Investors in startups and small businesses have been concerned about language buried deep within the Restoring Financial Stability Act of 2010, the financial reform bill passed by Congress this week. At one point during the lengthy debate over the bill, it would have made two changes that would have had a negative impact on angel investing nationwide.
First, the bill would have redefined “Accredited Investors” in a small business to require higher income levels and net worth. Accredited investors are wealthy individuals who register with the SEC and are able to demonstrate an understanding of risky investments such as angel financing. Under the proposed changes, the minimum annual income for an accredited investor would have increased from $200,000 to $450,000, and minimum assets would have increased from $1 million to $2.3 million. Experts estimated the changes would have eliminated between half and two-thirds of current angel investors from being able to invest in small businesses.
The second provision would have affected Regulation D (commonly known as Reg D) by giving the SEC 120 days to review a securities offering—an excessive length of time, in many experts’ opinions, that would further hamper the abilities of small companies to gain financing.
To read the full, original article click on this link: Financial Reform Legislation Gives Angel Investors a Break | Small Business Trends
Author: Rieva Lesonsky