Date: 2016-04-27
Speaker: MAXINE WATERS (democrat)
Chamber: H
State: California

Mr. Speaker. as I mentioned during the general debate on H.R. 4498. I am offering this amendment today in order to clarify and improve the bill. If this amendment is accepted. I am prepared to support this legislation. Indeed. I support the goal of connecting angel investor groups with companies seeking funding. particularly startups and emerging firms. Angel investor groups tend to be comprised of highly sophisticated individuals with significant experience investing in higher risk offerings. They tend to curate their groups carefully and are good gatekeepers for these demo day events. As such. my amendment seeks to support the efforts of these angel investor associations without creating a harmful loophole in some of the protections we put in place when we adopted the JOBS Act of 2012. This amendment includes several provisions to advance these goals. First. my amendment stipulates that no sponsor of a demo day can collect finders fees for connecting investors to companies. This provision ensures that event sponsorscolleges. nonprofits. trade associations. or otherwisedont have perverse incentives to drum up securities sales. Second. my amendment limits the relief offered under the bill to actual operating companies in the "real economy." As such. it excludes certain entities like shell companies and investment vehicles like hedge funds. I think that my amendment is appropriately calibrated to ensure that the benefits provided under the bill go to startups like technology firms or manufacturing companies rather than opaque or speculative firms. Third. my amendment would codify the relief the SEC has already provided for angel investor groups as it relates to these demo days. This will provide legal certainty to these groups without opening up any new loopholes. Let me describe how this would work. If the company wants to hold a demo day and also condition the market for a securities sale. as H.R. 4498 would allow. they would have to curate the group of people that attend the event. To be clear. under the bill as currently drafted. companies arent limited to holding science fairstyle demonstrations. They can discuss actual securities being offered. the types and amounts of those securities. who has already subscribed to their offerings. and how they intend to use the proceeds of the offering. Under the SECs relief and codified in this provision in my amendment. companies can hold these presentations. can talk about their securities. and can solicit attendance. They can even avoid the accredited investor verification requirement in the JOBS Act. They just have to call their existing networks of accredited investors and angel investor group members rather than blasting out an invitation to an entire college campus. If companies do want to blast out the invitation to entire campuses. they still can. they just have to abide by the verification provisions in the JOBS Act. In summary. this amendment I am offering today ensures that no loopholes to the JOBS Act verification requirement are opened up. that all manner of conflicted fees are prohibited. and that the benefits of the bill go to actual operating companies. And that is very important. actual operating companies. Mr. Speaker. whether it is through my work to clarify and improve the JOBS Act during the 112th Congress or my work with members on the committee this Congress to amend the definition of "accredited investors" or through my amendment today. I have long shown a willingness to work in good faith on issues related to capital formation. I would urge my colleagues to adopt my amendment so that we can all support a strong. bipartisan bill.