This bill would make it easier for startup businesses to attract investments from angel investors under the Securities and Exchange Commission’s (SEC) Regulation D. It would allow small companies looking to raise funds through the sale of equity or debt securities (like stocks or bonds) to be exempt from advertising requirements at pitch events sponsored by angel investor groups where:
Presentations or communications are made by or on behalf of the issuing company;
The advertising doesn’t refer to any specific offering of securities;
The sponsor doesn’t offer investment recommendations or advice to attendees;
The sponsor doesn’t receive compensation for the event, which would require them to register as a broker or dealer or as an investment advisor;
No specific information related to a securities offering is communicated (other than information about the number and type of securities to be offered).
Regulation D governs private placements, which are the sale of securities to a select number of accredited investors, and exempts small companies from having to register their securities with the SEC. It looks to restrict participation in private placements to accredited or sophisticated investors who meet requirements related to net worth, income, and business or investment experience that gives the investor financial awareness of the risks associated with their investment.
This legislation would only affect Regulation D with respect to presentations and communications with prospective investors, but not purchases or sales of securities.