Beginning a few weeks ago, there’s been a lot of digital ink spilt over how Chris Dodd’s financial reform package could make life more difficult for early-stage investors and early-stage companies (including by yours tuly). Specifically, the bill would repeal the federal preemption for Regulation D filings, while also opening the door for a doubling of the accredited investor thresholds.
So I spoke yesterday to a Senate Banking Committee source, who told me: “The original intent of these provisions was to enhance consumer protections. We are seriously considering the concerns brought to us in recent days.”
The source adds that the adjustments to accredited investor standards was proposed by state regulators, among others. I’ve also heard that that’s the same locus of support for changing the oversight of startup financing registrations.
A cynical view would be that the state regulators are trying to grab back some of the many responsibilities that the SEC has assumed over the past few decades. A more gracious view would be that state regulators actually could take the time to review Reg D filings, thus protecting both issuers and investors (the SEC has current oversighht authority, but rarely takes the time).
Sounds to me like something that got put into the bill without any input from the other side. Now that VCs are loudly raising objections, I wouldn’t be surprised if such changes are stripped — or at least scaled back — in the bill’s final version.