Public Policy

By Chris McCannell, Partner at Eris Group

Editor’s Note:  ACA wants to share with our members our progress in Washington.  It’s an important use of member dues, and we believe it is worth every penny.  We work with Eris Group on American public policy issues, and have had great results in the last year – from a 100% exemption on investment gains to House passage of bills that would ensure that demo days are not included in general solicitation and increasing the number of investors in an angel fund or syndicate from 99 to 249.  With Eris Group, ACA has also helped move the conversation about the definition of accredited investor to a more positive one (in angels’ view), and we are now regularly sought out by Members of Congress and other organizations for input and support of legislation and policy issues.

ACA learned in 2010 that Congress and regulators could have a huge impact on angel investors and the startups angels support.  ACA was able to ensure Dodd-Frank didn’t increase the financial thresholds for the accredited investor definition then, but the association learned it needed help from DC professionals to protect angels through that experience.

By: Marianne Hudson, ACA Executive Director

Victory! With lots of work by ACA and many leaders, the House passed the HALOS Act, which would ensure companies presenting in demo days would not have tripped the general solicitation trigger and therefore be required to take extra measures to verify all of their investors are accredited.  This is something the entire startup ecosystem – investors, entrepreneurs, accelerators, incubators, universities and more - cares about.  We will now concentrate our efforts on the Senate to make the bill a reality. The bill was approved by a 325-89 vote, meaning it was relatively bi-partisan.

By: Marianne Hudson, ACA Executive Director

Many angels, startups, VCs and the startup ecosystem have asked for more clarity about demo days for a couple years now.  These events seem to meet the definition of “general solicitation” and most investors don’t want to invest in companies that publicly advertise, but they have seen demo days as an important part of our world for decades.  The confusion may get clarity because of the work of a bi-partisan group of Members of Congress.

The Angel Capital Association supports HR 4498, the Helping Angels Lead Our Startups Act (HALOS Act) and want to thank Reps. Chabot, Sinema, Hurt and Takai for introducing this bi-partisan bill last week.  We believe the HALOS Act helps more job-creating startup companies raise the funding they need because it removes a barrier to funding.  There has already been discussed in a hearing of the House Financial Services and could be on a positive track.  A similar bill is also in the Senate, with bi-partisan sponsors as well.)

By: Marianne Hudson, ACA Executive Director

December 18 was a very big day for angel investors.  Not only did the SEC put out a staff report that recommends tweaks to the accredited investor definition, but Congress passed a big tax act that makes permanent the 100% exemption of capital gains.  Here’s what you need to know in connected blog posts:

Tax Benefits - The holiday party starts early with a gift from Congress

The House and Senate passed the PATH Act (Protecting Americans from Tax Hikes) which included the Angel Capital Association’s top tax priority, extension of Section 1202 of the US Tax Code which allows a 100% exclusion of gains on Qualified Small Business Stock has been made permanent. ACA will continue to support reform of this tax exemption, such as reducing the current minimum five year holding period, in future tax reform. ACA commends our champions who have promoted a tax code that rewards innovation and job creation: Senator Ron Wyden (D-OR), Senator Maria Cantwell (D-WA), Congresswoman Lynn Jenkins (R-KS) and Congressman Ron Kind (D-WI).  Thanks also to our government affairs leaders, Chris McCannell and Joel Riethmiller.

By: Marianne Hudson, ACA Executive Director

December 18 was a very big day for angel investors.  Not only did the SEC put out a staff report that recommends tweaks to the accredited investor definition, but Congress passed a big tax act that makes permanent the 100% exemption of capital gains.  Here’s what you need to know in connected blog posts:

Accredited Investor Definition – A mix of gifts and lumps of coal in our stockings

Not far from the US Capitol Building, the SEC quietly released a report from its staff on the Accredited Investor definition on the same day.  As many angels will remember, the SEC is required to study the definition by Congress in the Dodd-Frank Act.  Time will tell if this staff report fully addresses the requirement or if it informs future rulemaking by SEC Commissioners.

To ACA’s delight, some of the recommendations in the report actually match what our leadership has suggested in multiple meetings and letters, such as allowing people who are sophisticated but don’t meet financial thresholds to be accredited.  As in many things, however, there are also some recommendations in the report that are different than most angels would like.  All in all, the SEC staff’s report could have been much worse – for instance it does not include increasing financial thresholds for income to $450,000 and wealth to $2.5 million as some organizations advocated.

By: Marianne Hudson, ACA Executive Director

Crowdfunding experts have poured through the 685 pages of SEC rules and created a reasonable 43 page practical guide on how equity crowdfunding for the masses work.  Take advantage of this step-by-step guide that Crowdfund Capital Advisors have put together for entrepreneurs to raise funds when the rules allow it beginning May 16, 2016.

By Daniel DeWolf, Chair, Technology Practice Group and Co-Chair, Venture Capital and Emerging Companies Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.  He is also a member of the ACA Public Policy Advisory Council. 

This article originally appeared in VC Experts.

The SEC has finally provided clarity as to how an issuer of securities can conduct a private placement in a password protected web page under Rule 506(b), without it being deemed a “general solicitation” and thereby being subject to the additional requirements imposed by the new Rule 506(c). The guidance has been provided by the issuance of the Citizen VC No Action Letter (the “CVC Letter”), which request was authored by Mintz Levin.

By: William Carleton, Counselor @ Law, and volunteer chair of ACA Public Policy Advisory Council

The following is adapted from remarks prepared for the Angel Capital Association's 2015 Angel Insights Exchange, held in New Orleans the week of November 9. Bill is the volunteer chair of an advisory council to the ACA, but the views he expresses below are personal to him, and not a reflection of ACA views or policy.  This post originally appeared on Counselor @ Law.

As we all know, Dodd-Frank (2010) and the JOBS Act (2012) brought big changes to the rules that govern what’s okay and what’s not okay in the world of federal exemptions from securities registration requirements.

By: Marianne Hudson, ACA Executive Director

Two years after proposing rules for equity crowdfunding, the Securities and Exchange Commission approved rules for entrepreneurs to raise up to $1 million per year from all investors.  The new U.S. crowdfunding market will officially start in late April or early May of 2016.  The SEC also proposed new rules to modernize crowdfunding within states for public comment during its October 30 meeting. 

Here’s the early “skinny” on the approved rules, noting that they are 686 pages (not a typo):

By Krista Tuomi, Associate Professor, American University

Entrepreneurs often explore a range of funding sources to expand and/or finance working capital, including ‘alternative’ ones such as peer-to-peer (P2P) lending and invoice financing.  These have recently been enjoying media exposure, sometimes erroneously grouped in the same category as angels.  As with my previous blog post on bank loans, this table is supposed to give a rough idea of the advantages and disadvantages of each source.  Such information is useful when advising a firm, or considering investing in one which has already tapped this pool of money (and probably is paying dearly for it).

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