The news that Congress is seriously considering major re-writes of the painfully anachronistic rules on small securities offerings could just be the straw that breaks the back of this now 12 year equity investing return drought.
Two bills currently being considered in Congress – the Entrepreneur Access to Capital Act and the Access to Capital for Job Creators Act – shows that Washington is finally starting to grasp the chasm that separates the financial services industry as embodied in soulless and too big to understand banking institutions, and the action hero worlds of emerging company entrepreneurs and the investors that back them.
And that our fair regulators have at least an implicit understanding that very real (and real time) reputation and compliance checks and balances of our always on, always connected, online world is just better than the Feds’ analog and antiquated regulatory regime.
Heck, even consideration of these bills is a welcome sign that a consensus has formed that out-of-date and ineffective regulations - far more so than taxes - are the worst inhibitors of job growth and economic vitality.
How so? Well, the proposed bills would update core aspects of the securities laws – most of which were written in the 1930’s - to reflect how 21st Century business is actually done.
As in over e-mail. With relationships initiated, cultivated and maintained online.
They would exempt companies looking to raise $5 million or less from standard SEC filing requirements and lighten the virtually impossible to follow rules on utilizing social networking and other Internet-based communications to market offerings.
As a patriotic American, I say "hooray."
As an angel investor, I say “how can I get in on the fun!”
If these bills pass, I would predict that the value of all private companies would jump at least 10% simply because their pathways to liquidity would be far, far less.
Now attaining liquidity is almost always only possible via either a rare and difficult whole company sale or a public offering.
In contrast, these bills would remove many of the regulatory shackles that prevent secondary markets powered by inexpensive online deal syndication and transaction tools like Profounder, SecondMarket, and Prosper.com from flourishing.
And because they would allow smaller investments in private companies to be made almost as easily as into public stocks, they would address one of the biggest challenges of the Main Street investor –how to get pieces of the best deals.
Quite simply, the result would be more investors getting more of what they want - liquid, high performing equity investments.
Now what could be better than that?
So congress pass these bills!