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Sens. Toomey, Tester Introduce Bill To Help Businesses Raise Capital, Cut Red Tape And Create Jobs

Monday, Sep 12

WASHINGTON, D.C. -- Senators Pat Toomey (R-Pa.) and Jon Tester (D-Mont.) today introduced a bill to cut regulatory burdens on small businesses and expand their access to much-needed capital.

The bipartisan Small Company Capital Formation Act makes it easier for small startup companies to raise much-needed capital through public offerings. The bill changes the Securities and Exchange Commission rule known as "Regulation A" to allow companies to sell up to $50 million in shares without filing lengthy paperwork. Currently, businesses can only raise $5 million under Regulation A-a limit many businesses consider insufficient. The rule has not been changed in nearly 20 years.

Changing the rule will help entrepreneurs raise more capital and create jobs. The legislation will also improve the transparency of these offerings, providing investors with access to additional information.

Sen. Toomey, a member of the Senate Banking Committee, and Sen. Tester, chairman of the Senate Economic Policy Subcommittee of the Senate Banking Committee, have been working on the Small Company Capital Formation Act for many months after hearing from constituents about the potential of startup companies to create jobs and spur economic growth.

"The Small Company Capital Formation Act will ease the regulatory burden on small businesses by making it easier for start-ups and small companies to go public," Sen. Toomey said. "In our struggling economy, quicker entry into the market will allow smaller companies to access capital at an earlier stage in their growth. By encouraging small businesses to expand, the Small Company Capital Formation Act will allow these companies to be competitive, hire new workers and create badly needed jobs."

"We need to be doing everything we can to spur innovation, entrepreneurship, and job creation, and this legislation does all of that by streamlining the ability for new companies to prosper with the capital they need to grow," Sen. Tester said. "Startup businesses need access to capital so they can focus on scientific breakthroughs and job creation without being bogged down by government paperwork."

The Small Company Capital Formation Act is supported by the New York Stock Exchange.

Jeff Hatfield, CEO of Vitae Pharmaceuticals in Fort Washington, Pa., said the legislation is welcome.

"Private biotech companies like Vitae face a severe gap in the ability to access capital when promising new drugs - like our drug for chronic kidney disease - successfully progress to middle and late stage clinical development," Hatfield said. "Changes to the offering threshold of Regulation A would significantly improve the funding opportunities for small biotech companies by giving them access to the public markets at an earlier stage in their growth cycle and allowing them to raise the valuable capital needed, thus increasing the ability to grow jobs and speeding the delivery of life-saving therapies to patients."

Dr. Robert Bargatze of Ligocyte Pharmaceuticals in Bozeman, Mont. testified at Sen. Tester's July hearing to examine the potential of startup companies to create jobs and spur economic growth.

Bargatze spoke about the "breadth of the financing problem in the biotechnology industry" during July's hearing, saying it "calls for comprehensive solutions to ease capital formation, involving both tax and financial services policy."

"In addition to the difficult financing landscape and struggling public markets, growing biotech companies also face regulatory burdens which further hinder capital formation in our industry," Bargatze added. "Making changes to regulations which unintentionally harm the biotech industry would free companies to focus their efforts on their innovative scientific research rather than complex reporting and compliance."

Sens. Tester and Toomey's bill is online here.

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