McHenry Statement on Failure of SEC to Produce Regulation A Rule Proposal
Title IV of the JOBS Act mandates SEC propose rule amending Regulation A
Today, Congressman Patrick McHenry, Chairman of the Financial Services Subcommittee on Oversight and Investigations released the following statement on the Securities and Exchange Commission's (SEC) failure to propose a rule to amend Regulation A of the Securities Act of 1993 as mandated in Title IV of the JOBS Act:
“I find it inexcusable that, 19 months after enactment of the JOBS Act, the SEC has failed to even propose a rule for Regulation A. As economic growth remains tepid, a renewed Reg. A exemption would directly unlock new sources of capital for startups and small businesses by modernizing securities regulations and empowering everyday Americans to invest in their local businesses.
"That is why I authored H.R. 701, which passed the House with 416 votes, to require the SEC's completion of Reg A rulemaking by yesterday. Unfortunately, like much of the good work done by the House, Senate Majority Leader Harry Reid refused to bring this common-sense legislation up for a vote, punishing small businesses and startups that endlessly wait for the SEC to do its job.”
Regulation A is a securities exemption that enables small businesses to raise capital through a registration and disclosure process that is less complex, time-consuming, and expensive. However, exceedingly-low capital limits and burdensome regulations have led entrepreneurs to deem the Regulation unusable.
In response to these rules, Title IV of the JOBS Act increased the annual amount a small business can raise through Regulation A, from $5 million to $50 million. Additionally, Title IV of the JOBS Act also requires the SEC to remove onerous rules of Regulation A that have made it unfeasible for small businesses to raise capital needed to grow and prosper.
In February of this year, Congressman Patrick McHenry introduced H.R. 701 to compel the SEC to finish rules for Title IV of the JOBS Act by October 31, 2013. In May 2013, the United States House of Representatives overwhelmingly passed H.R. 701 by a vote of 416 to 6. Nonetheless, the SEC still has not even proposed new rules for Regulation A.