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ACA Public Policy Highlights

ACA is participating in debate and education on important issues. Below is more information on our activity and resources for ACA members to learn more and take action.

Financial Reform Act Includes Important Changes for Angels and Entrepreneurs

The financial reform bill - now known as the Dodd-Frank Wall Street Reform and Consumer Protection Act - became law on July 21st when President Obama signed the act. There are two sections in the approved legislation of particular interest to angels:

  • Section 413, Adjusting the Accredited Investor Standard (pages 202-203)
  • Section 926, Disqualifying Felons and Other "Bad Actors" from Regulation D Offerings (page 476)

The final legislation removed the provisions that concerned ACA related to Regulation D - so there is no 120-day waiting periods for approval of offerings and no patchwork of different state regulations for entrepreneurs raising capital. Instead, Section 926 adds more abilities for regulators to stop Regulation D private offerings from "bad actors."

The final act also eliminated automatic inflationary increases to the definition of "accredited investor" that would have decreased the number of angels in angel groups by about 60 percent (based on source data from the "Returns of Angels in Groups" academic study). However, Section 413 does include compromise language for net worth requirements, which stay at $1 million but exclude primary residence from the calculation.

IMPORTANT: The change in the net worth definition for accredited investors is effective right now. Securities and Exchange Commission staff have been quoted that the new standard is in place on the date of the enactment of the law (which happened July 21st.)

More information about the efforts to ensure improvements to the original bill are below.

ACA Supports Amendments to Senate Financial Reform Bill

Sen. Christopher Dodd drafted the Restoring American Financial Stability Act of 2010 that addresses many important financial reform issues. The original bill included two sections that would have reduced the number of accredited angel investors and create regulations that would have made raising angel capital more complicated and costly for entrepreneurs.

We are pleased that the Senate passed an amendment on May 17th sponsored by Sen. Kit Bond (R-MO) to address the problems in the two sections of the bill on May 13th and ACA supports this amendment. Original co-sponsors for amendment #4037 (later revised and updated to #4056) are Sen. Scott Brown (R-MA), Sen. Maria Cantwell (D-WA), and Sen. Mark Warner (D-VA). Six other Senators became co-sponsors. We thank all of them and particularly Sen. Bond and Sen. Dodd and their staff.


Background on the Issues Related to the Angel Issues in the Financial Reform Bill:

Sen. Christopher Dodd released a new bill, the Restoring American Financial Stability Act of 2010, that addresses many important financial reform issues. Unfortunately, the very lengthy bill also includes three sections that threaten to reduce the number of accredited angel investors in the United States by about 75 percent and complicate the regulation of Regulation D offerings (which include angel investments) to increase the time needed for entrepreneurs to raise money and make it more difficult to get investors across state lines.

ACA believes that the bill was not intended to negatively effect angel investment, small business, and jobs. We recommend either eliminating sections of the bill or adding language that clarifies that angel investors and companies receiving angel investment are not affected by the legislation.

The Census Bureau and Kauffman Foundation have released studies that show that start-ups and firms less than five years old generated ALL of the net new jobs over a 25 year period. Many of these small businesses are the type that angels invest in. At a time when America is losing jobs, it strikes us as a major disconnect to create legislation that penalizes high growth, job creating, privately financed small business, in expense, delay, and wasted effort.

The relevant sections of the bill are:

  • Sec 412 (page 380) Adjusting the Accredited Investor Standard for Inflation
  • Sec 926 (pages 816-819) Authority of State Regulators Over Regulation D Offerings

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