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CRAMER: HALOS Act Opens Doors for Entrepreneurs

Jan 10, 2017
Press Release

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WASHINGTON, D.C. – Congressman Kevin Cramer said a bill passed by the House of Representatives today opens doors for entrepreneurs seeking angel investors.

H.R. 79, the Helping Angels Lead Our Startups (HALOS) Act, amends the Securities Act of 1933 to ensure that startup companies do not inadvertently violate Securities and Exchange Commission (SEC) regulations governing general solicitation of potential investors. It clarifies that certain startup companies can give presentations about their company and host events like demo days without violating SEC investment solicitation bans. 

“There are so many barriers to entry for startup businesses and it’s time to bring some common sense to our securities laws,” said Cramer.  “This bill is an appropriate rollback of outdated rules and helps ensure the United States remains the global economy leader in innovation. We must do all we can to recognize the primary source of new jobs as coming from new and young companies. In fact, recent studies have shown startup businesses account for almost 20 percent of gross job creation in our nation.”

Bruce Gjovig, CEO & Entrepreneur Coach of for the University of North Dakota’s Center for Innovation Foundation in Grand Forks, said this legislation makes it easier for entrepreneurs to reach out to angel investors. “Investors want to follow the law, and the HALOS Act brings SEC solicitation rules in synch with how they learn about investment opportunities. Private equity and angel capital are mother’s milk for business startups, and this bill makes it easier for them to connect.”

Angel investors are generally wealthy individuals who, unlike typical professional investors, are actively involved in the startups they back.  In 2015, angels invested approximately $24.6 billion in more than 73,000 startups and were responsible for 90 percent of the equity investment that startups receive. Corporations like Amazon, Costco, Facebook, Google, and Starbucks were all first funded by angel investors.

Under the existing language in the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. SEC Regulation D contains three general rules for providing exemptions from the registration requirements, allowing some companies to offer and sell their securities without having to register the securities with the SEC. One such exemption is Rule 506 of Regulation D, which allows companies to offer securities for sale up to 35 non-accredited investors and an unlimited number of accredited investors, as long as the company does not market its securities through general solicitations or advertising.