Image: Reuters
Sure you’ve heard about the infamous Dodd bill – probably gazillion times too many.
The startup and investment community frown upon the initial bill and after much lobbying it’s announced that 2 amendments have been proposed to save the startup and investment community.
Floor debates on the Dodd bill starts today. Let’s recap the amendments.
TechFlash was one of the first sites that publicized these proposed amendments. The article penned by Dan Rosen, Joe Wallin and William Carleton focuses in on 2 provisions of the bill that threatened to topple Regulation D, and in turn, many angel investors who would be crippled by the new rulings.
In an “it’s about time, but we’re still grateful” manner, Rosen, Wallin and Carleton detailed that, while the Dodd bill reforms were initially supposed to weed out the criminals, most angel investors would have been innocent victims if the amendments weren’t made.
It has long been known that the few “cons” among us dapple in the gray area and fuel their fraud schemes and rip off investors, but the Dodd bill’s initially-planned changes to the rules would have been ugly for startups and angels.
Hideous actually.
Basically the Securities and Exchange Commission (SEC) was going to raise “accredited investor” thresholds – potentially more than doubling the amount of income or net worth an angel has to have in order to invest in startup seed financings.
And startups have to undergo a 120-day review period.
Ouch.
The proposed amendments currently en route to the Senate should surely save the day for angel investors if they’re passed in.
And we have Angel Capital Association (ACA) to thank for that, after executive director Marianne Hudson, supported by ACA members, made contact with Senators and their staff to table the concerns of the collective angel community.
So let’s make a simple comparison of the initial proposal and the new proposal for both of the Dodd bill provisions that had angels taking cover.
1.
2.
These amendments aren’t quite laws yet but we’ll find out in about 2 weeks. Stay tuned.
Update 5/14: Senate Vote to Save Startup Seed Financing and Angel Investing Could be Monday
Update 5/15: Resources for Contacting Your Senators About Saving Startup Seed Financing and Angel Investing
Update 5/17: Angel Investor Amendment Passes
Update 7/21: President Obama has signed the Dodd-Frank Wall Street Reform Act. Section 413 indicates that the standard net worth for an accredited investor will stay at US$1 million, excluding the value of a person’s principle place of residence.
SEC. 413. ADJUSTING THE ACCREDITED INVESTOR STANDARD.
(a) IN GENERAL.—The Commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the Commission under the Securities Act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 (as such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person.
* For series, references are published in the last installment of the series.
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