Senate Banking Bill Retains 120 Day Wait Period For Private Securities Offerings

Senator Dodd’s bill has now been filed with the full Senate.

As stated in a tweet yesterday:

Senate Banking Cmte (@SenateBanker)
4/15/10 7:36 PM

The Wall Street Reform bill has been filed with the full Senate – S. 3217 

Unfortunately, the bill keeps getting worse for startups.  The latest version of Section 926 is quoted below. 

If this version of the bill becomes law, it will essentially end the days of closing an all accredited investor offering and then filing a simple Form D with a filing fee post closing. Instead, companies will have to go through a process akin to registration, where they seek and obtain permission from state securities regulators before selling securities. This will be a significant burden for early stage companies trying to raise capital, and will slow down innovation in America, and hurt job growth. Let’s hope the Senate amends these provisions before they become law.


Section 18(b)(4) of the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended—by striking ‘‘A security’’ and inserting ‘‘(A) IN GENERAL—A security’’; by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and adjusting the margins accordingly; and by striking clause (iv), as so redesignated, and inserting the following:

‘‘(iv) Commission rules or regulations issued under section 4(2), except that the Commission may designate, by rule, a class of securities that it deems not to be covered securities because the offering of such securities is not of sufficient size or scope.

‘‘(v) Not later than 360 days after the date of enactment of the Restoring American Financial Stability Act of 2010, the Commission shall conduct a rulemaking to determine whether to designate a class of securities because the offering of such securities is not of sufficient size or scope.

‘‘(B) DESIGNATION OF NON-COVERED SECURITIES.—In making a designation under subparagraph (A)(iv), the Commission shall consider—

‘‘(i) the size of the offering;

‘‘(ii) the number of States in which the security is being offered; and

‘‘(iii) the nature of the persons to whom the security is being offered.


‘‘(i) IN GENERAL.—The Commission shall review any filings made relating to any security issued under Commission rules or regulations under section 4(2), other than one designated as a non-covered security under subparagraph (A)(iv), not later than 120 days of the filing with the Commission.

‘‘(ii) FAILURE TO REVIEW WITHIN 120 DAYS.—If the Commission fails to review a filing required under clause (i), the security shall no longer be a covered security, except that—‘‘(I) the failure of the Commission to review a filing shall not result in the loss of status as a covered security if the Commission, not later than 120 days of the filing with the Commission, has determined that there has been a good faith and reasonable attempt by the issuer to comply with all applicable terms, conditions, and requirements of the filing; and

‘‘(II) upon review of the filing, if the Commission, not later than 120 days of the filing with the Commission, determines that any failure to comply with the applicable filing terms, conditions, and requirements is insignificant to the offering as a whole.


‘‘(i) IN GENERAL.—Nothing in subparagraph (A)(iv), (B), or (C) shall be construed to prohibit a State from imposing notice filing requirements that are substantially similar to filing requirements required by rule or regulation under section 4(4) that were in effect on September 1,1996.

‘‘(ii) NOTIFICATION.—Not later than 180 days after the date of enactment of the Restoring American Financial Stability Act of 2010, the Commission shall implement procedures, after consultation with the States, to promptly notify States uponcompletion of review of securities offerings described in subparagraph (A)(iv) by the Commission.

‘‘(E) OFFERINGS AFFECTED.—The requirements of this section shall apply to offerings filed on or after the date of enactment of the Restoring Financial Stability Act of 2010.’’.

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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