Coates and Pozen: Bill to Help Businesses Raise Capital Goes Too Far – John Coates and Robert Pozen (Washington Post column)
March 16, 2012

“The House voted 390 to 23 last week for a bill (PDF) to provide regulatory relief for small companies trying to raise capital. The bill is moving quickly through the Senate; no one likes unnecessary regulations that burden economic growth.  But this bill does more than trim regulatory fat; parts of it cut into muscle. Small businesses will have a harder time raising capital if investors do not receive sufficient disclosures or other legal protections.  First, the bill would allow ‘crowd-financing’ under astonishingly flexible conditions. It would displace current Securities and Exchange Commission disclosure rules for public offerings, allowing a new venture to raise $1 million through widespread Internet solicitations as long as no single investor put in more than $10,000. But the loosened regulations would make it easier for future Bernie Madoffs to create, say, 50 fake firms, steal $50 million from unsuspecting investors and retire to a tropical island.” John Coates is a professor at Harvard Law School. Robert Pozen is a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution. Click here for more.