Letter to U.S. House: JOBS Act 3.0 is a Powerful Package for Entrepreneurs and Small Businesses

By at 16 July, 2018, 10:05 pm

Support Entrepreneurs and Small Businesses:  Vote YES on JOBS Act 3.0

UPDATE: On July 17, the U.S. House passed JOBS Act 3.0 by a vote of 406-4.

Dear Member of the U.S. House of Representatives:

On behalf of the Small Business & Entrepreneurship Council (SBE Council) and our more than 100,000 members and supporters nationwide, I am writing to express our strong support for the JOBS Act 3.0 package that will be soon be voted upon by the U.S. House. Entrepreneurs and small businesses require capital to leverage growth opportunities and to start new businesses. JOBS Act 3.0 is a powerful package of bills that will modernize various securities rules, reduce red tape, and fix barriers that will improve access to capital and the capital markets. The package will encourage higher levels of capital formation, which in turn will boost U.S. entrepreneurship and help finance America’s most promising small firms and their innovations.

Capital is the fuel that drives entrepreneurship and economic growth. It’s no secret that small businesses and startups need a continuous flow of capital to launch, compete and grow. In terms of startups, the dearth in entrepreneurial risk-taking remains tepid as our nation has a long way to go to make up for the shortfall of 3.7 million businesses that were never started due to weak economic conditions and a lack of capital. (SBE Council’s ‘Gap Analysis: Entrepreneurship in Decline, Millions of Missing Businesses,’ Aug. 2016).  Policies have improved the environment for starting, acquiring or expanding a business, but more needs to be done to unleash capital to boost entrepreneurship, business growth and initial public offering (IPO) activity.

The bipartisan work and collaboration behind the bills embedded within JOBS Act 3.0 is a testament to this critical small business need, and the relentless work of their sponsors and the Financial Services Committee. JOBS Act 3.0 will make a meaningful difference for our nation’s entrepreneurs and small businesses. Its enactment would be a big step forward for improving the competitiveness of U.S. capital markets and, through research and study in several of the bills, further identify weaknesses or policies that require reform.

SBE Council has previously noted our support for many of the bills in JOBS Act 3.0, as well as our advocacy for policies that have now been transformed into legislation, including:

H.R. 79, Helping Angels Lead Our Startups (HALOS) Act, which defines an “angel investor group” and clarifies SEC rules so that startups can showcase their ideas and businesses to interested parties at “demo days” or similar events without running afoul of the securities laws.

H.R. 477, Small Business Mergers, Acquisitions, Sales & Brokerage Simplification Act, would reduce the regulatory costs associated with the sale and purchase of small, privately held companies.

H.R. 1585, the Fair Investment Opportunities for Professional Experts Act, modernizes the definition of accredited investor to include individuals with the education and job experience to effectively evaluate investment opportunities and their risks.

H.R. 1645, Fostering Innovation Act, sensibly extends an exemption allowed for in the JOBS Act for growing companies whose business models require more regulatory flexibility. H.R. 1645 would extend the JOBS Act’s SOX 404(b) exemption for an additional five years for former emerging growth companies (EGCs) that maintain a public float below $700 million and average annual revenues below $50 million. The five-year extension would allow growing companies to direct their precious capital toward R&D, productivity, and market success rather than the one-size-fits-all regulatory burdens associated with costly 404(b) compliance.

H.R. 3903, Encouraging Public Offerings Act of 2017, would streamline the process by allowing an issuer to communicate with potential investors to “test the waters” in terms of gauging interest in a contemplated securities offering, either before or after the filing of a registration statement, and allowing an issuer to submit a confidential draft registration statement to the SEC for review prior to public filing or within one year after the initial public offering or registration. H.R. 3903 would lower costs and simplify the IPO process without jeopardizing investor protections.

H.R. 5877, Main Street Growth Act, would allow for the creation of venture exchanges, which would provide a tailored trading platform for small issuers and EGCs.

H.R. 6380, Crowdfunding Amendments Act, would allow crowdfunding investors to pool their money into a fund that is advised by a registered investment advisor.

H.R. 5970, Modernizing Disclosures for Investors Act, requires the SEC to provide a report to Congress with a cost-benefit analysis of EGCs’ use of SEC Form 10-Q and recommendations for decreasing costs, increasing transparency, and increasing efficiency of quarterly financial reporting by EGCs.

H.R. 3972, Family Office Technical Correction Act, clarifies that family offices and family clients are accredited investors under Regulation D of the SEC.

H.R. 2364, Investing in Main Street Act, amends the Small Business Investment Act by increasing the percentage a financial institution or federal savings association can invest in a small business investment company (SBIC) to 15 percent. If investing more than 5 percent, the institution or savings association would first need approval by federal regulators.

H.R. 4281, Expanding Access to Capital for Rural Job Creators Act, would require the SEC’s Advocate for Small Business Capital Formation to identify the unique challenges to small businesses in rural areas. The annual report made by the SEC’s Small Business Advocate would include a summary of these issues.

H.R. 6139, Improving Investment Research for Small and Emerging Issuers Act, requires the SEC to carry out a study to evaluate the issues affecting the provision of and reliance upon investment research into small issuers and pre-IPO companies, including EGCs and other small issuers.

H.R. 6321, Investment Adviser Regulatory Flexibility Improvement Act, directs the SEC to consider alternative methods for businesses or organizations to qualify as a “small business” or “small organization” for the purposes of assessing the regulatory impact on investment advisers.

H.R. 6324, Middle Market IPO Underwriting Cost Act, requires the SEC, in consultation with the Financial Industry Regulatory Authority, to study the direct and indirect costs associated with small and medium-sized companies to undertake initial public offerings.

Vibrant and competitive U.S. capital markets will help entrepreneurs and promising firms access the capital they need to grow, invest, innovate and create quality jobs. In a growing and dynamic economy there are many opportunities for entrepreneurs and small businesses to expand and grow. Ensuring these risk-takers have the capital they need to start a business or scale an existing business is critical for sustainable economic growth and our nation’s competitiveness.

JOBS Act 3.0 is a solid package that will make a significant and positive impact on the ecosystem for entrepreneurs.

SBE Council urges you to vote for JOBS Act 3.0. Thank you, in advance, for your support of America’s entrepreneurs, small businesses and their workforce.


Karen Kerrigan, President & CEO

cc:  The Honorable Jeb Hensarling, Chairman, Financial Services Committee

The Honorable Maxine Waters, Ranking Member, Financial Services Committee

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