House passes bill to ease stock sale disclosures

House passes bill to ease stock sale disclosures
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The House on Thursday passed a bill meant to ease capital access for small company stock sales, which Democrats fear would put investors at risk with limited information.

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The bill, approved 236-178 along party lines, combines three measures passed out of the House Financial Services Committee that would roll back Securities and Exchange Commission (SEC) disclosure and advertising regulations for companies with smaller stock offerings.

“This package of bills [helps] innovators gain access to capital. Because you can ask any business owner or dreamer out there. They know that ideas and work ethic are fundamental, but it takes capital to be able to make those ideas a reality,” Majority Whip Kevin McCarthy (R-Calif.) said in a floor speech before the vote.

One measure allows “microcap” companies to sell up one-third of their market value in stock within 12 months and exchange traded microcap companies to issue an unlimited number of shares. 

Another would allow companies whose investors have pre-existing relationships with an officer, director, or major shareholder of the company selling stock to sell up to $500,000 in shares without a stock prospectus.

The final measure would block the SEC from finalizing rules to bar advertising unregistered securities and stocks. 

“Put simply [the bill] would undo regulations put in place under Dodd-Frank that protect the American people from another financial crisis,” read a release from Democratic Whip Rep. Steny Hoyer (D-Md.).

The White House said it would veto the bill in a Tuesday statement.

“Markets function most efficiently when they are transparent, well-regulated, and trusted by investors and issuers alike,” said the White House. “These bills would undermine not only the health and integrity of our markets, but the very capital formation process they claim to promote.”