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This week, Representative John Carney (D-DE) introduced a piece of legislation in the House that could help many more startups find investors.

The bill, which was submitted to the Committee on Financial Services Wednesday, aims to accomplish two things 1) Establish an Office of the “Advocate” for Small Business Capital Formation within the Securities and Exchange Commission (SEC) and 2) Create a Small Business Capital Formation Advisory “Committee.” The legislation mimics some recommendations I proposed in a January, 2015 VentureBeat story: SEC to Small Business – We’re Just Not That into You.

There are a few interesting points here:

1. The legislation was introduced by a Democrat as opposed to pro-business Republicans, signaling that perhaps Democrats do care as much as Republicans about those small businesses in their jurisdictions that create jobs.

2. The Advocate would have a lofty list of responsibilities (and a staff to assist) that include:

  • Assisting small businesses and small business investors in resolving problems businesses and investors have with the Commission or with self-regulatory organizations;
  • Identify areas in which small businesses and small business investors would benefit from changes in the regulations of the Commission or the rules of self-regulatory organizations;
  • Identify problems that small businesses have with securing access to capital;
  • Analyze the potential impact on small businesses and small business investors of —
    • proposed regulations of the Commission that are likely to have a significant economic impact on small businesses and small business capital formation; and
    • proposed rules that are likely to have a significant economic impact on small businesses and small business capital formation of self-regulatory organizations;
  • Propose to the Commission changes in the regulations or orders of the Commission and to Congress any legislative, administrative, or personnel changes that may promote the interests of small businesses and small business investors

3. It creates a separate “Committee” to provide advice on the Commission’s rules, regulations, and policies as they relate to capital raising by small companies with less than a $250 million market cap, the buying and selling of their securities, and reporting and compliance issues facing these companies.

4. The Advocate would essentially operate out of the budget of the SEC but independently of the Commission so as not to bow to its pressure. And the Advocate would report to Congress (without SEC review of his or her report) on the issues that small businesses face, including issues with the Committee. But here are the teeth: It would require that the Commission file a formal response to all recommendations submitted to the Commission by the Office no later than three months after the date of submission.

If this bill passes, it should bring some transparency to the capital formation challenges small businesses face and what is holding the Commission back. There is a long road between a bill and a law, but what this bill signifies is that Congress understands that the needs of small businesses have fallen short of the SEC’s duties.

In my January VentureBeat post, my proof point was the now almost three-year delay in issuing the final Rules for Title III, Crowdfunding as part of the JOBS Act. Title III would allow small businesses for the first time in 80 years to raise debt or equity capital from their friends, family, and communities online via SEC registered platforms. In a piece I wrote earlier this week, I discuss how other countries have taken what President Obama signed into Law in 2012 and run with it in a transparent, accountable, efficient, fraud-free manner, while we in the U.S. are still waiting for politics to play out.

However, given the “bipartisan” nature of this bill, could this be something both Democrats and Republicans can agree upon and push through a bifurcated Congress for the sake of small businesses? I hope so.

Sherwood Neiss is a partner at Crowdfund Capital Advisors. Neiss helped lead the U.S. fight to legalize debt and equity based crowdfunding, coauthored Crowdfund Investing for Dummies, and cofounded Crowdfund Capital Advisors, where he provides strategy and technology services to those seeking to benefit from crowdfund investing. Neiss and Jason Best are credited as the fathers of Title III of the JOBS Act. After attending the bill-signing ceremony at the White House, they formed Crowdfund Capital Advisors to study what is happening in crowdfunding, analyze results, report trends, and follow opportunities. They are active investors in the crowd finance space.

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