities crowdfunding. While the bill would probably stand a good chance of approval in the House, we may have to wait until after the Presidential election. Perhaps in 2025.