World and Nation

Senate passes startups bill, with amendments

WASHINGTON — Depending on who is speaking, a bill approved by the Senate on Thursday to make it easier for small companies to raise money will either improve the economy by creating jobs or cause unwitting investors to get swindled.

The Senate voted 73-26 to approve the JOBS Act, whose acronym stands for Jump-start Our Business Startups.

The legislation, approved overwhelmingly by the House two weeks ago, would designate a category of “emerging growth” companies that could conduct initial public offerings of stock while being exempt from certain financial disclosure and governance requirements for up to five years.

In addition, the measure would provide a new form of financing to small companies. Through crowd-funding, or the sale of small amounts of stock to many individuals, companies could solicit equity investments through the Internet or elsewhere, raising up to $1 million annually without being required to register the shares for public trading with the Securities and Exchange Commission.

“This will make it easier for small and growing companies to raise the capital they need to keep growing and to hire more workers,” Sen. Pat Toomey, R-Pa., said after the vote.

Until now, he added, “we’ve made it more expensive to go public in this country and done nothing to make it easier to raise capital privately. This bill addresses both.”

Because the Senate made several amendments to the House bill, the package will be sent back to the House to work out differences. House Republican leaders said Thursday that they expected to take up the amended bill next week and hoped to send it quickly to President Barack Obama, who has said he will sign it.

Some Democrats, who made up all the opposing votes to the bill, and consumer-advocacy organizations were less optimistic about the effect of a law that rolls back regulations on corporate financial disclosure. Pension funds, lobbying organizations like AARP and the SEC chairwoman have also opposed the bill.

“Hasty deregulation has repeatedly been the source of financial crises — the savings and loan crisis, the Enron-era crisis and the Great Recession of 2008 — to name a few,” said Sen. Jack Reed, D-R.I., who voted against the measure after his effort to substitute a rewritten bill failed earlier this week. “I believe history will judge this misnamed bill quite harshly.”

Under the JOBS bill, companies with up to $1 billion in annual revenue would be free to ignore — for their first five years as a public company — regulations that were put into place after the end of the dot-com bubble and the collapse of Enron. Among them are requirements to hire an independent outside auditor to attest to a company’s internal financial controls, and restrictions on how financial analysts interact with investment bankers in promoting a company’s stock.