Congress Opens the Door to More Small Company Offerings

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Raising capital for small businesses has always been difficult and the economic downturn of 2008 did not help matters. Banks that were once a good source of small business financing are now paralyzed and afraid to take any real risk. Access to public markets has been reserved for a select few, especially considering the costs of being a public after the Sarbanes–Oxley Act of 2002. Unfortunately, the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), triggered changes to the “accredited investor” rules under Regulation D and “qualified client” rules under the Investment Adviser’s Act to effectively raise the bar for who could participate in certain types of private equity offerings. Fortunately, Congress is considering some relief that could open the door to more funding sources, including crowdfunding.

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