White House to ease IPO path

Written by The Financial Times | Washington | Updated: Feb 2 2012, 03:25am hrs
Shahien Nasiripour

The White House is expected to unveil fresh measures to boost small companies access to capital, even though the measures have previously drawn the ire of state regulators, senior Democratic lawmakers and investor advocates.

The Obama administration proposals will relax existing anti-fraud regulations for smaller companies, ease the path towards initial public offerings and allow companies to raise funds from individual investors without the usual restrictions on selling securities, according to people familiar with the matter.

The measures, which will require congressional approval, are to be released on Tuesday on the one-year anniversary of the White Houses Startup America initiative, which sought to aid entrepreneurs as they launch fresh businesses.

Barack Obama, US president, and his aides are keen on winning support from Americas small businesses after a rocky three-year relationship between the White House and corporate America.

But the proposals have been mired in controversy, as traditional White House allies claim that the initiatives will harm unsophisticated households that invest in equity offerings and enable fraud to flourish due to a relaxation of post-Enron reforms.

In September, the White House said it wanted to cut away the red tape that prevents many rapidly growing start-up companies from raising needed capital.

Versions of some of the measures have been passed by bipartisan majorities in the US House of Representatives, but none have passed the Senate.

Among the proposals are measures that would allow companies to raise tens of millions of dollars from investors without having to provide them with audited financial statements or regular reports to the Securities and Exchange Commission. State regulators have said that a parallel system of securities offerings with little oversight could be exploited by fraudsters.

Another proposal would allow firms to raise funds from individual investors, in a process known as crowd funding, without the usual investor protection that securities offerings provide.

John Coffee, professor at Columbia Law School, said of the measure late last year that unless it were altered, you could call this bill the Boiler Room Legalisation Act of 2011.

The White House declined to comment.