Politics in Action: H.R. 4498, H.R. 4901 and H.J.Res. 88

STATEMENT OF ADMINISTRATION POLICY

H.R. 4498 – Helping Angels Lead Our Startups Act

(Rep. Chabot, R-OH, and 11 cosponsors)

The Administration is committed to helping entrepreneurs and small business owners access the capital they need to innovate, grow their enterprises, and create jobs.  H.R. 4498, the Helping Angels Lead Our Startups (HALOS) Act, seeks to further these objectives by creating a new exemption to the prohibition of general solicitation for companies issuing private securities.  Specifically, the bill would require the Securities and Exchange Commission (SEC) to revise Regulation D so that the prohibition against general solicitation does not apply to presentations or communications made at an event sponsored by certain organizations. 

Although H.R. 4498 seeks to increase opportunities for companies to access investment capital, the Administration is concerned that the bill does not properly weigh the need for, and importance of, appropriate investor protections.  Title II of the Jumpstart Our Business Startups (JOBS) Act requires that issuers selling securities in private markets through general solicitation take "reasonable steps" to verify that all purchasers are "accredited investors."  This requirement helps ensure that unsophisticated investors do not make investments when they may not understand the attendant risks.  Creating a new exemption to this requirement may make it easier for companies to access necessary capital, but providing such an exemption comes at the cost of potentially increasing undue risk for certain investors.

Additionally, the SEC already has sought to alleviate some of the burden on startups and other small companies by exempting them from the "reasonable steps" requirement when the companies have a pre-existing, substantive relationship with the potential investors or have contacted the potential investors through a personal network before making a general solicitation.  The SEC determined that these relationships or communications were a sensible substitute for the "reasonable steps" otherwise required to assure that all purchasers were accredited investors, and did not unreasonably undermine investor protection.

The JOBS Act charged the SEC with implementing its titles through a robust rulemaking process, and the agency has done so by taking into account both the importance of access to capital for companies, as well as the importance of investor protection, both of which are essential for a well-functioning marketplace.  Any legislation that seeks to facilitate greater capital formation by clarifying or amending Federal securities law should similarly take both of these considerations into account.  We look forward to working with the Congress on this legislation as it moves forward.  

Note: The following were submitted to From The G-Man at 3:32 and 3:34 p.m. (EST) 

H.R. 4901 – SOAR Reauthorization Act

(Rep. Chaffetz, R-Utah, and 16 cosponsors)

H.R. 4901 would reauthorize the Scholarships for Opportunity and Results (SOAR) Act, which provides Federal support for improving traditional public schools in the District of Columbia (D.C.), expanding and improving high-quality D.C. public charter schools, and offering private school vouchers to a limited number of students.  While the Administration continues to strongly oppose the private school vouchers program within this legislation, known as the D.C. Opportunity Scholarship Program, the Administration will continue to use available SOAR Act funds to support students returning to the program until they complete school, so that their education is not disrupted.

Rigorous evaluation over several years demonstrates that D.C. vouchers have not yielded statistically significant improvements in student achievement by scholarship recipients compared to other students not receiving vouchers.  In addition, H.R. 4901 would extend this voucher program to students already attending private schools, thereby replacing existing private resources with public ones.  As a matter of public policy, the Administration remains focused on the changes needed to make the greatest impact on student outcomes in the Nation's public education system.  Instead of using Federal resources to support a handful of students in private schools, the Federal Government should focus its attention and available resources on improving the quality of public schools for all students. 

H.J.Res. 88 – Disapproval of Department of Labor Rule on

Fiduciary Responsibility of Financial Advisers

 (Rep. Roe, R-TN, and 30 cosponsors)

The Administration strongly opposes H.J.Res. 88 because the bill would overturn an important Department of Labor final rule critical to protecting Americans' hard-earned savings and preserving their retirement security.

The outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients' best interest when giving retirement investment advice.  Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns — costing American families an estimated $17 billion a year.

The Department's final rule will ensure that American workers and retirees receive retirement advice in their best interest, better enabling them to protect and grow their savings.  The final rule reflects extensive feedback from industry, advocates, and Members of Congress, and has been streamlined to reduce the compliance burden and ensure continued access to advice, while maintaining an enforceable best-interest standard that protects consumers.  It is essential that these critical protections go into effect.

If the President were presented with H.J.Res. 88, he would veto the bill.

Source: The Executive Office of the President, Office of Management and Budget