One provision would virtually double the theshold for qualifying as an accredited investors, while the other would have effectively removed the federal exemption for Regulation D — thus increasing the cost and complexity for those raising money from sources in multiple states.
VC bloggers took to their keyboards with outraged strokes, while trade groups like the Angel Capital Association and Connecticut Technology Council worked to change minds of Capitol Hill. Not sure which was more effective, but the trade groups are now claiming a tentative victory.
In an official statement, the Angel Capital Association says it “understands” that Dodd will introduce amendments related to both provisions:
- Accredited investors: Dodd’s new language would keep threshold limits at their current levels, which is $1 million in personal assets and/or annual income of $200,000 ($300,000 in the case of a joint filing). The only change would be that the value of the investor’s primary residence would be excluded from the personal asset calculation (thus raising the bar, but likely not doubling it).
- Regulation D: Dodd’s new language would remove all original reference to Regulation D, thus meaning that filings and oversight would still be in the hands of federal regulators (rather than state regulators, who pushed the original language). The only addition would be the disqualification of Regulation D usage by individuals determined to be “bad actors” by federal and state authorities.
The “understanding” of Dodd’s proposed amendments comes from numerous trade group conversations with Senate Banking Committee staffers, including back-and-forthy discussions with proponents of the original language.
“In Washington-speak, I have a high confidence level that these changes will be made,” says Matthew Nemerson, president and CEO of the Connecticut Technology Council. “I don’t see Republicans blocking them, and it sounds like people have understood and agreed with our point of view.”
Nothing is certain until written and passed, of course, but it sure seems like Dodd and company are on the side of angels…